EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of October 31, 2005, among Silverstar Holdings, Ltd., a Bermuda
corporation (the "Company"), and the purchasers signatory hereto (each such
purchaser is a "Purchaser" and collectively, the "Purchasers").
This Agreement is made pursuant to the Securities Purchase Agreement,
dated as of the date hereof among the Company and the Purchasers (the "Purchase
Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions
-----------
Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms in
the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:
"Advice" shall have the meaning set forth in Section 6(d).
"Effectiveness Date" means, with respect to the initial Registration
Statement required to be filed hereunder, the 90th calendar day (120th
calendar day in the event of a full review by the Commission) following the
date hereof and, with respect to any additional Registration Statements
which may be required pursuant to Section 3(c), the 60th calendar day
following the date on which the Company first knows, or reasonably should
have known, that such additional Registration Statement is required
hereunder; provided, however, in the event the Company is notified by the
Commission that one of the above Registration Statements will not be
reviewed or is no longer subject to further review and comments, the
Effectiveness Date as to such Registration Statement shall be the fifth
Trading Day following the date on which the Company is so notified if such
date precedes the dates required above.
"Effectiveness Period" shall have the meaning set forth in Section
2(a).
"Event" shall have the meaning set forth in Section 2(b).
"Event Date" shall have the meaning set forth in Section 2(b).
"Filing Date" means, with respect to the initial Registration Statement
required hereunder, the 30th calendar day following the date hereof and,
with respect to any additional Registration Statements which may be
required pursuant to Section 3(c), the 30th day following the date on which
the Company first knows, or reasonably should have known that such
additional Registration Statement is required hereunder.
1
"Holder" or "Holders" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 5(c).
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Plan of Distribution" shall have the meaning set forth in Section
2(a).
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable
Securities covered by a Registration Statement, and all other amendments
and supplements to the Prospectus, including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by
reference in such Prospectus.
"Registrable Securities" means (i) all of the shares of Common Stock
issuable upon conversion in full of the Debentures, (ii) all Warrant
Shares, (iii) shares of Common Stock underlying the warrants issuable
pursuant to Section 6(c) of the Debentures, (iv) any securities issued or
issuable upon any stock split, dividend or other distribution,
recapitalization or similar event with respect to the foregoing and (v) any
additional shares issuable in connection with any anti-dilution provisions
in the Debentures or the Warrants (in each case, without giving effect to
any limitations on conversion set forth in the Debenture or limitations on
exercise set forth in the Warrant).
"Registration Statement" means the registration statements required to
be filed hereunder and any additional registration statements contemplated
by Section 3(c), including (in each case) the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre-
and post-effective amendments, all exhibits thereto, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.
2
"Rule 424" means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.
"Selling Shareholder Questionnaire" shall have the meaning set forth in
Section 3(a).
2. Shelf Registration
------------------
(a) On or prior to each Filing Date, the Company shall prepare and file
with the Commission a "Shelf" Registration Statement covering the resale of
130% of the Registrable Securities on such Filing Date for an offering to
be made on a continuous basis pursuant to Rule 415. The Registration
Statement shall be on Form S-3 (except if the Company is not then eligible
to register for resale the Registrable Securities on Form S-3, in which
case such registration shall be on another appropriate form in accordance
herewith) and shall contain (unless otherwise directed by the Holders)
substantially the "Plan of Distribution" attached hereto as Annex A.
Subject to the terms of this Agreement, the Company shall use its best
efforts to cause a Registration Statement to be declared effective under
the Securities Act as promptly as possible after the filing thereof, but in
any event prior to the applicable Effectiveness Date, and shall use its
best efforts to keep such Registration Statement continuously effective
under the Securities Act until all Registrable Securities covered by such
Registration Statement have been sold or may be sold without volume
restrictions pursuant to Rule 144(k) as determined by the counsel to the
Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent and the affected Holders (the
"Effectiveness Period"). The Company shall telephonically request
effectiveness of a Registration Statement as of 5:00 pm Eastern Time on a
Trading Day. The Company shall immediately notify the Holders via facsimile
of the effectiveness of a Registration Statement on the same Trading Day
that the Company telephonically confirms effectiveness with the Commission,
which shall be the date requested for effectiveness of a Registration
Statement. The Company shall, by 9:30 am Eastern Time on the Trading Day
after the Effective Date (as defined in the Purchase Agreement), file a
Form 424(b)(5) with the Commission. Failure to so notify the Holder within
1 Trading Day of such notification shall be deemed an Event under Section
2(b).
(b) If: (i) a Registration Statement is not filed on or prior to its
Filing Date (if the Company files a Registration Statement without
affording the Holders the opportunity to review and comment on the same as
required by Section 3(a), the Company shall not be deemed to have satisfied
this clause (i)), or (ii) the Company fails to file with the Commission a
request for acceleration in accordance with Rule 461 promulgated under the
Securities Act, within five Trading Days of the date that the Company is
notified (orally or in writing, whichever is earlier) by the Commission
that a Registration Statement will not be "reviewed," or not subject to
further review, or (iii) prior to its Effectiveness Date, the Company fails
to file a pre-effective amendment and otherwise respond in writing to
comments made by the Commission in respect of such Registration
3
Statement within 10 Trading Days after the receipt of comments by or notice
from the Commission that such amendment is required in order for a
Registration Statement to be declared effective, or (iv) a Registration
Statement filed or required to be filed hereunder is not declared effective
by the Commission by its Effectiveness Date, or (v) after the Effectiveness
Date, a Registration Statement ceases for any reason to remain continuously
effective as to all Registrable Securities for which it is required to be
effective, or the Holders are not permitted to utilize the Prospectus
therein to resell such Registrable Securities for 20 consecutive Trading
Days in any individual case but no more than an aggregate of 30 Trading
Days during any 12-month period (which need not be consecutive Trading
Days) (any such failure or breach being referred to as an "Event", and for
purposes of clause (i) or (iv) the date on which such Event occurs, or for
purposes of clause (ii) the date on which such five Trading Day period is
exceeded, or for purposes of clause (iii) the date which such 10 Trading
Day period is exceeded, or for purposes of clause (v) the date on which
such 20 or 30 Trading Day period, as applicable, is exceeded being referred
to as "Event Date"), then in addition to any other rights the Holders may
have hereunder or under applicable law, on each such Event Date and on each
monthly anniversary of each such Event Date (if the applicable Event shall
not have been cured by such date) until the applicable Event is cured, the
Company shall pay to each Holder an amount in cash, as partial liquidated
damages and not as a penalty, equal to 1.5% of the aggregate purchase price
paid by such Holder pursuant to the Purchase Agreement for any Registrable
Securities then held by such Holder. If the Company fails to pay any
partial liquidated damages pursuant to this Section in full within seven
days after the date payable, the Company will pay interest thereon at a
rate of 18% per annum (or such lesser maximum amount that is permitted to
be paid by applicable law) to the Holder, accruing daily from the date such
partial liquidated damages are due until such amounts, plus all such
interest thereon, are paid in full. The partial liquidated damages pursuant
to the terms hereof shall apply on a daily pro-rata basis for any portion
of a month prior to the cure of an Event.
3. Registration Procedures.
-----------------------
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Not less than five Trading Days prior to the filing of each
Registration Statement or any related Prospectus or any amendment or
supplement thereto (including any document that would be incorporated or
deemed to be incorporated therein by reference), the Company shall, (i)
furnish to each Holder copies of all such documents proposed to be filed,
which documents (other than those incorporated or deemed to be incorporated
by reference) will be subject to the review of such Holders, and (ii) cause
its officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall
not file a Registration Statement or any such Prospectus or any amendments
or supplements thereto to which the Holders of a majority of the
Registrable Securities shall reasonably object in good faith, provided
that, the Company is notified of
4
such objection in writing no later than 5 Trading Days after the Holders
have been so furnished copies of such documents. Each Holder agrees to
furnish to the Company a completed Questionnaire in the form attached to
this Agreement as Annex B (a "Selling Shareholder Questionnaire") not less
than two Trading Days prior to the Filing Date or by the end of the fourth
Trading Day following the date on which such Holder receives draft
materials in accordance with this Section.
(b) (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to a Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep a Registration
Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the
Commission such additional Registration Statements in order to register for
resale under the Securities Act all of the Registrable Securities; (ii)
cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement (subject to the terms of this Agreement), and as so
supplemented or amended to be filed pursuant to Rule 424; (iii) respond as
promptly as reasonably possible to any comments received from the
Commission with respect to a Registration Statement or any amendment
thereto and as promptly as reasonably possible provide the Holders true and
complete copies of all correspondence from and to the Commission relating
to a Registration Statement; and (iv) comply in all material respects with
the provisions of the Securities Act and the Exchange Act with respect to
the disposition of all Registrable Securities covered by a Registration
Statement during the applicable period in accordance (subject to the terms
of this Agreement) with the intended methods of disposition by the Holders
thereof set forth in such Registration Statement as so amended or in such
Prospectus as so supplemented.
(c) If during the Effectiveness Period, the number of Registrable
Securities at any time exceeds 90% of the number of shares of Common Stock
then registered in a Registration Statement, then the Company shall file as
soon as reasonably practicable but in any case prior to the applicable
Filing Date, an additional Registration Statement covering the resale by
the Holders of not less than 130% of the number of such Registrable
Securities.
(d) Notify the Holders of Registrable Securities to be sold (which
notice shall, pursuant to clauses (ii) through (vi) hereof, be accompanied
by an instruction to suspend the use of the Prospectus until the requisite
changes have been made) as promptly as reasonably possible (and, in the
case of (i)(A) below, not less than five Trading Days prior to such filing)
and (if requested by any such Person) confirm such notice in writing no
later than one Trading Day following the day (i)(A) when a Prospectus or
any Prospectus supplement or post-effective amendment to a Registration
Statement is proposed to be filed; (B) when the Commission notifies the
Company whether there will be a "review" of such Registration Statement and
whenever the Commission comments in writing on such Registration Statement
(the Company shall provide true and complete copies thereof and all written
responses thereto to each of the Holders); and (C) with respect to a
Registration Statement or any post-effective amendment, when the same has
become effective; (ii) of any request by the Commission or any other
Federal or state
5
governmental authority for amendments or supplements to a Registration
Statement or Prospectus or for additional information; (iii) of the
issuance by the Commission or any other federal or state governmental
authority of any stop order suspending the effectiveness of a Registration
Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening
of any Proceeding for such purpose; (v) of the occurrence of any event or
passage of time that makes the financial statements included in a
Registration Statement ineligible for inclusion therein or any statement
made in a Registration Statement or Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any material
respect or that requires any revisions to a Registration Statement,
Prospectus or other documents so that, in the case of a Registration
Statement or the Prospectus, as the case may be, it will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
and (vi) the occurrence or existence of any pending corporate development
with respect to the Company that the Company believes may be material and
that, in the determination of the Company, makes it not in the best
interest of the Company to allow continued availability of a Registration
Statement or Prospectus; provided that any and all of such information
shall remain confidential to each Holder until such information otherwise
becomes public, unless disclosure by a Holder is required by law; provided,
further, notwithstanding each Holder's agreement to keep such information
confidential, the Holders make no acknowledgement that any such information
is material, non-public information.
(e) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of a
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale
in any jurisdiction, at the earliest practicable moment.
(f) Furnish to each Holder, without charge, at least one conformed copy
of each such Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or deemed to
be incorporated therein by reference to the extent requested by such
Person, and all exhibits to the extent requested by such Person (including
those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission.
(g) Promptly deliver to each Holder, without charge, as many copies of
the Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request in
connection with resales by the Holder of Registrable Securities. Subject to
the terms of this Agreement, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement
thereto, except after the giving on any notice pursuant to Section 3(d).
6
(h) If NASDR Rule 2710 requires any broker-dealer to make a filing
prior to executing a sale by a Holder, the Company shall (i) make an Issuer
Filing with the NASDR, Inc. Corporate Financing Department pursuant to
NASDR Rule 2710(b)(10)(A)(i), (ii) respond within five Trading Days to any
comments received from NASDR in connection therewith, (iii) and pay the
filing fee required in connection therewith.
(i) Prior to any resale of Registrable Securities by a Holder, use its
commercially reasonable efforts to register or qualify or cooperate with
the selling Holders in connection with the registration or qualification
(or exemption from the Registration or qualification) of such Registrable
Securities for the resale by the Holder under the securities or Blue Sky
laws of such jurisdictions within the United States as any Holder
reasonably requests in writing, to keep each registration or qualification
(or exemption therefrom) effective during the Effectiveness Period and to
do any and all other acts or things reasonably necessary to enable the
disposition in such jurisdictions of the Registrable Securities covered by
each Registration Statement; provided, that the Company shall not be
required to qualify generally to do business in any jurisdiction where it
is not then so qualified, subject the Company to any material tax in any
such jurisdiction where it is not then so subject or file a general consent
to service of process in any such jurisdiction.
(j) If requested by the Holders, cooperate with the Holders to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent
permitted by the Purchase Agreement, of all restrictive legends, and to
enable such Registrable Securities to be in such denominations and
registered in such names as any such Holders may request.
(k) Upon the occurrence of any event contemplated by this Section 3, as
promptly as reasonably possible under the circumstances taking into account
the Company's good faith assessment of any adverse consequences to the
Company and its stockholders of the premature disclosure of such event,
prepare a supplement or amendment, including a post-effective amendment, to
a Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference,
and file any other required document so that, as thereafter delivered,
neither a Registration Statement nor such Prospectus will contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. If the
Company notifies the Holders in accordance with clauses (ii) through (vi)
of Section 3(d) above to suspend the use of any Prospectus until the
requisite changes to such Prospectus have been made, then the Holders shall
suspend use of such Prospectus. The Company will use its best efforts to
ensure that the use of the Prospectus may be resumed as promptly as is
practicable. The Company shall be entitled to exercise its right under this
Section 3(k) to suspend the availability of a Registration Statement and
Prospectus, subject to the payment of partial
7
liquidated damages pursuant to Section 2(b), for a period not to exceed 60 days
(which need not be consecutive days) in any 12 month period.
(l) Comply with all applicable rules and regulations of the Commission.
(m) The Company may require each selling Holder to furnish to the
Company a certified statement as to the number of shares of Common Stock
beneficially owned by such Holder and, if required by the Commission, the
person thereof that has voting and dispositive control over the Shares.
During any periods that the Company is unable to meet its obligations
hereunder with respect to the registration of the Registrable Securities
solely because any Holder fails to furnish such information within three
Trading Days of the Company's request, any liquidated damages that are
accruing at such time as to such Holder only shall be tolled and any Event
that may otherwise occur solely because of such delay shall be suspended as
to such Holder only, until such information is delivered to the Company.
4. Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to a
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Trading Market on which the Common Stock is then
listed for trading, (B) in compliance with applicable state securities or Blue
Sky laws reasonably agreed to by the Company in writing (including, without
limitation, fees and disbursements of counsel for the Company in connection with
Blue Sky qualifications or exemptions of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as requested by the Holders) and (C) if not
previously paid by the Company in connection with an Issuer Filing, with respect
to any filing that may be required to be made by any broker through which a
Holder intends to make sales of Registrable Securities with NASD Regulation,
Inc. pursuant to the NASD Rule 2710, so long as the broker is receiving no more
than a customary brokerage commission in connection with such sale, (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities and of printing prospectuses if the
printing of prospectuses is reasonably requested by the holders of a majority of
the Registrable Securities included in a Registration Statement), (iii)
messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. In no event shall the Company be
responsible for any broker or similar commissions or, except to the extent
provided for in the Transaction Documents, any legal fees or other costs of the
Holders.
8
5. Indemnification
---------------
(a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder,
the officers, directors, agents, brokers (including brokers who offer and
sell Registrable Securities as principal as a result of a pledge or any
failure to perform under a margin call of Common Stock), investment
advisors and employees of each of them, each Person who controls any such
Holder (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) and the officers, directors, agents and employees
of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, reasonable attorneys'
fees) and expenses (collectively, "Losses"), as incurred, arising out of or
relating to any untrue or alleged untrue statement of a material fact
contained in a Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any Prospectus or form of
prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading, except to the extent, but only to the
extent, that (i) such untrue statements or omissions are based solely upon
information regarding such Holder furnished in writing to the Company by
such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Holder expressly for use in a Registration
Statement, such Prospectus or such form of Prospectus or in any amendment
or supplement thereto (it being understood that the Holder has approved
Annex A hereto for this purpose) or (ii) in the case of an occurrence of an
event of the type specified in Section 3(d)(ii)-(vi), the use by such
Holder of an outdated or defective Prospectus after the Company has
notified such Holder in writing that the Prospectus is outdated or
defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(d). The Company shall notify the Holders promptly
of the institution, threat or assertion of any Proceeding arising from or
in connection with the transactions contemplated by this Agreement of which
the Company is aware.
(b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such controlling
Persons, to the fullest extent permitted by applicable law, from and
against all Losses, as incurred, to the extent arising out of or based
solely upon: (x) such Holder's failure to comply with the prospectus
delivery requirements of the Securities Act or (y) any untrue or alleged
untrue statement of a material fact contained in any Registration
Statement, any Prospectus, or any form of prospectus, or in any amendment
or supplement thereto or in any preliminary prospectus, or arising out of
or relating to any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements therein not
misleading (i) to the extent, but
9
only to the extent, that such untrue statement or omission is contained in
any information so furnished in writing by such Holder to the Company
specifically for inclusion in such Registration Statement or such
Prospectus or (ii) to the extent that (1) such untrue statements or
omissions are based solely upon information regarding such Holder furnished
in writing to the Company by such Holder expressly for use therein, or to
the extent that such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities and was reviewed
and expressly approved in writing by such Holder expressly for use in a
Registration Statement (it being understood that the Holder has approved
Annex A hereto for this purpose), such Prospectus or such form of
Prospectus or in any amendment or supplement thereto or (2) in the case of
an occurrence of an event of the type specified in Section 3(d)(ii)-(vi),
the use by such Holder of an outdated or defective Prospectus after the
Company has notified such Holder in writing that the Prospectus is outdated
or defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(d). In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the
net proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing,
and the Indemnifying Party shall have the right to assume the defense
thereof, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except
(and only) to the extent that it shall be finally determined by a court of
competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have prejudiced the Indemnifying
Party.
An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified
Party or Parties unless: (1) the Indemnifying Party has agreed in writing
to pay such fees and expenses; (2) the Indemnifying Party shall have failed
promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding;
or (3) the named parties to any such Proceeding (including any impleaded
parties) include both such Indemnified Party and the Indemnifying Party,
and such Indemnified Party shall have been advised by counsel that a
material conflict of interest is likely to exist if the same counsel were
to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to
assume the defense thereof and the reasonable fees and expenses of one
separate counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent
10
shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement
of any pending Proceeding in respect of which any Indemnified Party is a
party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter
of such Proceeding.
Subject to the terms of this Agreement, all reasonable fees and
expenses of the Indemnified Party (including reasonable fees and expenses
to the extent incurred in connection with investigating or preparing to
defend such Proceeding in a manner not inconsistent with this Section)
shall be paid to the Indemnified Party, as incurred, within ten Trading
Days of written notice thereof to the Indemnifying Party; provided, that
the Indemnified Party shall promptly reimburse the Indemnifying Party for
that portion of such fees and expenses applicable to such actions for which
such Indemnified Party is not entitled to indemnification hereunder,
determined based upon the relative faults of the parties.
(d) Contribution. If the indemnification under Section 5(a) or 5(b) is
unavailable to an Indemnified Party or insufficient to hold an Indemnified
Party harmless for any Losses, then each Indemnifying Party shall
contribute to the amount paid or payable by such Indemnified Party, in such
proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among
other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission
of a material fact, has been taken or made by, or relates to information
supplied by, such Indemnifying Party or Indemnified Party, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include,
subject to the limitations set forth in this Agreement, any reasonable
attorneys' or other reasonable fees or expenses incurred by such party in
connection with any Proceeding to the extent such party would have been
indemnified for such fees or expenses if the indemnification provided for
in this Section was available to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 5(d),
no Holder shall be required to contribute, in the aggregate, any amount in
excess of the amount by which the proceeds actually received by such Holder
from the sale of the Registrable Securities subject to the Proceeding
exceeds the amount of any damages that such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission, except in the case of fraud by such Holder.
The indemnity and contribution agreements contained in this Section are
in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
11
6. Miscellaneous
-------------
(a) Remedies. In the event of a breach by the Company or by a Holder,
of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company and each Holder agree that monetary damages would
not provide adequate compensation for any losses incurred by reason of a
breach by it of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specific performance in respect
of such breach, it shall waive the defense that a remedy at law would be
adequate.
(b) No Piggyback on Registrations. Except as set forth on Schedule 6(b)
attached hereto, neither the Company nor any of its security holders (other
than the Holders in such capacity pursuant hereto) may include securities
of the Company in the initial Registration Statement other than the
Registrable Securities. No Person has any right to cause the Company to
effect the registration under the Securities Act of any securities of the
Company. The Company shall not file any other registration statements until
the initial Registration Statement required hereunder is declared effective
by the Commission, provided that this Section 6(b) shall not prohibit the
Company from filing amendments to registration statements already filed.
(c) Compliance. Each Holder covenants and agrees that it will comply
with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities
pursuant to a Registration Statement.
(d) Discontinued Disposition. Each Holder agrees by its acquisition of
such Registrable Securities that, upon receipt of a notice from the Company
of the occurrence of any event of the kind described in Section 3(d), such
Holder will forthwith discontinue disposition of such Registrable
Securities under a Registration Statement until such Holder's receipt of
the copies of the supplemented Prospectus and/or amended Registration
Statement, or until it is advised in writing (the "Advice") by the Company
that the use of the applicable Prospectus may be resumed, and, in either
case, has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such
Prospectus or Registration Statement. The Company will use its best efforts
to ensure that the use of the Prospectus may be resumed as promptly as it
practicable. The Company agrees and acknowledges that any periods during
which the Holder is required to discontinue the disposition of the
Registrable Securities hereunder shall be subject to the provisions of
Section 2(b).
(e) Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file
with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of
12
any of its equity securities, other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or their then equivalents relating to
equity securities to be issued solely in connection with any acquisition of
any entity or business or equity securities issuable in connection with the
stock option or other employee benefit plans, then the Company shall send
to each Holder a written notice of such determination and, if within
fifteen days after the date of such notice, any such Holder shall so
request in writing, the Company shall include in such registration
statement all or any part of such Registrable Securities such Holder
requests to be registered; provided, however, that, the Company shall not
be required to register any Registrable Securities pursuant to this Section
6(e) that are eligible for resale pursuant to Rule 144(k) promulgated under
the Securities Act or that are the subject of a then effective Registration
Statement.
(f) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the same shall be in writing and signed by
the Company and each Holder of the then outstanding Registrable Securities
(assuming for such purpose only that all Debentures and Warrants have been
converted and exercised, as applicable). Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of all of the Registrable Securities to which such waiver or
consent relates; provided, however, that the provisions of this sentence
may not be amended, modified, or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(g) Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be delivered as set
forth in the Purchase Agreement.
(h) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written
consent of all of the Holders of the then-outstanding Registrable
Securities. Each Holder may assign their respective rights hereunder in the
manner and to the Persons as permitted under the Purchase Agreement.
(i) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has entered, as of the date hereof, nor shall the Company or
any of its subsidiaries, on or after the date of this Agreement, enter into
any agreement with respect to its securities, that would have the effect of
impairing the rights granted to the Holders in this Agreement or otherwise
conflicts with the provisions hereof. Except as set forth on Schedule 6(i),
neither the Company nor any of its subsidiaries has previously entered into
any agreement granting any registration rights with respect to any of its
securities to any Person that have not been satisfied in full.
(j) Execution and Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to
be an original and, all of which taken together shall constitute one and
the same Agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid binding
obligation of the
13
party executing (or on whose behalf such signature is executed) the
same with the same force and effect as if such facsimile signature were
the original thereof.
(k) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be determined with
the provisions of the Purchase Agreement.
(l) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(m) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their commercially reasonable efforts to find and
employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of
the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(n) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(o) Independent Nature of Holders' Obligations and Rights. The
obligations of each Holder hereunder are several and not joint with the
obligations of any other Holder hereunder, and no Holder shall be
responsible in any way for the performance of the obligations of any other
Holder hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Holder
pursuant hereto or thereto, shall be deemed to constitute the Holders as a
partnership, an association, a joint venture or any other kind of entity,
or create a presumption that the Holders are in any way acting in concert
with respect to such obligations or the transactions contemplated by this
Agreement. Each Holder shall be entitled to protect and enforce its rights,
including without limitation the rights arising out of this Agreement, and
it shall not be necessary for any other Holder to be joined as an
additional party in any proceeding for such purpose.
********************
14
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
SILVERSTAR HOLDINGS, LTD.
By: /s/ Clive Kabatznik
---------------------------------
Name: Clive Kabatznik
Title: Chief Executive Officer
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
15
[SIGNATURE PAGE OF HOLDERS TO SSTR RRA]
Name of Holder: DKR SoundShore Oasis Holding Fund Ltd.
Signature of Authorized Signatory of Holder: __________________________
Name of Authorized Signatory: Brad Caswell
Title of Authorized Signatory: Director
16
Plan of Distribution
--------------------
Each Selling Stockholder (the "Selling Stockholders") of the common
stock ("Common Stock") of Silverstar Holdings, Ltd., a Bermuda corporation (the
"Company") and any of their pledgees, assignees and successors-in-interest may,
from time to time, sell any or all of their shares of Common Stock on the
Trading Market or any other stock exchange, market or trading facility on which
the shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. A Selling Stockholder may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o settlement of short sales entered into after the effective
date of the registration statement of which this prospectus is
a part;
o broker-dealers may agree with the Selling Stockholders to sell
a specified number of such shares at a stipulated price per
share;
o a combination of any such methods of sale;
o through the writing or settlement of options or other hedging
transactions, whether through an options exchange or
otherwise; or
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), if available, rather
than under this prospectus.
Broker-dealers engaged by the Selling Stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated, but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction not in excess of a customary brokerage commission
in compliance with NASDR Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with NASDR IM-2440.
17
In connection with the sale of the Common Stock or interests therein,
the Selling Stockholders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the
Common Stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of the Common Stock short and deliver these
securities to close out their short positions, or loan or pledge the Common
Stock to broker-dealers that in turn may sell these securities. The Selling
Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Each Selling Stockholder has
informed the Company that it does not have any written or oral agreement or
understanding, directly or indirectly, with any person to distribute the Common
Stock. In no event shall any broker-dealer receive fees, commissions and markups
which, in the aggregate, would exceed eight percent (8%).
The Company is required to pay certain fees and expenses incurred by
the Company incident to the registration of the shares. The Company has agreed
to indemnify the Selling Stockholders against certain losses, claims, damages
and liabilities, including liabilities under the Securities Act.
Because Selling Stockholders may be deemed to be "underwriters" within
the meaning of the Securities Act, they will be subject to the prospectus
delivery requirements of the Securities Act. In addition, any securities covered
by this prospectus which qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than under this prospectus.
Each Selling Stockholder has advised us that they have not entered into any
written or oral agreements, understandings or arrangements with any underwriter
or broker-dealer regarding the sale of the resale shares. There is no
underwriter or coordinating broker acting in connection with the proposed sale
of the resale shares by the Selling Stockholders.
We agreed to keep this prospectus effective until the earlier of (i)
the date on which the shares may be resold by the Selling Stockholders without
registration and without regard to any volume limitations by reason of Rule
144(e) under the Securities Act or any other rule of similar effect or (ii) all
of the shares have been sold pursuant to the prospectus or Rule 144 under the
Securities Act or any other rule of similar effect. The resale shares will be
sold only through registered or licensed brokers or dealers if required under
applicable state securities laws. In addition, in certain states, the resale
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
18
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the resale shares may not simultaneously
engage in market making activities with respect to the Common Stock for the
applicable restricted period, as defined in Regulation M, prior to the
commencement of the distribution. In addition, the Selling Stockholders will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including Regulation M, which may limit the timing of
purchases and sales of shares of the Common Stock by the Selling Stockholders or
any other person. We will make copies of this prospectus available to the
Selling Stockholders and have informed them of the need to deliver a copy of
this prospectus to each purchaser at or prior to the time of the sale.
19
Annex B
SILVERSTAR HOLDINGS, LTD.
SELLING SECURITYHOLDER NOTICE AND QUESTIONNAIRE
The undersigned beneficial owner of common stock, par value $.01 per
share (the "Common Stock"), of Silverstar Holdings, Ltd., a Bermuda corporation
(the "Company"), (the "Registrable Securities") understands that the Company has
filed or intends to file with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (the "Registration
Statement") for the registration and resale under Rule 415 of the Securities Act
of 1933, as amended (the "Securities Act"), of the Registrable Securities, in
accordance with the terms of the Registration Rights Agreement, dated as of
October 31, 2005 (the "Registration Rights Agreement"), among the Company and
the Purchasers named therein. A copy of the Registration Rights Agreement is
available from the Company upon request at the address set forth below. All
capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Registration Rights Agreement.
Certain legal consequences arise from being named as a selling
securityholder in the Registration Statement and the related prospectus.
Accordingly, holders and beneficial owners of Registrable Securities are advised
to consult their own securities law counsel regarding the consequences of being
named or not being named as a selling securityholder in the Registration
Statement and the related prospectus.
NOTICE
The undersigned beneficial owner (the "Selling Securityholder") of
Registrable Securities hereby elects to include the Registrable Securities owned
by it and listed below in Item 3 (unless otherwise specified under such Item 3)
in the Registration Statement.
20
The undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:
QUESTIONNAIRE
1. Name.
(a) Full Legal Name of Selling Securityholder
--------------------------------------------------------------
--------------------------------------------------------------
(b) Full Legal Name of Registered Holder (if not the same as (a)
above) through which Registrable Securities Listed in Item 3
below are held:
--------------------------------------------------------------
--------------------------------------------------------------
(c) Full Legal Name of Natural Control Person (which means a
natural person who directly or indirectly alone or with others
has power to vote or dispose of the securities covered by the
questionnaire):
--------------------------------------------------------------
--------------------------------------------------------------
2. Address for Notices to Selling Securityholder:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Telephone:----------------------------------------------------------------------
Fax:----------------------------------------------------------------------------
Contact Person:-----------------------------------------------------------------
3. Beneficial Ownership of Registrable Securities:
(a) Type and Principal Amount of Registrable Securities
beneficially owned:
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
21
4. Broker-Dealer Status:
(a) Are you a broker-dealer?
Yes |_| No |_|
(b) If "yes" to Section 4(a), did you receive your Registrable
Securities as compensation for investment banking services to
the Company.
Yes |_| No |_|
Note: If no, the Commission's staff has indicated that you should be
identified as an underwriter in the Registration Statement.
(c) Are you an affiliate of a broker-dealer?
Yes |_| No |_|
(d) If you are an affiliate of a broker-dealer, do you certify
that you bought the Registrable Securities in the ordinary
course of business, and at the time of the purchase of the
Registrable Securities to be resold, you had no agreements or
understandings, directly or indirectly, with any person to
distribute the Registrable Securities?
Yes |_| No |_|
Note: If no, the Commission's staff has indicated that you should be
identified as an underwriter in the Registration Statement.
5. Beneficial Ownership of Other Securities of the Company Owned by the
Selling Securityholder.
Except as set forth below in this Item 5, the undersigned is not the
beneficial or registered owner of any securities of the Company other
than the Registrable Securities listed above in Item 3.
(a) Type and Amount of Other Securities beneficially owned by the
Selling Securityholder:
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
22
6. Relationships with the Company:
Except as set forth below, neither the undersigned nor any of its
affiliates, officers, directors or principal equity holders (owners of
5% of more of the equity securities of the undersigned) has held any
position or office or has had any other material relationship with the
Company (or its predecessors or affiliates) during the past three
years.
State any exceptions here:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
The undersigned agrees to promptly notify the Company of any
inaccuracies or changes in the information provided herein that may occur
subsequent to the date hereof at any time while the Registration Statement
remains effective.
By signing below, the undersigned consents to the disclosure of the
information contained herein in its answers to Items 1 through 6 and the
inclusion of such information in the Registration Statement and the related
prospectus and any amendments or supplements thereto. The undersigned
understands that such information will be relied upon by the Company in
connection with the preparation or amendment of the Registration Statement and
the related prospectus.
IN WITNESS WHEREOF the undersigned, by authority duly given, has caused
this Notice and Questionnaire to be executed and delivered either in person or
by its duly authorized agent.
Dated: __________________ Beneficial Owner:______________________
By:
---------------------------------
Name:
Title:
PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND
RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:
23