UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant
to Rule 14a-11(c) or Rule 14a-12
Silverstar Holdings, Ltd.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction
applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
SILVERSTAR HOLDINGS, LTD.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 30, 2006
NOTICE IS HEREBY GIVEN that the 2005 Annual Meeting of Stockholders
(the "Meeting") of Silverstar Holdings, Ltd. (the "Company") will be held at the
offices of Troutman Sanders LLP, The Chrysler Building, 405 Lexington Avenue,
Ninth Floor, New York, New York on Thursday, March 30, 2006, at 12:00 p.m.,
Eastern Standard Time, to consider and act upon the following matters:
1. the election of five (5) directors of the Company to serve as the
Board of Directors until the next annual meeting of stockholders
and until their successors are duly elected and qualified;
2. a proposal to approve the issuance of up to (a) 2,876,870 shares
of the Company's common stock underlying a $5,000,000 principal
amount Variable Rate Secured Convertible Debenture due October
31, 2008 and (b) 791,139 shares of the Company's common stock
underlying a warrant dated October 31, 2005;
3. a proposal to ratify the appointment Rachlin Cohen & Holtz LLP as
the Company's independent public accountants for the fiscal year
ending June 30, 2006; and
4. the transaction of such other business as may properly come
before the Meeting or any adjournment or postponement thereof.
Information regarding the matters to be acted upon at the Meeting is
contained in the accompanying Proxy Statement.
The close of business on February 28, 2006 has been fixed as the record
date for the determination of stockholders entitled to notice of and to vote at
the Meeting and any adjournment or postponement thereof. A list of such
stockholders will be open for examination by any stockholder for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting at Troutman Sanders LLP, The Chrysler Building, 405
Lexington Avenue, Ninth Floor, New York, New York 10174.
By Order of the Board of Directors,
Dawna Ferguson,
Secretary
Hamilton, Bermuda
March 6, 2006
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IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. EACH STOCKHOLDER
IS URGED TO SIGN, DATE AND RETURN THE ENCLOSED FORM OF PROXY WHICH IS BEING
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. AN ENVELOPE ADDRESSED TO THE
COMPANY'S TRANSFER AGENT IS ENCLOSED FOR THAT PURPOSE AND NEEDS NO POSTAGE IF
MAILED IN THE UNITED STATES.
- --------------------------------------------------------------------------------
SILVERSTAR HOLDINGS, LTD.
Clarendon House
Church Street, Hamilton HM CX, Bermuda
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
MARCH 30, 2006
This Proxy Statement is furnished to the holders of our common stock,
par value $.01 per share, and to the holders of our Class B common stock, par
value $.01 per share in connection with the solicitation of proxies by and on
behalf of our Board of Directors for use at our 2005 Annual Meeting of
Stockholders (the "Annual Meeting") to be held on Thursday, March 30, 2006, at
12:00 p.m., Eastern Standard Time, at the offices of Troutman Sanders LLP, The
Chrysler Building, 405 Lexington Avenue, Ninth Floor, New York, New York, and at
any adjournments or postponements of such meeting. The Annual Meeting is being
held for the purposes set forth in the accompanying Notice of Annual Meeting.
The approximate mailing date of this Proxy Statement is March 6, 2006.
The close of business on February 28, 2006 has been fixed by the Board
of Directors as the record date for the determination of stockholders entitled
to notice of, and to vote at, the Annual Meeting and any adjournments or
postponements of such meeting. As of the record date, there were 8,296,747
shares of our common stock outstanding and 814,786 shares of our Class B common
stock outstanding, which are the only classes of our voting securities issued
and outstanding. Each share of our common stock outstanding on the record date
will be entitled to one vote on all matters to come before the Annual Meeting.
Each share of our Class B common stock outstanding on the record date will be
entitled to five votes on all matters to come before the Annual Meeting.
Cumulative voting is not permitted. A majority of our total issued voting
shares, represented in person or by proxy, is required to constitute a quorum
for the transaction of business at the Annual Meeting. Proxies submitted which
contain votes withheld in the election of directors, abstentions or broker
non-votes will be deemed present at the Annual Meeting in determining the
presence of a quorum.
The affirmative vote of a majority of the votes cast, in person or by
proxy, at the Annual Meeting will be required (i) to elect each director
(Proposal 1), (ii) to approve the issuance of up to (a) 2,876,870 shares of the
Company's common stock underlying a $5,000,000 principal amount Variable Rate
Secured Convertible Debenture due October 31, 2008 and (b) 791,139 shares of the
Company's common stock underlying a warrant dated October 31, 2005 (Proposal 2),
and (iii) to ratify the appointment of Rachlin Cohen & Holtz LLP as our
independent public accountants for our fiscal year ending June 30, 2006
(Proposal 3). Abstentions, broker non-votes and votes not otherwise cast at the
Annual Meeting will not be counted for the purpose of determining the outcome of
the vote on Proposals 1, 2 and 3.
OUR BOARD OF DIRECTORS HAS UNANIMOUSLY RECOMMENDED A VOTE FOR EACH
NOMINEE NAMED IN THE PROXY, FOR PROPOSAL 2 AND FOR PROPOSAL 3.
It is important that your shares are represented at the Annual Meeting,
and, therefore, all stockholders are cordially invited to attend the Annual
Meeting. However, whether or not you plan to attend the Meeting, you are urged
to, as promptly as possible, mark, sign, date and return enclosed proxy card,
which requires no postage if mailed in the United States in the enclosed
pre-paid envelope. If you hold shares directly in your name and attend the
Annual Meeting, you may vote your shares in person, even if you previously
submitted a proxy card.
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Unless otherwise specified, all proxies received will be voted FOR the
election of all nominees named herein to serve as directors and FOR each of the
other proposals set forth in the accompanying Notice of Annual Meeting of
Stockholders and described below. A proxy may be revoked at any time before its
exercise by delivering written notice of revocation to our Secretary, by
executing a proxy bearing a later date or by attendance at the Annual Meeting
and electing to vote in person. Attendance at the Annual Meeting without voting
in person will not constitute revocation of a proxy.
Our Annual Report on Form 10-K for the 2005 fiscal year and our
Quarterly Reports on Form 10-Q for the fiscal quarters ended September 30, 2005
and December 31, 2005 (which is not part of the proxy soliciting material),
which contains financial data and other information about us, is also enclosed
herewith. EXHIBITS TO THE FORM 10-K WILL BE FURNISHED WITHOUT CHARGE TO ANY
STOCKHOLDER SO REQUESTING BY WRITING TO CORPORATE SECRETARY, SILVERSTAR
HOLDINGS, LTD., 1900 GLADES ROAD, SUITE 435, BOCA RATON, FL 33431.
3
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of January 10, 2006, certain
information as to the beneficial ownership of our common stock and Class B
common stock by:
o each person known by us to own more than five percent (5%) of our
outstanding shares;
o each of our directors;
o our executive officer named in the Summary Compensation Table under
"Executive Compensation;" and
o all of our directors and executive officer as a group.
Amount and Nature of Beneficial
-------------------------------
Ownership (1)
-------------
Percentage of
Name and Address of Class B Percentage of Voting
------- ------------- ------
Beneficial Shareholder Common Stock Common Ownership Power
- ---------------------- ------------ ------ --------- -----
Stock (2) (1)(3) (1)(3)
--------- ------ ------
Michael Levy 115,090 (4) 590,137 7.8% 25.2%
9511 West River Street
Schiller Park, Illinois
60176
Clive Kabatznik 1,163,490 (5) 190,000 14.9% 17.3%
1900 Glades Road
Suite 435
Boca Raton, Florida 33431
Cornelius J. Roodt 134,090 (6) 0 1.5% 1.1%
P.O. Box 4001
Kempton Park
South Africa
John Grippo 59,090 (7) 0 * *
1900 Glades Road
Suite 435
Boca Raton, Florida 33431
Douglas Brisotti 24,090 (8) 0 * *
1900 Glades Road
Suite 435
Boca Raton, Florida 33431
All executive officers and 1,490,850 (9) 780,137 24.2% 43.6%
directors as a group (5
persons) * Less than 1%.
(1) Beneficial ownership is calculated in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934. Shares subject to stock options,
warrants or convertible securities, for purposes of this table, are
considered beneficially owned only to the extent currently exercisable
or exercisable within 60 days after November 16, 2005.
(2) Except as otherwise indicated, each of the parties listed has sole
voting and investment power with respect to all shares of Class B
common stock indicated above.
4
(3) For the purposes of this calculation, our common stock and our Class B
common stock are treated as a single class of common stock. Our Class B
common stock is entitled to five votes per share, whereas our common
stock is entitled to one vote per share.
(4) Includes 55,000 shares of our common stock issuable upon exercise of
options that are immediately exercisable and 9,090 shares of restricted
stock.
(5) Includes 975,000 shares of our common stock issuable upon exercise of
options that are immediately exercisable and 9,090 shares of restricted
stock.
(6) Includes 115,000 shares of our common stock issuable upon exercise of
options that are immediately exercisable and 9,090 shares of restricted
stock.
(7) Includes 45,000 shares of our common stock issuable upon exercise of
options that are immediately exercisable and 9,090 shares of restricted
stock.
(8) Includes 15,000 shares of our common stock issuable upon exercise of
options that are immediately exercisable and 9,090 shares of restricted
stock.
(9) Includes 1,225,000 shares of our common stock issuable upon exercise of
options that are immediately exercisable and 45,450 shares of
restricted stock.
5
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PROPOSAL 1
ELECTION OF DIRECTORS
---------------------------------------------
At the Annual Meeting, our stockholders will elect five (5) directors
to serve until the next annual meeting of stockholders and until their
respective successors are elected and qualified. Unless otherwise directed, all
proxies will be voted in favor of the election of Messrs. Levy, Kabatznik,
Roodt, Brisotti and Grippo to serve as directors upon their nomination at the
Annual Meeting. All nominees currently serve on our Board of Directors and their
terms expire at the Annual Meeting.
Each nominee has advised us of his willingness to serve as a director
and we have no reason to expect that any of the nominees will be unable to stand
for election at the date of the Annual Meeting. In the event that any nominee
should become unavailable for election to the Board of Directors for any reason,
the persons named in the proxies have discretionary authority to vote such
proxies for one or more alternative nominees who will be designated by the then
existing Board of Directors.
The Board of Directors unanimously recommends that stockholders vote
FOR the election of each nominee listed in this proxy statement.
INFORMATION ABOUT NOMINEES
The following table sets forth information regarding the nominees for
director and our executive officer:
NAME AGE DIRECTOR SINCE POSITIONS WITH THE COMPANY
---- --- -------------- --------------------------
Michael Levy 59 1995 Chairman of the Board of Directors
Clive Kabatznik 49 1995 Vice Chairman of the Board of Directors,
Chief Executive Officer, President, Chief
Financial Officer and Director
Cornelius J. Roodt 46 1996 Director
John T. Grippo 50 2003 Director
Douglas Brisotti 37 2005 Director
All directors hold office until their respective successors are elected, or
until death, resignation or removal. Officers hold office until the meeting of
the Board of Directors following each Annual Meeting of Stockholders and until
their successors have been chosen and qualified.
MICHAEL LEVY is our co-founder and has served as Chairman of our Board of
Directors since our inception in 1995. Since 1987, Mr. Levy has been the Chief
Executive Officer and Chairman of the Board of Arpac L.P., a Chicago-based
manufacturer of plastic packaging machinery.
CLIVE KABATZNIK is our co-founder and has served as a director and our President
since our inception in 1995 and as our Vice Chairman, Chief Executive Officer
and Chief Financial Officer since October 1995. Mr. Kabatznik has served as
President of Colonial Capital, Inc. a Miami-based investment banking company
that specializes in advising middle market companies in areas concerning
mergers, acquisitions, private and public agency funding and debt placements.
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CORNELIUS J. ROODT has served as a member of our Board of Directors since
December 1996 and was appointed Managing Director and Chief Financial Officer of
one of our subsidiaries, First South African Holdings (Pty.) Ltd., in July 1996.
Mr. Roodt was responsible for overseeing all of the South African operations of
First South African Holdings (Pty.) Ltd. Mr. Roodt led the buyout of First
Lifestyle Holdings and he is currently Chief Executive of the successor company,
First Lifestyle Holdings, (Pty) Ltd. He is no longer an executive officer of any
of our subsidiaries. From February 1994 to June 1996, Mr. Roodt was a senior
partner at Price Waterhouse Corporate Finance, South Africa. From January 1991
to January 1994, he was an audit partner at Price Waterhouse, South Africa.
JOHN GRIPPO, has served as a member of our Board of Directors since December
2004 and has been the president of his own financial management practice, John
Grippo, Inc. since September 2000. His firm provides services as Chief Financial
Officer to small to mid-sized public and private companies and also provides
other related accounting and consulting services. Prior to that, Mr. Grippo
served for ten years as a Chief Financial Officer to companies in the
housewares, electric vehicles and financial services industries. He worked for
five years as an auditor with Arthur Andersen, LLP, followed by seven years in
various accounting positions in the financial services industry. He is a member
of the New York Society of Certified Public Accountants and the American
Institute of Certified Public Accountants.
DOUGLAS BRISOTTI has served as a member of our Board of Directors since March
2005 and most recently served as the president of the games/media division at
theglobe.com, an Internet communications corporation, and its subsidiaries since
October 2003. Prior to theglobe.com, Mr. Brisotti served as group director for
Yahoo! Inc.'s Southeast United States and Caribbean regions from December 2000
to December 2002. At Yahoo! he was primarily responsible for strategic client
revenue relationships, including content integration, merchant integration,
sponsorships and advertising, as well as expanding relationship internationally.
BOARD MEETINGS AND COMMITTEES
Our Board of Directors is responsible for our overall management.
During the fiscal year ended June 30, 2005, our Board of Directors held four
meetings and acted by unanimous written consent once. Each incumbent director
attended at least 75% of all meetings of the Board and committees on which the
person served which were held during the year.
Our Board of Directors has a separate audit committee, compensation
committee and nominating committee. The audit committee is currently composed of
Michael Levy, John Grippo and Cornelius J. Roodt, each of whom are independent
directors as defined in Rule 10A-3 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Board of Directors has determined that Messrs.
Grippo and Roodt meet the standards of an audit committee "financial expert" as
defined by the Sarbanes Oxley Act of 2002. The audit committee is responsible
for annually selecting and retaining the independent auditors, reviewing with
the independent auditors the scope and results of the audit engagement and
establishing and monitoring our financial policies and control procedures. The
responsibilities of the audit committee are set forth in an Audit Committee
Charter adopted by our Board of Directors, a copy of which was included as an
appendix to the Company's 2004 proxy statement, filed with the Securities and
Exchange Commission (the "SEC") on November 15, 2004. The audit committee met
five times during fiscal year ended June 30, 2005.
The compensation committee is currently composed of Michael Levy and
John Grippo. These persons are intended to be non-employee directors within the
meaning of Rule 16b-3(b)(3)(i) promulgated under the Exchange Act. The
compensation committee has power and authority with respect to all matters
pertaining to compensation payable and the administration of employee benefits,
deferred compensation and our stock option plans. The Compensation Committee met
three times during fiscal year ended June 30, 2005.
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The Company's nominating committee is currently composed of Douglas
Brisotti and John Grippo, each of whom are independent directors as defined in
Rule 4200(a)(15) of the NASD's listing standards.
The function of the nominating committee is to consider and recommend
to the Board candidates for appointment or election as directors. The specific
functions and responsibilities of the nominating committee are set forth in a
written charter of the nominating committee, adopted by the Board of Directors,
a copy of which was included as an appendix to the Company's 2004 proxy
statement, filed with the SEC on November 15, 2004.
A nominee to the Board of Directors must have such experience in
business or financial matters as would make such nominee an asset to the Board
of Directors. In recommending director candidates, the nominating committee
takes into consideration such factors as it deems appropriate based on the
Company's current needs. These factors may include: professional and personal
ethics and integrity; business, professional, or industry knowledge and
contacts; business and financial sophistication, common sense and wisdom, and
the ability to make informed judgments on a wide range of issues; relevant
skills and experience demonstrated through business, professional, charitable or
civic affairs; the ability to exercise independent judgment; as sell as the
candidate's ability to devote the required time and effort to serve on the
Board.
The nominating committee will consider for nomination candidates
recommended by stockholders if the stockholders comply with the following
requirements: If a stockholder wishes to recommend a candidate to the nominating
committee for consideration as a Board of Directors' nominee, such stockholder
must submit in writing to the nominating committee the recommended candidate's
name, a brief resume setting forth the recommended candidate's business and
educational background and qualifications for service, any other information
relating to such nominee that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Exchange Act, and a notarized consent
signed by the recommended candidate stating the recommended candidate's
willingness to be nominated and to serve. This information must be delivered to
the nominating committee of the Company at the Company's address and must be
received in a timely manner as specified in the Company's proxy statements
(these timing requirements are not applicable to persons nominated by or at the
direction of the Board of Directors). The timing requirements with respect to
next year's annual meeting are described in the section of this proxy statement
entitled "Stockholder Proposals." The nominating committee may request further
information if it determines a potential candidate may be an appropriate
nominee.
DIRECTOR COMPENSATION
Except for Mr. Levy, our directors do not receive fixed compensation
for their services as directors other than options to purchase 15,000 shares of
our common stock granted to each director and 9,090 shares of restricted common
stock and options to purchase 25,000 shares of our common stock granted to the
Chairman of the Board of Directors, and options to purchase 20,000 shares of our
common stock granted to the Chairman of the Audit Committee, in each case under
our 1995 Stock Option Plan. Mr. Levy receives an annual consulting fee of
$60,000 and options to purchase 25,000 shares of our common stock per year,
solely in connection with his service as Chairman of our Board of Directors.
Directors are reimbursed for their reasonable out-of-pocket expenses incurred in
connection with their duties.
EXECUTIVE COMPENSATION
The following summary compensation table sets forth the aggregate
compensation we paid or accrued to our Chief Executive Officer during the fiscal
years ended June 30, 2003, June 30, 2004 and June 30, 2005. Apart from our Chief
Executive Officer, whose annual salary is $325,000, none of the executive
officers of the Company or any of the Company's subsidiaries received
compensation in excess of $100,000 during the fiscal year ended June 30, 2005.
8
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
FISCAL
NAME AND YEAR SECURITIES
PRINCIPAL POSITION ENDED OTHER ANNUAL RESTRICTED UNDERLYING
JUNE 30, SALARY BONUS COMPENSATION STOCK AWARDS STOCK OPTIONS
$ $
Clive Kabatznik, 2005 320,000 0 --- 9,090 15,000
President, Chief 2004 315,000 0 --- --- 5,000
Executive Officer 2003 315,000 0 --- --- 5,000
and Chief Financial
Officer
The options granted to Mr. Kabatznik during fiscal year ended June 30, 2005
represent:
o an option granted under our 1995 Stock Option Plan to purchase 15,000
shares of our common stock, which is currently exercisable at an
exercise price of $1.06 per share;
o an option granted under our 1995 Stock Option Plan to purchase 50,000
shares of our common stock, which is currently exercisable at an
exercise price of $2.00 per share.
o an option granted to purchase 450,000 shares of our common stock,
which is currently exercisable at an exercise price of $2.00 per
share.
The options granted to Mr. Kabatznik during fiscal year ended June 30, 2004
represent:
o an option granted under our 1995 Stock Option Plan to purchase 5,000
shares of our common stock, which is currently exercisable at an
exercise price of $1.61 per share;
The options granted to Mr. Kabatznik during fiscal year ended June 30, 2003
represent:
o an option granted under our 1995 Stock Option Plan to purchase 5,000
shares of our common stock, which is currently exercisable at an
exercise price of $0.16 per share.
OPTIONS GRANTED IN FISCAL 2005
The following table sets forth the details of options to purchase
common stock we granted to our named executive officers (consisting solely of
our Chief Executive Officer) during fiscal year ended June 30, 2005, including
the potential realized value over the 5 year term of the option based on assumed
rates of stock appreciation of 5% and 10%, compounded annually. These assumed
rates of appreciation comply with the rules of the Securities and Exchange
Commission and do not represent our estimate of future stock price. Actual
gains, if any, on stock option exercises will be dependent on the future
performance of our common stock. Each option is immediately exercisable.
9
OPTIONS GRANTED
---------------
POTENTIAL REALIZABLE
NUMBER OF PERCENT OF TOTAL PER VALUE AT ASSUMED ANNUAL
NAME SECURITIES TO SHARE RATE OF STOCK PRICE
UNDERLYING EMPLOYEES IN EXERCISE EXPIRATION DATE APPRECIATION
OPTIONS FISCAL YEAR PRICE FOR OPTION TERM
5% 10%
Clive Kabatznik 15,000 2.4% $1.06 December 18, $15,000 $21,000
2009
Clive Kabatznik 500,000 81.3% $2.00 January 31, $485,000 $693,000
2010
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information concerning the
exercise of options held by our named executive officers (consisting solely of
our Chief Executive Officer) during the fiscal year ended June 30, 2005 and the
number of shares of our common stock underlying unexercised stock options
granted by us to our named executive officers (consisting solely of our Chief
Executive Officer) and the value of those options at June 30, 2005.
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN THE
SHARES ACQUIRED VALUE UNDERLYING OPTIONS AT MONEY OPTIONS AT FISCAL
NAME OF EXECUTIVE OFFICER UPON EXERCISE REALIZED (1) FISCAL YEAR END YEAR-END (2)
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
Clive Kabatznik 15,000 $9,250 975,000 --- $8,650 $---
(1) Based on the closing bid price for our common stock on the Nasdaq National
Market on the date of exercise less the applicable exercise price of the
options.
(2) Based on the closing bid price for our common stock on the Nasdaq National
Market on June 30, 2005 or $1.63 less the exercise price of the options.
EMPLOYMENT AGREEMENTS
On January 29, 2005, the Company's Board of Directors approved a new
Employment Agreement with Clive Kabatznik (the "Employment Agreement"). Pursuant
to the Employment Agreement, Mr. Kabatznik will serve as the Chief Executive
Officer, President and Chief Financial Officer of the Company beginning as of
January 1, 2005 and continuing through and until December 31, 2009. As
compensation for his services, Mr. Kabatznik will receive an annual base salary
of $325,000 increasing by $10,000 in 2006 and increasing to $350,000 per annum
from the beginning of 2007 to the end of 2009. During the term of the agreement,
Mr. Kabatznik shall be entitled to an annual bonus in an amount to be determined
by the Company's Board of Directors and Compensation Committee based on results
of operations of the Company for each fiscal year starting in the fiscal year
ending June 30, 2006. Such bonus will be dependent on the Company's net income
from operations achieving a rate of return on equity of not less than 20%
annually.
1995 STOCK OPTION PLAN
Our Board of Directors has adopted and our shareholders, prior to our
initial public offering, approved our 1995 Stock Option Plan. Our 1995 Stock
Option Plan provides for the grant of:
o options that are intended to qualify as incentive stock options within
the meaning of Section 422 of the Internal Revenue Code of 1986 to key
employees; and
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o options not intended to so qualify to key employees, including our
directors and officers, and to directors and consultants who are not
employees.
The total number of shares of our common stock for which options may be
granted under our 1995 Stock Option Plan is 850,000 shares.
Our 1995 Stock Option Plan is administered by the compensation
committee of our Board of Directors. The compensation committee will determine
the terms of options exercised, including the exercise price, the number of
shares subject to the option and the terms and conditions of exercise. No option
granted under our 1995 Stock Option Plan is transferable by the optionee other
than by will or the laws of descent and distribution and each option is
exercisable during the lifetime of the optionee only by such optionee or his
legal representatives.
The exercise price of incentive stock under our 1995 Stock Option Plan
must be at least equal to 100% of the fair market value of such shares on the
date of grant, or 110% of fair market value in the case of an optionee who owns
or is deemed to own stock possessing more than 10% of the voting rights of our
outstanding capital stock. The term of each option will be established by the
compensation committee, in its sole discretion. However, the maximum term for
each incentive stock option granted under our 1995 Stock Option Plan is ten
years, or five years in the case of an optionee who owns or is deemed to own
stock possessing more than 10% of the total combined voting power of our
outstanding capital stock. Options will become exercisable at such times and in
such installments as the compensation committee will provide in the terms of
each individual option.
The maximum number of shares for which options may be granted to any
individual in any fiscal year is 210,000. Our 1995 Stock Option Plan also
contains an automatic option grant program for our directors. Each of our
non-employee directors is automatically granted an option to purchase 10,000
shares of our common stock following each annual meeting of shareholders. In
addition, each of our employee directors is automatically granted an option to
purchase 5,000 shares of our common stock following each annual meeting of
shareholders. Each grant has an exercise price per share equal to the fair
market value of the our common stock on the grant date, is immediately
exercisable and has a term of five years measured from the grant date, subject
to earlier termination if an optionee's service as a Board member is terminated
for cause.
Through December 31, 2005, we have granted options to purchase 255,000
shares of our common stock under our 1995 Stock Option Plan, 165,000 of which
have been exercised. The 1995 Stock Option Plan was terminated on December 19,
2005.
2004 STOCK INCENTIVE PLAN
Our board of directors has adopted and our shareholders approved our
2004 Stock Incentive Plan (the "2004 Plan"). The 2004 Plan is intended to
provide an incentive to employees (including executive officers), and directors
of and consultants to the Company and its affiliates, and is intended to be the
successor plan to the 1995 Stock Option Plan (which was terminated on December
19, 2005). The 2004 Plan authorizes the issuance of a maximum of 1,000,000
shares of our common stock (subject to adjustment as described in the 2004 Plan)
pursuant to stock grants or options to purchase common stock to employees
(including officers and directors who are employees) and non-employee directors
of, and consultants to, us.
The 2004 Plan provides for the grant of (i) "incentive stock options"
("ISOs") within the meaning of Section 422(b) of the Internal Revenue Code of
1986, as amended (the "Code"), (ii) non-qualified stock options (which are stock
options that do not qualify as ISOs), and (iii) stock awards.
The 2004 Plan is administered by the compensation committee of our
Board of Directors. The compensation committee will determine the terms of
options exercised, including the exercise price, the number of shares subject to
the option and the terms and conditions of exercise.
11
The exercise price of each option will be determined by the
compensation committee; provided, however, that the exercise price of an ISO may
not be less than the fair market value of our common stock on the date of grant
(110% of such fair market value if the optionee owns (or is deemed to own) more
than 10% of our voting power). Options may be granted for terms determined by
the compensation committee; provided, however, that the term of an ISO may not
exceed 10 years (5 years if the optionee owns (or is deemed to own) more than
10% of our voting power). The maximum number of shares of our common stock for
which options may be granted to an employee in any calendar year is 230,000. In
addition, the aggregate fair market value of shares with respect to which ISOs
may be granted to an employee which are exercisable for the first time during
any calendar year may not exceed $100,000. The exercise price of each option is
payable in full upon exercise or, if the applicable stock option contract
entered into by us with an optionee permits, in installments.
Options may not be transferred other than by will or by the laws of
descent and distribution, and may be exercised during the optionee's lifetime
only by the optionee or his or her legal representatives. Except as may
otherwise be provided in the applicable option contract, if the optionee's
relationship with us as an employee or consultant is terminated for any reason
(other than the death or disability of the optionee), the option may be
exercised, to the extent exercisable at the time of termination of such
relationship, within three months thereafter, but in no event after the
expiration of the term of the option. We may withhold cash and/or shares of our
common stock having an aggregate value equal to the amount which we determine is
necessary to meet its obligations to withhold any federal, state and/or local
taxes or other amounts incurred by reason of the grant or exercise of an option,
its disposition or the disposition of shares acquired upon the exercise of the
option. Alternatively, we may require the optionee to pay us such amount, in
cash, promptly upon demand.
Through December 31, 2005, we have not granted any options under our
2004 Stock Incentive Plan. The 2004 Stock Incentive Plan will terminate on
November 12, 2014.
NON-PLAN STOCK OPTIONS
During the fiscal year ended June 30, 2005, we granted non-plan stock
options to purchase 450,000 shares of our common stock at an exercise price of
$2.00 per share and 180,000 options at an exercise price of $0.81 per share.
PERFORMANCE GRAPH
The following graph compares the cumulative return to holders of our
common stock for the period commencing June 30, 2000 and ending September 30,
2005 with the NASDAQ Composite and the Dow Jones Internet Commerce Index as a
peer group index for the same period. The comparison assumes $100 was invested
on June 30, 2000 in our common stock and in each of the comparison groups. We
have paid no dividends to shareholders to date.
12
[GRAPHIC OMITTED]
06/00 06/01 06/02 06/03 06/04 06/05
Silverstar Holdings, Ltd. $100 $24.62 $ 9.23 $14.77 $18.28 $33.87
Nasdaq Stock Market-US Index $100 $54.38 $36.70 $40.66 $75.82 $76.21
ECM Dow Jones Internet Commerce $100 $41.50 $27.70 $48.66 $40.50 $43.25
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of our compensation committee of our Board of
Directors is now or ever has been one of our officers or employees. None of our
executive officers serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving on our
Board of Directors or our compensation committee.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee has reviewed Silverstar's audited financial statements for
the last fiscal year and discussed them with management.
Silverstar's independent auditors, Rachlin Cohen & Holtz LLP ("RCH")
have discussed with the Audit Committee the quality, in their judgment, as well
as the acceptability of Silverstar's accounting principles as applied in its
financial reporting. RCH, the Audit Committee and management have discussed
matters such as the consistency, clarity and completeness of accounting policies
and disclosures, the reasonableness of significant judgments and accounting
estimates, significant audit adjustments, and such other matters as are required
to be discussed with the Audit Committee under generally accepted auditing
standards.
RCH has discussed with the Audit Committee and has disclosed to the
Audit Committee, in writing, all relationships between RCH and its related
entities and Silverstar and its related entities that, in RCH's professional
judgment, may be reasonably thought to bear on independence and has confirmed
that in its professional judgment, RCH is independent of Silverstar within the
meaning of the Securities Act of 1933, as amended.
The Audit Committee, based on the review and discussions described
above, has recommended to the Board of Directors that the audited financial
statements be included in Silverstar's Annual Report on Form 10-K for the last
fiscal year.
Michael Levy, Chairman
John Grippo
Cornelius Roodt
13
REPORT OF THE COMPENSATION COMMITTEE
OVERVIEW AND PHILOSOPHY
The compensation committee is composed entirely of non-employee
directors and is responsible for developing and making recommendations to the
Board of Directors with respect to the Company's executive compensation
policies.
The objectives of the Company's executive compensation program are to:
o Support the achievement of desired Company performance.
o Provide compensation that will attract and retain superior talent and
reward performance.
EXECUTIVE OFFICER COMPENSATION PROGRAM
The Company's executive officer compensation program is comprised of
base salary, long-term incentive compensation in the form of stock options,
specific performance-based bonuses and various benefits, including medical and
pension plans generally available to employees of the Company. The Company and
its sole executive officer entered into an employment agreement dated January
29, 2005. See "Executive Compensation--Employment Agreements."
BASE SALARY
Base salary level for the Company's Chief Executive Officer is
competitively set relative to similar companies. In determining salary, the
compensation committee also takes into account individual experience and
performance and specific issues particular to the Company.
STOCK OPTION PROGRAM
The stock option program is the Company's long-term incentive plan for
providing an incentive to key employees (including directors and officers who
are key employees) and to directors who are not employees of the Company.
1995 STOCK OPTION PLAN
The 1995 Stock Option Plan authorizes the compensation committee to
award key executives stock options. Options granted under the 1995 Stock Option
Plan may be granted containing terms determined by the compensation committee,
including exercise period and price. The 1995 Stock Option Plan was terminated
on December 19, 2005.
2004 STOCK INCENTIVE PLAN
The 2004 Stock Incentive Plan authorizes the compensation committee to
award key executives stock options. Options granted under the 2004 Stock
Incentive Plan may be granted containing terms determined by the compensation
committee, including exercise period and price.
BENEFITS
The Company provides to our Chief Executive Officer medical and pension
benefits that generally are available to Company employees. The amount of
perquisites for our Chief Executive Officer, as determined in accordance with
the rules of the SEC relating to executive compensation, did not exceed 10% of
his of salary for the fiscal year ended June 30, 2005.
14
BONUS
The Company provides its Chief Executive Officer an annual bonus based
on results of operations of the Company for each fiscal year. Such bonus will be
dependant on the Company's net income from operations achieving a rate of return
on equity of not less than 20% annually.
CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation of the Chief Executive Officer is based upon the
criteria enunciated above. On January 29, 2005, the Company entered into a new
Employment Agreement with Mr. Clive Kabatznik. See "Executive Compensation -
Employment Agreement". Pursuant to the Employment Agreement, Mr. Kabatznik will
serve as the Chief Executive Officer, President and Chief Financial Officer of
the Company beginning as of January 1, 2005 and continuing through and until
December 31, 2009. As compensation for his services, Mr. Kabatznik will receive
an annual base salary of $325,000 increasing by $10,000 in 2006 and increasing
to $350,000 per annum from the beginning of 2007 to the end of 2009 in addition
to the bonuses described above.
Michael Levy
John Grippo
Members of the Compensation Committee
STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Any stockholder who wishes to send communications to the Board of
Directors should mail them addressed to the intended recipient by name or
position in care of: Corporate Secretary, Silverstar Holdings, Ltd., 1900 Glades
Road, Suite 435, Boca Raton, FL 33431. Upon receipt of any such communications,
the Corporate Secretary will determine the identity of the intended recipient
and whether the communication is an appropriate stockholder communication. The
Corporate Secretary will send all appropriate stockholder communications to the
intended recipient. An "appropriate stockholder communications" is a
communication from a person claiming to be a stockholder in the communication,
and the subject of which relates solely to the sender's interest as a
stockholder and not to any other personal or business interest.
In the case of communications addressed to the Board of Directors, the
Corporate Secretary will send appropriate stockholder communications to the
Chairman of the Board. In the case of communications addressed to the
independent or outside directors, the Corporate Secretary will send appropriate
stockholder communications to the Chairman of the audit committee. In the case
of communications addressed to committees of the Board, the Corporate Secretary
will send appropriate stockholder communications to the chairman of such
committee.
The Board of Directors encourages all of its members to attend the
Company's annual meeting of stockholders so that each director may listen to any
concerns that stockholders may have that are raised at the annual meeting. All
of the members of the Board of Directors attended the Company's 2004 annual
meeting of stockholders.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our executive officer and
directors, and persons who beneficially own more than 10% of our common stock,
to file initial reports of ownership and reports of changes of ownership with
the Securities and Exchange Commission and furnish copies of those reports to
us. Based solely on a review of the copies of the reports furnished to us to
date, or written representations
15
that no reports were required, we believe that all reports required to be filed
by such persons with respect to our fiscal year ended June 30, 2005 were timely
made.
CODE OF ETHICS
The Company's Board of Directors adopted a Code of Ethics which applies
to all of the Company's directors, executive officers and employees. A copy of
the Code of Ethics is available upon request to the Corporate Secretary,
Silverstar Holdings, Ltd., 1900 Glades Road, Suite 435, Boca Raton, FL 33431.
Directors are elected by a majority of the votes cast at the Meeting. Votes
withheld in the election of directors and abstentions or broker non-votes, if
any, will be deemed as present for the purposes of determining the presence of a
quorum at the Meeting. Vote withheld will be counted against the election of a
director, but abstentions or broker non-votes, if any, will not be counted
towards the election of any person as a director. Brokers who hold shares of
common stock as nominees will have discretionary authority to vote such shares
of common stock as nominees if they have not received voting instructions from
the beneficial owner by the tenth day before the meeting, provided that this
proxy statement has been transmitted to the beneficial holder at least 15 days
prior to the Meeting. In the event that any of the nominees should become
unavailable before the Meeting, it is intended that shares represented by the
enclosed proxy will be voted for one or more substitute nominees as may be
nominated by the current Board of Directors.
16
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PROPOSAL 2
APPROVAL OF THE ISSUANCE OF UP TO (A) 2,876,870 SHARES OF THE
COMPANY COMMON STOCK UNDERLYING A $5,000,000 PRINCIPAL
AMOUNT VARIABLE RATE SECURED CONVERTIBLE DEBENTURE DUE
OCTOBER 31, 2008 AND (B) 791,139 SHARES OF THE COMPANY'S
COMMON STOCK UNDERLYING A WARRANT DATED OCTOBER 31, 2005
-------------------------------------------------------------------
GENERAL
On October 21, 2005, the Company entered into a Securities Purchase
Agreement (the "Purchase Agreement") with DKR Soundshore Oasis Holding Fund Ltd.
(the "Holder"), under which the Company issued and sold to the Holder in a
private placement (i) $5,000,000 principal amount Variable Rate Convertible
Debenture due October 31, 2008 (the "Debenture") and (ii) a warrant to purchase
791,139 shares of the Company's common stock at an exercise price of $1.896 per
share (the "Warrant"). The transactions contemplated by the Purchase Agreement
were consummated on October 31, 2005. The Company has filed the Purchase
Agreement as an Exhibit to its Current Report on Form 8-K, filed with the SEC on
October 27, 2005.
The Company intends to use the proceeds from the sale of the securities
for working capital purposes.
DESCRIPTION OF THE DEBENTURE
The Debenture is convertible at any time, at the option of the Holder,
into up to 2,876,870 shares of the Company's common stock at a conversion price
of $1.738. Pursuant to the Purchase Agreement, the Company agreed to hold a
special meeting of shareholders (which may also be at the annual meeting of
shareholders) at the earliest practical date following the closing date, and in
any event within 60 calendar days following the closing date, for the purpose of
obtaining approval as may be required by the applicable rules and regulations of
the Nasdaq SmallCap Market from the shareholders of the Company with respect to
the foregoing transactions, including the issuance of the shares of common stock
issuable upon exercise of the Warrant and conversion of the Debenture in excess
of 19.99% of the issued and outstanding common stock of the Company on the
closing date ("Shareholder Approval"). Until such Shareholder Approval is
obtained, the Company may not issue upon conversion of the Debenture a number of
shares of common stock, which, when aggregated with any shares of common stock
issued upon exercise of the Warrant would exceed 19.999% of outstanding common
stock of the Company. In addition, the Company may not effect any conversion of
the Debenture and the Holder of the Debenture is not permitted to convert the
Debenture into shares of common stock if such conversion would give the Holder a
beneficial ownership of more than 4.99% of the outstanding shares of common
stock of the Company. This 4.99% limitation may be waived by the Holder upon not
less than 61 days prior notice to the Company.
The Company shall pay monthly interest on the outstanding principal
amount of the Debenture at a rate per annum equal to the prime rate for the
applicable interest period plus 1.5%. The interest rate for any interest period
shall be decreased by 2% to the extent that the volume weighted average trading
price of the common stock for five (5) consecutive trading days immediately
prior to such interest period (the "Trigger Price") exceeds the conversion price
by 25% (and shall be decreased by an additional 2% for every successive 25% that
the Trigger Price exceeds the then applicable conversion price but in no event
shall the interest rate be less than 0%). All overdue accrued and unpaid
interest to be paid under the Debenture shall entail a late fee at a rate of 18%
per annum.
17
The principal amount of the Debenture is redeemable at the rate of
$185,185.19 per month, plus accrued and unpaid interest and liquidated damages,
commencing on July 6, 2006 and may be paid, at the Company's option (i) in cash
or (ii) in shares of the Company's common stock in an amount not to exceed 10%
of the total dollar trading volume of the common stock during the 10 trading
days immediately prior to the applicable monthly redemption date based on a
conversion price equal to 85% of the average of the lowest three volume weighted
average price during the 10 trading days immediately prior to the applicable
monthly redemption date. The Company has the option, at any time, to redeem some
or all of the outstanding Debenture, in cash, in an amount equal to the sum of
(i) 115% of the principal amount of the Debenture outstanding, plus accrued and
unpaid interest and liquidated damages (the "Optional Redemption Amount")
(provided, however, that the Company may pay up to 15% of the principal amount
comprising of a portion of the Optional Redemption Amount in shares of the
Company's common stock if certain conditions are satisfied). If the Company does
not consummate the acquisition described above before December 31, 2005, the
Company may redeem all (but not less than all) of the outstanding Debenture, for
an amount, in cash, equal to 102.5% of the principal amount of the Debenture
then outstanding, plus accrued and unpaid interest and liquidating damages.
The conversion price of the Debenture will be adjusted and the number
of shares of common stock to be issued upon conversion of the Debenture will be
adjusted upon the occurrence of, among other things, the payment of stock
dividend, a stock split, the merger or sale of the Company, or reclassification
of the Company's capital. In addition, the Debenture includes certain
anti-dilution provisions in connection with future issuances by the Company of
securities which would entitle the holder to acquire common stock below the then
applicable conversion price.
The Debenture contains certain events of default that are customarily
included in financings of this nature. If an event of default occurs, the Holder
may make all sums of principal, interest and other amounts owed at such time
payable in cash. In the event of such acceleration, the amount payable to the
Holder shall equal the sum of: (i) the greater of: (A) 115% of the principal
amount of the Debenture (plus accrued and unpaid interest) or (B) the principal
amount of the Debenture to be prepaid (plus accrued and unpaid interest),
divided by the applicable conversion price; and (ii) all other amounts, costs,
expenses and liquated damages due in respect of the Debenture.
The Company's obligations under the Debenture are secured by a lien on
all assets of the Company in favor of the Holder pursuant to a Security
Agreement, dated October 31, 2005, among the Company, all of the subsidiaries of
the Company and the Holder, and guaranteed by all the subsidiaries of the
Company pursuant to a Subsidiary Guarantee, dated October 31, 2005, made by the
Company's subsidiaries in favor of the Holder. In addition, the obligations of
the Company under the Debenture are personally guaranteed by Mr. George
Karfunkel pursuant to a Personal Guarantee, dated October 31, 2005, between Mr.
Karfunkel and the Holder.
The Company has filed the Debenture, the Security Agreement and the
Subsidiary Guarantee as Exhibits to its Current Report on Form 8-K, filed with
the SEC on November 4, 2005.
DESCRIPTION OF THE WARRANT
The Warrant has an exercise period of five years from the date of
issuance. The exercise price of the Warrant will be adjusted and the number of
shares of common stock to be issued upon exercise of the Warrant will be
adjusted upon the occurrence of, among other things, the payment of stock
dividend, a stock split, the merger or sale of the Company, or reclassification
of the Company's capital. In addition, the Warrant includes certain
anti-dilution provisions in connection with future issuances by the Company of
securities which would entitle the holder to acquire common stock below the then
applicable exercise price.
Until the Shareholder Approval is obtained, the Company may not issue
upon exercise of the Warrant a number of shares of common stock, which, when
aggregated with any shares of common stock
18
issued upon conversion of or as payment of interest on the Debenture would
exceed 19.999% of outstanding common stock of the Company. In addition, the
Company may not effect any exercise of the Warrant and the Holder of a Warrant
is not permitted to exercise the Warrant into shares of common stock if such
exercise would give the Holder a beneficial ownership of more than 4.99% of the
outstanding shares of common stock of the Company. This 4.99% limitation may be
waived by the Holder upon not less than 61 days prior notice to the Company.
The Company has filed the Warrant as an Exhibit to its Current Report
on Form 8-K, filed with the SEC on November 4, 2005.
REASON FOR STOCKHOLDER APPROVAL
Rule 4350(i) of the National Association of Securities Dealers, Inc.
(the "NASD") requires issuers whose securities are listed on the Nasdaq Small
Cap Market, the market on which the Company's common stock is listed, to obtain
stockholder approval of a transaction other than a public offering involving the
sale or issuance by the issuer of common stock (or securities convertible into
or exercisable to purchase common stock) equal to 20% or more of the common
stock or 20% or more of the voting power outstanding before the issuance for
less than (i) the greater of book value or (ii) market value of the stock.
Immediately prior to issuing the Debenture and the Warrant to the
Holder, there were 8,246,747 shares of the Company's common stock outstanding,
of which approximately 1,649,349 shares represented 20% of the number of shares
of common stock then outstanding.
The total number of shares of common stock that may be issued by the
Company in connection with the conversion of the Debenture and the exercise of
the Warrant is dependent upon, among other things, whether the Debenture is
converted or the Warrant is exercised, whether the principal and/or interest on
the Debenture is paid in cash or common stock and the market price of the common
stock used in calculating any such payments, and whether or not the
anti-dilution adjustment provisions of such securities come into effect. Based
on a current conversion price of $1.738 for the Debenture and 791,139 shares of
common stock issuable to the Holder upon exercise of the Warrant, the Company
would be required to issue approximately 3,668,009 shares of common stock, which
would exceed the Nasdaq 20% share limitation. Pursuant to the Purchase
Agreement, the Company agreed to seek Shareholder Approval of the possible
issuance of shares of common stock underlying the Debenture and warrant to the
Holder or its transferees in excess of the Nasdaq 20% share limitation.
The issuance of shares upon conversion of the Debenture and exercise of
the Warrant may cause immediate and substantial dilution to the Company's
existing stockholders. Accordingly, if Proposal 2 is approved, an aggregate
total of 3,668,009 shares of common stock may be issuable (excluding additional
shares of common stock that may be issuable upon conversion of interest payment
and/or resulting from anti-dilution adjustments), representing a total of
approximately 30.79% of the Company's shares of common stock outstanding
immediately after the full conversion of the Debenture and full exercise of the
Warrant.
The Board of Directors believes that it is in the Company`s best
interest for the Holder to be able to convert its Debenture and exercise its
Warrant and for the Company to be able to pay principal and interest in shares
of the Company's common stock for an aggregate amount of common stock that may
exceed the NASD 20% share limitation. Approval of this Proposal 2 by the
shareholders would satisfy the stockholder approval requirements of NASD Rule
4350(i).
If Shareholder Approval is not obtained and the NASD 20% share
limitation was reached, the Company would be forced to pay the principal and
interest on the Debenture in cash. If the Company is forced to pay principal and
interest in cash rather than common stock, the amount of cash available to fund
its operations would be reduced. In addition, if Shareholder Approval is not
obtained, the Holder would be
19
prohibited from converting the Debenture or exercising the Warrant if doing so
exceeded the 20% limitation and this would likely cause that the value of the
Debenture and Warrant to be reduced. Any reduction in the value of the Company`s
securities may make it more difficult to raise any additional financing in the
future.
REQUIRED VOTE
The affirmative vote of a majority of the votes cast at the Meeting is
required to approve the issuance of up to (a) 2,876,870 shares of the Company's
common stock underlying a $5,000,000 principal amount Variable Rate Secured
Convertible Debenture due October 31, 2008 and (b) 791,139 shares of the
Company's common stock underlying a warrant dated October 31, 2005. Abstentions
or broker non-votes, if any, will not be counted as votes "cast" with respect to
this matter.
The Board of Directors unanimously recommends that stockholders vote
FOR this Proposal.
20
-------------------------------------------
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
-------------------------------------------
The firm of Rachlin Cohen & Holtz LLP audited our financial statements
for the fiscal year ended June 30, 2005. The audit committee has appointed that
firm to act as our independent public accountants for the fiscal year ending
June 30, 2006. The Board of Directors believes it is appropriate to present to
the Annual Meeting a resolution ratifying the appointment of Rachlin Cohen &
Holtz LLP as our independent public accountants for the fiscal year ending June
30, 2006. A representative of Rachlin Cohen & Holtz LLP is not expected to be
present at the Annual Meeting.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
Audit fees billed to the Company by Rachlin Cohen & Holtz LLP for its
audit of the Company's financial statements and for its review of the financial
statements included in the Company's Quarterly Reports on Form 10-Q filed with
the Securities and Exchange Commission for 2005 and 2004 totaled $67,020 and
$62,000, respectively.
Tax Fees
Tax fees billed to the Company by Rachlin Cohen & Holtz LLP for its tax
returns for the fiscal year 2005 and 2004 were $0 and $0, respectively.
Other Fees
Other fees billed to the Company by Rachlin Cohen & Holtz LLP for all
other non-audit or tax services rendered to the Company for the fiscal year 2005
and 2004 were $6,829 and $0, respectively.
Audit Committee Pre-Approval Policies
The Audit Committee has adopted a procedure under which all fees
charged by Rachlin Cohen & Holtz LLP must be pre-approved by the Audit
Committee, subject to certain permitted statutory de minimus exceptions.
REQUIRED VOTE
The affirmative vote of a majority of the votes cast at the Meeting is
required to ratify the appointment of Rachlin Cohen & Holtz, LLP as the
independent public accountants of the Company for the fiscal year ending June
30, 2006. Abstentions or broker non-votes, if any, will not be counted as votes
"cast" with respect to this matter. Brokers who hold shares of common stock as
nominees will have discretionary authority to vote such shares of common stock
as nominees if they have not received voting instructions from the beneficial
owner by the tenth day before the meeting, provided that this proxy statement
has been transmitted to the beneficial holder at least 15 days prior to the
Meeting.
The Board of Directors unanimously recommends that stockholders vote
FOR this Proposal.
21
MISCELLANEOUS
STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the 2006 Annual
Meeting of Stockholders and to be included in the proxy statement and form of
proxy distributed by the Board of Directors in connection with the 2006 annual
meeting of stockholders, must be received by us in writing not later than
November 7, 2006.
If the Company does not receive written notice by January 23, 2007 from
a stockholder who intends to present at the next annual meeting a proposal that
is not discussed in the Company's proxy statement, the persons named in the
proxy accompanying the Company's proxy statement for that annual meeting will
have the discretionary authority to vote on such proposal at such meeting.
SOLICITATION OF PROXIES
We are bearing the cost of preparing, assembling, printing and mailing
the Notice of Annual Meeting, this Proxy Statement and proxies. We will also
reimburse brokers who are holders of record of our common stock for their
reasonable out-of-pocket expenses in forwarding proxies and proxy soliciting
material to the beneficial owners of such shares. In addition to the use of the
mails, proxies may be solicited without extra compensation by our directors,
officers and employees by telephone, telecopy, telegraph, email or personal
interview.
OTHER MATTERS
Management does not intend to bring before the Annual Meeting for
action any matters other than those specifically referred to above and is not
aware of any other matters which are proposed to be presented by others. If any
other matters or motions should properly come before the Annual Meeting, the
persons named in the proxy intend to vote thereon in accordance with their
judgment on such matters or motions, including any matters or motions dealing
with the conduct of the Annual Meeting.
PROXIES
All stockholders are urged to fill in their choices with respect to the
matters to be voted upon, sign and promptly return the enclosed form of proxy.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you about
us by referring you to those documents. The information incorporated by
reference is considered to be part of this Proxy Statement. We incorporate by
reference in this Proxy Statement our Annual Report on Form 10-K for the fiscal
year ended June 30, 2005, including financial statements and reports thereon of
Rachlin, Cohen & Holtz LLP, filed on September 28, 2005 and our Quarterly
Reports on Form 10-Q for the fiscal quarter ended September 30, 2005, filed on
November 14, 2005 and the fiscal quarter ended December 31, 2005, filed on
February 14, 2006, which are enclosed herewith.
By Order of the Board of Directors,
Dawna Ferguson
Secretary
March 6, 2006
22
PROXY PROXY CARD PROXY
- ----- -----
SILVERSTAR HOLDINGS, LTD.
ANNUAL MEETING OF STOCKHOLDERS
------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of common stock of Silverstar Holdings, Ltd.
(the "Company") hereby revokes all previous proxies, acknowledges receipt of the
Notice of the Stockholders' Meeting to be held on March 30, 2006, and hereby
appoints Clive Kabatznik and Michael Levy, and each of them, as proxies of the
undersigned, with full power of substitution, for the undersigned and in the
name, place and stead of the undersigned, to vote as designated on the reverse
side of this proxy, and otherwise represent all of the shares of the undersigned
at said meeting and at any adjournments or postponements thereof with the same
effect as if the undersigned were present and voting the shares.
[CONTINUED AND TO BE SIGNED ON REVERSE SIDE]
The Board of Directors recommends a vote FOR all listed nominees and
FOR Proposals 2 and 3
PLEASE MARK YOUR CHOICES LIKE THIS IN BLUE OR BLACK INK [X]
(1) Election of directors
|_| FOR ALL NOMINEES NOMINEES: |_| Michael Levy
|_| Clive Kabatznik
|_| WITHHOLD AUTHORITY |_| Cornelius J. Roodt
FOR ALL NOMINEES |_| John T. Grippo
|_| Douglas Brisotti
|_| FOR ALL EXCEPT
(see instructions below)
*INSTRUCTION: To withhold authority for any individual nominee(s),
mark "FOR ALL EXCEPT" and fill in the circle next to each
nominee you wish to withhold, as shown here: |_|
(2) Approval of the issuance of up to (a) 2,876,870 shares of the Company's
common stock underlying a $5,000,000 principal amount Variable Rate Secured
Convertible Debenture due October 31, 2008 and (b) 791,139 shares of the
Company's common stock underlying a warrant dated October 31, 2005
FOR AGAINST ABSTAIN
|_| |_| |_|
(3) Ratification of the appointment of Rachlin Cohen & Holtz LLP, as
independent certified accountants for the Company for the fiscal year ending
June 30, 2006.
FOR AGAINST ABSTAIN
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1
THE SHARES REPRESENTED BY THIS PROXY, DULY EXECUTED, WILL BE VOTED IN ACCORDANCE
WITH THE SPECIFICATIONS MADE. IF NO SPECIFICATION IS MADE, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED FOR EACH OF THE ABOVE NOMINEES AND FOR
EACH OF PROPOSALS 2 AND 3, AND IN ACCORDANCE WITH THE DISCRETION OF THE PERSONS
APPOINTED AS PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING. IN CASE ANY NOMINEE SHOULD BECOME UNAVAILABLE FOR ELECTION TO THE BOARD
OF DIRECTORS FOR ANY REASON, THE PERSONS APPOINTED AS PROXIES SHALL HAVE
DISCRETIONARY AUTHORITY TO VOTE THIS PROXY FOR ONE OR MORE ALTERNATIVE NOMINEES
WHO WILL BE DESIGNATED BY THE THEN EXISTING BOARD OF DIRECTORS.
TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE MARK YOUR CHOICE ON
ALL PROPOSALS, AND SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE.
__________________________
__________________________
To change the address on your account, please check the box
at right and indicate your new address in the address space
above. Please note that changes to registered name(s) on the
account may not be submitted via this method. |_|
__________________ Date: __________ _____________________ Date: ___________
Signature Signature
Note: Please sign exactly as your name or names appear on this Proxy. Where
shares are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such. If
the signer is a corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.