UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. ____)
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On Track Innovations Ltd.
(Name of Registrant as Specified In Its Charter)
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ON TRACK INNOVATIONS LTD.
NOTICE OF THE 20172021 ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 21, 2017DECEMBER 2, 2021
You are hereby notified that the 20172021 Annual General Meeting of Shareholders of On Track Innovations Ltd. (the “Company”), will be held on Tuesday, November 21, 2017,Thursday, December 2, 2021, at 5:10:00 P.M.A.M., Israel time, at our offices, Z.H.R.5 Hatnufa St., Yokneam Industrial Zone, Rosh Pina,Yokneam, Israel, 12000002069200 (the “Meeting”), for the following purposes:
| 1. | To elect each of Sandra B. Hardardottir, William C. Anderson |
| 2. | To elect Zvi Atlas, to serve as an external director of the Company from the date of the Meeting |
| To approve | ||
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| 4. | To |
| 5. | To approve the grant of equity to Mr. Yehuda Holtzman, Chief Executive Officer of the Company; |
| 6. | to approve amendments to the Articles amending the terms of re-election of directors of the Company; |
| 7. | To approve an increase in the Company’s authorized share capital, by NIS 2,000,000, divided into 20,000,000 ordinary shares of NIS 0.1 par value per share, to NIS 12,000,000, divided into 120,000,000 ordinary shares of NIS 0.1 par value per share, and to amend the Articles and the Company’s Memorandum of Association accordingly |
| 8. | To |
| To present the financial statements of the Company for the fiscal year ended December 31, |
The Board recommends that you vote in favor of itemsItem Nos. 1, 2, 3, 4, 5, 6, 7 and 58 above. No vote is required for item 9.
Record Date and Right to Vote
The Board has fixed the close of business on Monday, October 13, 2017,25, 2021, as the record date for the Meeting (“Record Date”). Subject to the provisions of Israeli law and the Company’s Amended and Restated Articles, of Association (the “Articles of Association”), only shareholders on the Record Date are entitled to notice of and to vote at the Meeting and at any adjournment or postponement thereof.
All shareholders that are entitled to notice and to vote at the Meeting are cordially invited to attend the Meeting. If your shares are registered in your name, please bring the admission ticket attached to your proxy card. If your shares are registered in the name of a broker, trust, bank or other nominee, you will need to bring a proxy or a letter from that broker, trust, bank or other nominee or your most recent brokerage account statement, that confirms that you are the beneficial owner of those shares as of the Record Date (“Proof of Ownership”). If you do not have either an admission ticket or Proof of Ownership, you will not be admitted to the Meeting.
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Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting to be held on December 2, 2021:
The proxy statement, proxy card and Annual Report to shareholders for the year ended December 31, 2020 are also available at http://www.otiglobal.com/agm and on our proxy agent’s website at www.proxyvote.com.
Shareholders may also obtain additional paper or e-mail copies of these materials at no cost by writing to
On Track Innovations Ltd., 5 Hatnufa St., Yokneam Industrial Zone, Yokneam, Israel, 2069200, attention: CFO.
Your vote is important regardless of the number of shares you own. You may vote by telephone or over the internetInternet on our proxy agent’s website at www.proxyvote.com until the Cut-Off Date (as defined below) by following the instructions included on the enclosed proxy card. If you are not voting by phone or internet,Internet, the Company requests that you complete, sign, date and return the enclosed proxy card without delay and no later than the Cut-Off Date described below in the enclosed postage-paid return envelope, even if you now plan to attend the Meeting. You may revoke your proxy at any time prior to its exercise by delivering written notice or another duly executed proxy bearing a later date to the Secretary of the Company, or by attending the Meeting and voting in person. We will not be able to count a proxy card unless we receive it at our principal executive offices at Z.H.R.5 Hatnufa St., Yokneam Industrial Zone, P.O. Box 32, Rosh-Pina,Yokneam, Israel, 1200000,2069200, or at the office of our proxy agent,Broadridge Financial Solutions Inc. at Vote Processing, c/o Broadridge, 51 Mercedes Way Edgewood, NY 11717, in the enclosed envelope, by Saturday,Monday, November 18, 201729, 2021 at 5:10:00 P.M.A.M. Israel time, which is November 18, 201729, 2021 at 10:03:00 A.M. Eastern Time (the “Cut-Off Date”).
IMPORTANT: If your shares are held in the name of a brokerage firm, bank, nominee or other institution, you should provide instructions to your broker, bank, nominee or other institution on how to vote your shares, otherwise your broker, nominee or other institution may have the right to vote on the matters contained in the proxy pursuant to its sole discretion. Please contact the person responsible for your account and give instructions for a proxy to be completed for your shares.
By order of the Board, /s/ Assaf Cohen | |
Assaf Cohen Chief Financial Officer |
October 16, 201728, 2021
IMPORTANT: In order to secure a quorum and to avoid the expense of additional proxy solicitation, please sign, date and return your proxy promptly and no later than the Cut-Off Date, in the enclosed envelope even if you plan to attend the meeting personally. Your cooperation is greatly appreciated.
ON TRACK INNOVATIONS LTD.
Z.H.R.5 Hatnufa St., Yokneam Industrial Zone
Rosh Pina,Yokneam, Israel, 1200000
PROXY STATEMENT2069200
PROXY STATEMENT
INTRODUCTION
This proxy statement and the accompanying proxy card are being sent by On Track Innovations Ltd. (the “Company”) to the holders of record of the Company’s outstanding ordinary shares on October 13, 201725, 2021 (the “Record Date”). We intend to first mail this proxy statement and our annual report to shareholders for the fiscal year ended December 31, 2020, as well as the enclosed proxy card, on or about October 28, 2021, to all shareholders entitled to vote at the Annual Meeting. The Record Date has been fixed by the Company’s Board of Directors (the “Board”) as described hereunder. The accompanying proxy is being solicited by the Board of Directors of the Company (the “Board”), for use at our 20172021 Annual General Meeting (the “Meeting”), to be held on Tuesday, November 21, 2017,Thursday, December 2, 2021, at 5:10:00 P.M.A.M. Israel time, at our offices, Z.H.R.5 Hatnufa St., Yokneam Industrial Zone, Rosh Pina,Yokneam, Israel, 12000002069200 and at any adjournment or postponement thereof.thereof; however, we are actively monitoring developments with regard to the coronavirus, or COVID-19, and it is possible that the Meeting may be held solely by means of remote communication. In the event it is not possible or advisable to hold the Meeting in person, we will announce alternative arrangements for the Meeting as promptly as practicable. The cost of solicitation of proxies will be borne by the Company. Directors, officers and employees of the Company may also assist in the solicitation of proxies by mail, telephone, telefax, in person or otherwise, without additional compensation. Brokers, custodians and fiduciaries will be requested to forward proxy soliciting materials to the owners of the Ordinary Shares held in their names and the Company will reimburse them for their reasonable out-of-pocket expenses incurred in connection with the distribution of such proxy materials.
The Board has fixed October 13, 201725, 2021 as the Record Date for the Meeting. Only shareholders of record on the Record Date are entitled to notice of and to vote at the Meeting or any adjournment or postponement thereof. On October 13, 2017,25, 2021, there were 41,134,37872,789,893 outstanding ordinary shares of the Company (“Ordinary Shares.Shares”). Each Ordinary Share is entitled to one vote per share. Subject to the provisions of Israeli law and pursuant to the Amended and Restated Articles of Association of the Company (the “Articles”), no business may be transacted at any shareholder meeting unless a quorum is present when the meeting begins. The quorum required for a meeting of shareholders is at least two shareholders present in person or by proxy, holding in the aggregate at least one third (33 1/3%) of the issued and outstanding Ordinary Shares as of the Record Date (the “Quorum”). Abstentions will not be counted with respect to the items below, but will be counted in determining if a Quorum is present. Broker non-votes, as defined below, are counted in determining if a Quorum is present.
All Ordinary Shares represented in person or by valid proxies received by the Company prior to the Cut-Off Date (as defined below), and not revoked, will be voted as specified in the proxies or voting instructions. Votes that are left blank will be voted as recommended by the Board. With regard to other matters that may properly come before the Meeting, votes will be cast at the discretion of the proxies.
Broker non-votes occur when a beneficial owner of shares held in “street name” does not give instructions to the broker or nominee holding the shares as to how to vote on matters deemed “non-routine.” Generally, if shares are held in street name, the beneficial owner of the shares is entitled to give voting instructions to the broker or nominee holding the shares. If the beneficial owner does not provide voting instructions, the broker or nominee can still vote the shares with respect to matters that are considered to be “routine,” but not with respect to “non-routine” matters. In the event that a broker, bank, or other agent indicates on a proxy that it does not have discretionary authority to vote certain shares on a non-routine proposal, then those shares will be treated as broker non-votes. Because Items No. 1, 2, 3, 4, 5 and 46 in this proxy statement are non-routine proposals, your broker, bank or other agent will not be entitled to vote on these proposals without your instructions. ItemItems No. 5 is a7 and 8 are routine proposal,proposals, so
your broker, bank or other agents will be entitled to vote on those proposalsthat proposal without your instruction. No vote is required for Item No. 6.9.
Any shareholder who has submitted a proxy may revoke it at any time before it is voted, by written notice addressed to and received by our Secretary, by submitting a duly executed proxy bearing a later date, but not after the Cut-Off Date, or by electing to vote in person at the Meeting. The mere presence at the Meeting of the person appointing a proxy does not, however, revoke the appointment.
We will not be able to count a proxy card unless we receive it at our principal executive offices at Z.H.R.5 Hatnufa St., Yokneam Industrial Zone, P.O. Box 32, Rosh Pina,Yokneam, Israel, 1200000,2069200, or at our proxy agent, Broadridge Financial Solutions Inc. at Vote Processing, c/o Broadridge, 51 Mercedes Way Edgewood, NY 11717, in the enclosed envelope, by Saturday,Monday, November 18, 2017,29, 2021, at 5:10:00 P.M.A.M. Israel time, which is Saturday,Monday, November 18, 201729, 2021 at 10:3:00 A.M. Eastern Time (“Cut-Off Date”). You may also vote by telephone or over the Internet on our proxy agent’s website at www.proxyvote.com until the Cut-Off Date by following the instructions included on the enclosed proxy card.
Our website address and our proxy agent’s website address are included several times in this proxy statement as a textual reference only, and the information in these websites is not incorporated by reference into this proxy statement.
1
ITEM NO. 1 –- ELECTION OF DIRECTORS
Introduction
The number of our directors is currently fixed at least five and not more than ten, as provided for by our Articles. Currently we have six directors serving on our Board, with three directorsone director, Mr. Anderson, having terms that expirehis term expiring at the Meeting, one withMeeting. In addition, our Board voted to appoint Ms. Hardardottir to act as director effective as of May 5, 2020, and voted to add an additional member, Mr. Uri Arazy as a term that expires in January 2019 and another with a term that expires at the General Meeting that will take place after December 15, 2019.director effective as of March 3, 2021. The Board has nominated Ms. Hardardottir, Mr. William C. Anderson III, Mr. James Scott Medford,Arazy and Mr. Michael Soluri, each of whomAnderson, who currently servesserve as a director,directors to be our Director Nominees. Shareholders will be asked to elect each of the said Director Nominees to hold office starting on the date of the Meeting until our next General Meetinggeneral meeting following three years from their election. The enclosed proxy,election, or, if returned, and unless indicatedItem No. 5 below is approved, until the Company’s next annual meeting of shareholders. Further, in Item No. 2, we are proposing to the contrary, will be voted for the election of each of the Director Nominees.elect an external director to replace Ms. Marks, who is stepping down as an external director, effective December 1, 2021.
We have been advised by each of the Director Nominees that he isthey are willing to be named as a nomineenominees and each isare willing to serve as a directordirectors, if elected. If some unexpected occurrence should make necessary, in the discretion of the Board, the substitution of some other person for the nominees,nominee, it is the intention of the persons named in the proxy to vote for the election of such other person as may be designated by the Board.
Furthermore, as required by the Israeli Companies Law of 19991999-5759, as amended (the “Companies Law”), allthe Director Nominees have declared in writing that they possess the requisite skills and expertise, as well as sufficient time, to perform their duties as a directordirectors of the Company.
The names of each current member of our Board, our executive officers, and their ages as of the Record Date, are as follows:
Name | Age | Position(s) Held | ||||
| 47 | Chairman of the Board of Directors | |||||
| William C. Anderson III (1) | 50 | Director | ||||
| 63 | Director | |||||
| Donna | 65 | Director | ||||
| 54 | Director | |||||
| Michael Shanahan (1) | 66 | Director | ||||
| Yehuda Holtzman | 60 | Chief Executive Officer | ||||
| 37 | Chief Financial Officer |
| (1) | Independent |
| (2) | Member of the Compensation Committee |
| (3) | Member of the Audit Committee |
| (4) | External Director Under the Companies Law (“External Director”) |
| (5) | Ms. Marks has submitted her resignation from the Board, effective December 1, 2021. |
Director NomineesInformation about the Board
The principal occupation, business experience and education of each nominee for election as director are set forth below.
Nominees for Election
William C. Anderson IIIwas elected as an External Director under the Companies Law in 2014 to hold office foras a three-year term that commenced on May 26, 2014. On May 24,director and was reelected in November 2017 Mr. Anderson was reappointed to serve as a Director until the Meeting.general meeting of shareholders that will take place three years following his reelection. Mr. Anderson is the founder of AmpThink LLC, a wireless solutions company focused on building large, complex, wireless networks employing different technologies, including low and high frequency RFID, wireless bridging, WiFi, near field communications and Bluetooth. AmpThink has led the delivery of networks for three recent major American football sporting events. Mr. Anderson has been acting as Chief Executive Officerthe President of AmpThink LLC since its incorporation in 2011. Prior to AmpThink, Mr. Anderson was co-founder of Genesta, a wireless systems integrator specializing in the design and deployment of warehouse automation systems, where Mr. Anderson from 2000 to 2011 Mr. Anderson acted as Chief Technology Officer. In this position, Mr. Anderson helped create solutions for clients such as Con Edison, Frito-Lay, and Sara Lee. Mr. Anderson holds a degree in Economics and Philosophy from Boston College and a Master’s degree in Management Science from The State University of New York at Oswego.York.
The Company believes Mr. Anderson’s qualifications, including his years of experience in the high-tech industry and network solutions business, as well as his experience as Chief Technology Officer and Chief Executive OfficerPresident of private American companies, make him suitable to serve as a director of the Company.
Uri Arazy
James Scott Medfordwas appointed by the Board to serve as a director in March 2021, and until the next general meeting of shareholders of the Company at which directors are being elected. He served in a variety of positions in Intel Corporation between 1984 and 2019. Between 2005 and 2019, Mr. Arazy served as an Investment Director of Intel Capital Israel. In the past five years, Mr. Arazy invested and served on the board of directors of technology startups including WSC Sports Technologies, Interlude, Spotinst, Moovit, Velostrata, Cloudify and Gigaspaces. Mr. Arazy holds a B.A. in Computer Science from Queens College, NY, an M.Sc. in Computer Science from Columbia University, NY, an M.B.A. from Tel Aviv University and Northwestern University and an M.A. in Security and Diplomacy from the Tel Aviv University.
The Company believes Mr. Arazy’s experience in the high-tech industry and his vast experience serving as a director make him suitable to serve as a director of the Company.
Sandra B. Hardardottir was appointed in May 2020 as a director and as Chairman of our BoardBoard. From 1994 to 2001, Ms. Hardardottir was the founder and Managing Director of Directors on January 15, 2017 to hold office until the Meeting. Mr. Medford has over 35 years of experiencePremier Recruitment Ltd., a recruitment company specializing in the fieldsconstruction industry, and co-founder of AIDC (automatic identificationPremier Electrical Ltd., an electrical contractor in the commercial and data capture), encompassing early introductionindustrial sectors. From 2003 to bar coding, wireless technology, speech recognition and RFID (Radio-Frequency Identification). From 1990 to 2006, Mr. Medford2008, Ms. Hardardottir served initially as a Vice President at Intermec Technologies, where he developed various departments. During 2006, Mr. MedfordSenior Business Analyst and then was promoted to Senior Executive of a partner at Genesta Partnership, which designs and deploys systems in manufacturing and logistics, where he also managed projects for Fortune 100 companies.national U.S. management consulting firm. From 2008 to 2015, Mr. Medford served2012, Ms. Hardardottir held interim roles such as President and Director of Operations of companies that required short term relief to shareholders and leadership teams that faced immediate challenges requiring a shift in strategic focus and rebuilding of core competencies to align with company goals. From 2014 to 2017, Ms. Hardardottir acted as a Senior Vice President of Sales at Impinj, a manufacturer of RFID integrated circuits, devicesBusiness/Executive Analyst for Cogent Analytics, LLC, performing holistic business analysis and software. Since 2015, Mr. Medford has served as Chief Sales Officer at Invengoproviding recommendations to improve performance through organizational structuring, operational efficiencies, and profit engineering. Ms. Hardardottir completed an International Pte Ltd., a leading provider of RFID technologyFinance Reporting and solutions, focused on growing the AmericanControls course and European markets, mainlyholds an M.B.A. with honors from Durham University Business School in the retail segments. Mr. Medford currently provides consulting services to numerous high tech solution companies and investment firms, and since 2015 has served as Chairman of LMC, Ltd, a UK based company providing solutions to the international rail and transportation industry.England.
The Company believes Mr. Medford’sMs. Hardardottir’s operational executive management and board experience with global companies make himfrom various industrial sectors makes her suitable to serve as a director and Chairman of the Board of Directors of the Company.
Other Currently Serving Directors
Leonid Berkovitch has served as an External Director since April 2020. Mr. Berkovitch has nearly 30 years of experience in the smart card industry, having worked in leading technology companies in areas including telecom, e-transactions and digital security. From 1996 to 2004, Mr. Berkovitch served as a Senior Vice President Sales EMEA, Marketing & Product lines Director in the Test & Transactions Division of Schlumberger Limited (NYSE: SLB). From 2004 to 2006, Mr. Berkovitch served as a Business Unit Director for Axalto. From 2006 to 2011, Mr. Berkovitch served as a Managing Director Emerging Businesses for Gemalto N.V. Mr. Berkovitch joined Orange Group at the end of 2011 and served as a Vice-President Product Marketing in Viaccess-Orca (an affiliate company of Orange) until 2018. Since 2018, he has been Director IoT, Connected Home at Orange’s Corporate Unit and since the end of 2020, has taken a position of Senior Director; Connectivity at Orange Business Services. Mr. Berkovitch holds a Master of Science degree in Telecommunication Engineering from the State University of Telecommunications of Saint-Petersburg.
Donna Marks has served as a director since 2015, and currently qualifies as an External Director under the Companies Law. Ms. Marks submitted her resignation from the Board, effective December 1, 2021. Ms. Marks is a Certified Public Accountant with a wide variety of experience serving clients in various industries over her 39 years in the practice of public accounting. Ms. Marks has served as a director, working at the Fuoco Group, LLC, an accounting firm between the years 2011 and 2014, while acting as a consultant for Fuoco Group through 2018. Prior to joining the Fuoco Group, Mrs. Marks was the managing partner of her own firm, Donna Marks, PA and served as a Managing Director at American Express Tax and Business Services (which merged into the international accounting firm of RSM International). Ms. Marks earned a B.A. in Business Administration degree in Accounting (magna cum laude) from the University of South Florida in 1978 and is a member of the Florida Institute of Certified Public Accountants.
Michael SoluriShanahan has served as a director since January 2020. Mr. Shanahan has served as owner and managing partner at Shanahan Law Firm since 2006. From 1988 to 1998, Mr. Shanahan served as an associate and then partner at the Seattle, Washington law firm, Bauer Moynihan& Johnson. From 1998 to 2003, Mr. Shanahan served as Vice President of administration and general counsel for Western Pioneer, Inc., and from 2003 to 2006, as Vice President of administration and general counsel for Blue North Fisheries, Inc., both companies in the fishing industry. In addition, since 1997, Mr. Shanahan has served as an adjunct professor at the Seattle University Law School. Mr. Shanahan holds a J.D. from the Seattle University School of Law and a B.A. from the University of Washington.
Executive Officers
Yehuda Holtzman was appointed as the Company’s Chief Executive Officer in November 2019. Mr. Holtzman served from 1998 to 2011 as president of MobileAccess Ltd., a director on January 15, 2017cellular technology company he co-founded and sold to serveCorning in 2011. Following that, Mr. Holtzman co-founded and was the Chief Executive Officer of ExploreGate Ltd., a big data/AI company, and from 2016 until 2018, he was the Meeting.Chief Executive Officer of Mobilogy Inc., a provider of mobile lifecycle solutions which was acquired in 2018.
Assaf Cohen was appointed as the Company’s Chief Financial Officer in February 2018. Prior to his appointment, Mr. Soluri is a technology sales executive with expertise in global direct IT sales within the finance, manufacturing and retail industries and the internet of things field. From 1993 to 1995, Mr. SoluriCohen served as the Sales Director of Ameriquest Technologies,Company’s controller and deputy Chief Financial Officer from July 2015 and oversaw the Company’s finance department in this capacity. Prior to joining the Company, Mr. Cohen was a controller at a private company, digitizing existing processes. From 1995Samgal Ltd., for a year and a half and prior to 1997,that he was a senior accountant at Ernst & Young. Mr. Soluri served asCohen received a B.A. in economics and accounting from the Executive Sales Director of Siemens Data Communications, whereHaifa University, and he focused on smart switching technologies and intelligent data hub markets. From 1998 to 2015, Mr. Soluri served as the Executive Manager, Global Client Services at the Imaging, Software and Solutions Division of Lexmark International, and since 2016 has served as the Chief Revenue Officer and Vice President of EDM Group that focuses on information management for organizations.
The Company believes Mr. Soluri’s professional and corporate experience make him suitable to serve asis a director of the Company. Certified Public Accountant in Israel.
There are no family relationships between any of our directors or executive officers.
Proposed Resolution
It is proposed that the following resolution be adopted at the Meeting:
“RESOLVED, to elect each of Sandra B. Hardardottir, William C. Anderson III, James Scott Medford and Michael SoluriUri Arazy as a DirectorDirectors on the Board starting on the date of the Meeting until our next General Meeting following three years from their election.general meeting.”
Required Vote
The affirmative vote of a majority of the Ordinary Shares voting on the matter is required to approve this resolution. The election ofvoting for each director shall be votedconducted separately. Since abstentions are not considered votes cast, they will have no impact on the outcome of this proposal. Broker non-votes will not impact the results of the vote on directors’ election,this proposal, but will be counted for purposes of determining whether there is a quorum.
The Board recommends a vote FOR the election of each of Sandra B. Hardardottir, William C. Anderson and Uri Arazy as Directors to the Board until our next general meeting. |
ITEM NO. 2 — APPROVAL OF AMENDMENT TO THE AMENDED AND RESTATED SHARE OPTION PLAN
Our Amended and Restated 2001 Stock Option Plan (the “Plan”) expired on February 28, 2016. As a result of the foregoing, following the approval of the compensation committee (the “Compensation Committee”) and the Board, the Company is seeking the approval of shareholders to amend the Plan, so that securities may be issued under the Plan from time to time until December 31, 2021. 4
General Description of the Current Plan
The following is a summary of the material provisions of the Plan, which is qualified in its entirety by the specific provision of the Plan, as amended, the full text of which is set forth inAppendix A to this proxy statement.
Purpose. The purpose of the Plan is to afford an incentive to officers, directors, employees and consultants of the Company, or any subsidiary of the Company which now exists or hereafter is organized or acquired by the Company, or any affiliate, to acquire a proprietary interest in the Company, to continue as employees, directors and consultants, to increase their efforts on behalf of the Company, to promote the success of the Company’s business and to attract new employees, directors or consultants, whose services are considered valuable.
Administration. The Plan is administered by our Compensation Committee, which makes recommendations to our Board regarding the grantees of options and the terms of the grant, including exercise prices, grant dates, vesting schedules, acceleration of vesting and forfeiture. Under the Plan, the terms and conditions of options are set forth in individual option agreements with the grantee.
Eligibility. Our employees, directors, consultants and service providers, and those of our subsidiaries and affiliates, are the persons eligible to participate in the Plan as recipients of options.
Shares Reserved. As of October 1, 2017, the aggregate number of outstanding options under the Plan is 1,393,500 of which 445,000 were issued between March 2016 and November 2016 (and currently cannot be exercised as a result of an agreement between various option holders and the Company whereby such holders have agreed not to exercise until the number of shares available under the Plan are increased) and an additional 844,006 options are available for grant under the Plan. If any outstanding option expires or is canceled or terminated, the shares allocable to the unexercised, canceled or terminated portion of such option shall become available for subsequent grants unless the Plan has been terminated.
Term and Exercisability. Usually, unless otherwise determined by the Compensation Committee and the Board, the options granted vest gradually over a period of between three to four years starting on the date of the grant and vesting in portions of 1/3-1/4 respectively of the total number of options granted each year. The options granted expire after a five year period and no grantee is entitled to exercise his or her options following the end of said five years period from the date of the grant.ITEM NO. 2 — ELECTION OF AN EXTERNAL DIRECTOR
Termination and Amendment. Under the Plan, if the employment or services of a grantee is terminated for cause, all of his or her options expire immediately. A grantee whose employment or services is terminated without cause may exercise within three months of termination his or her options that are vested at the time of termination. If the termination is due to the death or disability of the grantee, the options may be exercised within 18 months of the date of termination in the case of death and 12 months in the case of disability.Background
The Board may at any time amend, alter, suspend or terminateUnder the Plan. However, no amendment, alteration, suspension or termination of the Plan shall impair the rights of any grantee, unless otherwise is mutually agreed in writing between the grantee and the Compensation Committee. Additionally, under NASDAQ rules, certain amendments that materially change the Plan are subject to approval by our shareholders. Before giving effect to the proposed amendment the Plan expired on February 28, 2016. After giving effect to the amendment to the Plan, the Plan will expire on December 31, 2021.
Exercise Price. The exercise price of the options grantedCompanies Law, a public company incorporated under the Plan or any portion thereof is determined by the compensation committee, subject to the applicable law and any guidelines as may be determined by the Board from time to time.
Assignability and Sale. Unless otherwise provided in the Plan and/or in any appendix thereof, no option, whether fully paid or not, shall be assignable, transferable, given as a gift, pledged or any right with respect to them given to any third party whatsoever, and during the lifetimelaws of the grantee each and all of such grantee’s rights to purchase Company’s shares are exercisable only by the grantee. Any such action made directly or indirectly, for an immediate validation or for a future one, is void, and any purported assignment, transfer or pledge of an option in contradiction to the provisions of the Plan will cause the option to immediately expire.
Adjustments. In the event of a transaction in which all or substantially all of the Company’s shares are to be exchanged for securities of another company, the shares underlying any grantee’s unexercised options shall be substituted with securities of the successor company, unless otherwise provided in the grantee’s option agreement.
Acceleration. Notwithstanding anything to the contrary in the Plan, the grantee is entitled to full acceleration of unvested options upon the grantee’s termination from the Company if such termination is due to certain Transactions, which are defined in the Plan and which include consolidation, merger, and the sale of substantially all of the Company’s assets, if such termination occurs in circumstances related to the Transaction, as further determined by the Compensation Committee.
Israeli Tax Matters. In accordance with the terms and conditions imposed by Section 102 of the Israel Income Tax Ordinance, (“Ordinance”), grantees subject to taxation by the State of Israel that receive options undermust elect at least two External Directors; therefore, the Plan (excluding grantees who previously received options that were incorporated upon the commencement of Amendment No. 132 of the Ordinance that was approved on July 24, 2002 and became effective on January 1, 2003, and those who are not employees or office holders and those who are our controlling shareholders) are afforded certain tax benefits. The Company elected the benefits available under the “capital gains” alternative. There are various conditions that must be met in order to qualify for these benefits, including registration of the options in the name of a trustee (the “Trustee”), for each of the Israeli employees who is granted options. Each such option, and any Ordinary Shares acquired upon the exercise of such option, must be held by the Trustee for a period commencing on the date of grant and ending no earlier than 24 months as of the end of the date in which the option was granted and deposited in trust with the Trustee or as of the end of such tax year (based on the time of grant). In the capital gains alternative a company may not recognize expenses pertaining to the options for tax purposes. We also grant our Israeli employees options pursuant to Section 102(c) of the Ordinance that are not held in trust by a trustee, which while enabling the immediate exercising and selling of options granted under the Plan, will be subject to the marginal tax rate uprequirement to 50% plus paymentselect External Directors and to comply with the audit committee and compensation committee composition requirements under the Companies Law.
On October 9, 2021, Ms. Marks announced that she will step down from her position as an External Director effective December 1, 2021. Mr. Berkovitch acts as our second External Director and his term expires in April 2023.
External Director Nominee
Zvi Atlas is a nominee to serve as an External Director of the Company for a three year term. Mr. Atlas served as managing partner at Ezra Yehuda Rozenblum Internal Audit Firm (Kreston Israel) from 2019 until December 2020 when he retired. From 1997 to 2019, and again after retirement since January 2021, Mr. Atlas served as owner and Chief Executive Officer at AIM Atlas Investment Management Ltd., a private risk management consulting firm. In addition, between 2010 and 2012, Mr. Atlas served as a member of the board of directors and the audit committee of CredoRax (Malta) Ltd., a licensed private Merchant Acquiring Bank. Mr. Atlas holds an M.B.A. in Finance from the Tel Aviv University, a B.Sc. in Industrial Engineering from the Tel Aviv University and a Certification of Tax and Accounting Consultant by the Ministry of Finance of Israel.
The Company believes that Mr. Atlas’ professional and corporate experience, as well as his knowledge and familiarity with corporate finance and accounting, marketing, and product management, make him suitable to serve as an External Director of the Company.
The Company has received a statement from Mr. Atlas, in which he declares that he meets all of the requirements applicable to External Directors, as set forth in the Companies Law. Furthermore, based on Mr. Atlas’ statements, he meets the requirement of the Companies Law that an External Director shall possess financial and accounting expertise.
The Company is not aware of any reason why Mr. Atlas, if elected as an External Director, would be unable to serve as such. The Company does not have any understanding or agreement with respect to the National Insurance Institute and health tax on the datefuture election of the sale of the shares or options. As of
January 1, 2003, Section 3(i) of the Ordinance was partially replaced by Section 102(c) and no longer applies to allocations of options to Israeli employees (including directors and office holders). Section 3(i) still applies and imposes taxes on individuals and entities subject to taxation in Israel who are not employees (such as consultants and service providers) and to employees who are considered “controlling shareholders.”
Tax consequences arising from the grant or exercise of any option, from the payment of shares underlying such option or from any other event or act under the Plan, are borne by the grantee of the option. The Company and/or its subsidiaries or any other person required by applicable law shall withhold tax as required by applicable law. Grantees shall indemnify the Company and/or its subsidiaries against liability for any such tax.
U.S. Tax Matters. The Company only issues awards under the Plan to Israeli residents and, as a result, the Plan generally does not implicate U.S. tax matters for the Company or award recipients.
Reasons for Adoption of the Plan Amendment
Since our Plan expired on February 28, 2016, but from March 2016 through November 2016, we inadvertently issued 445,000 options that are currently outstanding and unexercised, we need to extend the term of the Plan to allow the exercise of these options and issuance of additional options under the Plan. If the amendment to the Plan is not approved, the foregoing options will be cancelled and we will not be able to grant additional options under the Plan which could adversely affect our ability to attract and retain qualified personnel.
Awards under the Plan
Under the Plan, as of October 1, 2017, 14,212,494 options had been exercised and 1,393,500 options are outstanding including 605,168 exercisable. Of the options that are outstanding, as of October 1, 2017, 753,000 options are held by our directors and executive officers, and have a weighted average exercise price of $1.12 per share.
Awards under the Plan may be granted to our officers, directors, employees and consultants. Because the grants of awards under the Plan will be in the discretion of our Compensation Committee, it is not possible to determine the future awards that will be granted to executive officers or directors under the Plan if the amendment is approved. For information regarding option awards previously made to our named executive officers and directors under the Plan, see the sections entitled “Outstanding Equity Awards at Fiscal Year End” and “Director Compensation for 2016”, respectively, below. For information regarding option awards which the Company intends to make to its non-executive directors, see Item No. 3 below.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table reflects certain information about our equity compensation plans as of December 31, 2016:
| Plan Category | Number of securities to be issued upon exercise of outstanding options | Weighted-average exercise price of outstanding options | Number of securities remaining available for future issuance under equity compensation plans | |||||||||
| Equity compensation plan approved by security holders | - | - | - | |||||||||
| Equity compensation plan not approved by security holders | 1,604,836 | $ | 1.36 | 657,672 | ||||||||
| Total | 1,604,836 | $ | 1.36 | 657,652 | ||||||||
Proposed ResolutionMr. Atlas.
It is proposed that the following resolution be adopted at the Meeting:
“RESOLVED,to approveelect Zvi Atlas as an amendment to the Plan so that Options may be granted pursuant to the Plan from time to time until December 31, 2021, as specified in Appendix A.”
Required Vote
The affirmative vote of a majority of the shares votingExternal Director on the matter is required to approve this resolution. Since abstentions are not considered votes cast, they will have no effectBoard for a three-year term, commencing on the outcome of this proposal. Broker non-votes will not impact the results of the vote on the amendment to the Plan, but will be counted for purposes of determining whether there is a quorum.
ITEM NO. 3 — APPROVAL OF THE GRANT OF OPTIONS TO DIRECTOR NOMINEES
The Company wishes to grant to each of William C. Anderson III, James Scott Medford, and Michael Soluri (collectively, the “Director Nominees”) options to purchase up to 30,000 Ordinary Shares of the Company under the Plan, with an exercise price calculated according to the average closing price of the Company’s Ordinary Shares on NASDAQ during the 30 days prior to the date of grant. These options will vest over three years, commencing the date of the election of the Director Nominees (and subject to the election of the respective nominee), where 1/3 of the options shall vest at the end of each year following the vesting commencement date, provided that at such vesting date, the respective director holds office as a directorMeeting and further subject to the terms of the Plan.
Under the Companies Law, such grants are subject to shareholder approval.
It is being clarified that even if Item No. 2 above will not be approved, but the grant of options stated herein is approved, then the grant of the said options will be in full force and effect and though not issued under the Plan, will be subject to the terms of the Plan with respect to exercise period, adjustments and other technical matters not stated herein.
Proposed Resolution
It is proposed that the following resolution be adopted at the Meeting:
“RESOLVED, to approve the grant of optionscompensation payable to purchase up to 30,000 Ordinary Shares of the Company under the Plan to each of Mr. Anderson, Mr. Medford and Mr. Soluri, subject to the terms specified above.”
Required Vote
The affirmative vote of a majority of the shares voting on the matter is required to approve this resolution,him as provided either (i) included in such majority is at least a majority of the shares of shareholders who are non-controlling1
1 Under the Companies Law, in general, a person will be deemed to be a controlling shareholder if the person has the power to direct the activities of the Company, other than by reason of being a director or other office holder of the Company, and you are deemed to have a personal interest if any member of your immediate family (spouse, sibling, parent, grandparent or each of the foregoing with respect to your spouse or their spouse) has a personal interest in the adoption of the proposal. In addition, you are deemed to have a personal interest if a company, other than the Company, that is affiliated with you has a personal interest in the adoption of the proposal. Such company is a company in which you or a member of your immediate family serves as a director or chief executive officer, has the right to appoint a director or the chief executive officer, or owns 5% or more of the outstanding shares. You are also deemed to have a personal interest if you are voting other person’s shares pursuant to a proxy provided by the
shareholders and do not have a personal interest in said resolution; or (ii) the total number of shares of shareholders specified in clause (i) who voted against this resolution does not exceed two percent of the voting rights in the Company. Since abstentions are not considered votes cast, they will have no effect on the outcome of this proposal. Broker non-votes will not impact the results of the vote on the approval of the grant of options to our Director Nominees, but will be counted for purposes of determining whether there is a quorum.
ITEM NO. 4 — ADVISORY VOTE ON THE COMPENSATION OF OUR NAMEDEXECUTIVE OFFICERS (“SAY-ON-PAY VOTE”)
In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934 (the “Exchange Act”) and related rules of the Securities and Exchange Commission (the “SEC”), we are including a separate proposal subject to shareholder vote to approve, on a non-binding, advisory basis, the compensation of our Named Executive Officers (as defined below) listed in the Summary Compensation Table as disclosed in this proxy statement pursuant to Item 402 of Regulation S-K. To learn more about our executive compensation, see “Compensation of Directors and Executive Officers” elsewhere in this proxy statement.”
Our compensation policy for our Named Executive Officers is designed to reward high performance and innovation, to promote accountability and to ensure that executive interests are aligned with the interests of our shareholders. The following is a summary of the primary components of our Named Executive Officers’ compensation. We urge our shareholders to review the “Compensation of Directors and Executive Officers” section of this proxy statement and related compensation tables for more information.
One component of our compensation program is base compensation or salary. We design base salaries to fall within a competitive range of the companies against which we compete for executive talent. Generally, the base salary established for an individual Named Executive Officer reflects many inputs, including our Chief Executive Officer’s assessment of the Named Executive Officer’s performance, the level of responsibility of the Named Executive Officer, and competitive pay levels based on salaries paid to employees with similar roles and responsibilities at our peer group companies.
Another component of our compensation program is cash bonuses. We structure our cash bonus award program to reward Named Executive Officers for our Company’s successful performance, and for each individual’s contribution to that performance.
A third component of our compensation program is equity awards. We grant share options to our Named Executive Officers in order to align their interests with the interests of our shareholders by tying the value delivered to our Named Executive Officers to the value of our Ordinary Shares. We also believe that share option grants to our Named Executive Officers provide them with long-term incentives that will aid in retaining executive talent by providing opportunities to be compensated through the Company’s performance and rewarding executives for creating shareholder value over the long-term.
At our 2016 annual meeting of shareholders held on December 15, 2016, we provided our shareholders with the opportunity to cast a non-binding advisory vote on executive compensation. Over 87% of the votes cast on this “say-on-pay vote” were voted in favor of the proposal. We have considered the say-on-pay vote and we believe that strong support from our shareholders for the say-on-pay vote indicates that our shareholders are supportive of our approach to executive compensation. In the future, we will continue to consider the outcome of our say-on-pay votes when making compensation decisions regarding the Named Executive Officers. At our extraordinary shareholders meeting held in May 2014, our shareholders also voted in favor of the proposal to hold say-on-pay votes annually. We expect to conduct the next advisory vote at our 2018 annual meeting of shareholders.
other person that has a personal interest, whether or not you have a discretion to vote the shares. However, you are not deemed to have a personal interest in the adoption of the proposal if your interest in such proposal arises solely from your ownership of the Company’s Ordinary Shares, or to a matter that is not related to a relationship with a controlling shareholder.
The vote on this proposal is not intended to address any specific element of compensation; rather, the vote relates to the compensation of our Named Executive Officers, as described in this proxy statement in accordance with the compensation disclosure rules of the SEC. To the extent there is any significant vote against our Named Executive Officer compensation as disclosed in this proxy statement, the Compensation Committee of our Board will evaluate whether any actions are necessary to address the concerns of shareholders.
Our Board believes that the information provided in this proxy statement demonstrates that our Named Executive Officer compensation is designed to provide incentives and rewards for both our short-term and long-term performance, and is structured to motivate the Company’s Named Executive Officers to meet our strategic objectives, thereby maximizing total return to shareholders.
Therefore, it is proposed that the following resolution be adopted at the Meeting:
“RESOLVED, to approve, on a non-binding advisory basis, the compensation of the Company’s Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the compensation tables and narrative discussion set forth in this proxy statement.”
Required Vote
The affirmative vote of a majority of the Ordinary Shares voting on the matter is required to approve this resolution, provided eithereither: (i) included in such majority is at least a majority of the Ordinary Shares of shareholders who are non-controlling2 shareholders nor havingand do not have a personal interest in said resolution;election (excluding a personal interest that is not related to the relationship with the controlling shareholder)1, excluding for such purpose any abstentions; or (ii) the total number of Ordinary Shares of shareholders specified in clause (i) who voted against this resolution does not exceed two percent of the voting rights in the Company. Since abstentions are not considered votes cast, they will have no effect on the outcome of this proposal. Broker non-votes will not impact the results of the vote on executive compensation,this proposal, but will be counted for purposes of determining whether there is a quorum.
The Board recommends a vote FOR the above resolution.
| 1 | Under the Companies Law, in general, a person will be deemed to be a controlling shareholder if the person has the power to direct the activities of the Company, other than by reason of being a director or other office holder of the Company, and you are deemed to have a personal interest if any member of your immediate family (spouse, sibling, parent, grandparent or each of the foregoing with respect to your spouse or their spouse) has a personal interest in the adoption of the proposal. In addition, you are deemed to have a personal interest if a company, other than the Company, that is affiliated with you has a personal interest in the adoption of the proposal. Such company is a company in which you or a member of your immediate family serves as a director or chief executive officer, has the right to appoint a director or the chief executive officer, or owns 5% or more of the outstanding shares. You are also deemed to have a personal interest if you are voting another person’s shares pursuant to a proxy provided by a shareholder who has a personal interest in the said resolution, even if you do not have a personal interest in the said resolution. |
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ITEM NO. 3 – APPROVAL OF AN AMENDED AND RESTATED COMPENSATION POLICY
The Companies Law provides that public companies incorporated under the laws of Israel, whose shares have been offered to the public in or outside of Israel, such as the Company, are required to adopt a policy governing the compensation of “Office Holders”. The Companies Law defines the term “Office Holder” of a company to include a director, the chief executive officer, the chief financial officer and any manager who is directly subordinated to the chief executive officer. As reported on the Company’s Current Report on Form 8-K filed on September 30, 2019, the proposal to amend the compensation policy of the Company (as amended from time to time, the “Compensation Policy”) that was included in the Company’s Proxy Statement filed with the Securities and Exchange Commission (“SEC”) on August 23, 2019 was not approved by the general meeting of shareholders of the Company as the proposal did not receive the requisite majority required under the Companies Law. Notwithstanding the above, under the Companies Law, the board of directors of a company may overrule the resolution of the general meeting of the company’s shareholders to not approve proposed changes to the company’s compensation policy, if certain conditions are met. Accordingly, and pursuant to the Companies Law, on November 5, 2019, the Board approved the same proposed amendments to the Compensation Policy, as were included in the Company’s Proxy Statement filed on August 23, 2019. In this Meeting, the Company wishes to submit the Company’s amended and restated compensation policy for executive officers, introducing amendments related to the Company’s directors’ and officers’ insurance (“D&O Insurance”) as well as the Company’s ability to grant equity to its employees, as further described below, for the approval of its shareholders. Following the recommendation of the Compensation Committee of the Board (the “Compensation Committee”) and the approval of the Board, we recommend to approve the Compensation Policy.
A compensation policy is required to address, among other things, matters relating to insuring the liability of Office Holders in customary D&O Insurance. In connection with the D&O Insurance, historically, the Israeli Securities Authority (the “ISA”) determined that compensation policy of a company must include, among other things, reference to the premium, framework for change over the three years limit of liability and deductible. However, in a recent public legal opinion, the ISA has re-examined its position, considering the unique circumstances of the D&O Insurance market and the external changes that have taken place over the recent years in the insurance market. Following such examination, the ISA resolved to waive the demand that the compensation policy would include, when addressing D&O Insurance matters, limitation on the premium paid for such D&O Insurance, and, if applicable, the deductible amounts under the D&O Insurance, provided that the same are in line with market conditions at the time the policy is made.
Accordingly, and in accordance with the position of the ISA, we propose to amend Section 5.3(b) to the Compensation Policy to reflect such position changes, which each of the Compensation Committee and Board deemed necessary in light of the changes in insurance markets in recent years and would provide us with flexibility that is necessary in light of market conditions that we cannot change.
In addition, the Company has conducted a review of the compensation payable to its directors and provided for in Item 4 below. Following the review and after the approval of our Compensation Committee and our Board, the Company proposes to amend the Compensation Policy to align with what the Company believes would be proper and adequate compensation to its directors. Accordingly, the Company is also proposing to amend Sections 3(a), 5.1(a) and 6.3.2 to the Compensation Policy.
Lastly, the Company is also proposing to amend Sections 6.3.1 and 6.3.2 to the Compensation Policy to allow the Company to grant its employees and directors, among others, restricted shares, equity and bonuses in an amount that will create an incentive for such employees and directors, which will encourage them to assist the Company in its efforts to generate revenues (the “Amended Policy”).
A marked copy of the Amended Policy indicating the proposed amendments thereof is attached hereto as Exhibit A.
It is proposed that the following resolution be adopted at the Meeting:
“RESOLVED, that the Company’s Amended and Restated Compensation Policy, in the form attached as Exhibit A to the proxy statement, be, and hereby is, approved.”
Required Vote
The affirmative vote of a majority of the Ordinary Shares voting on the matter is required to approve this resolution, provided either (i) included in such majority is at least a majority of the Ordinary Shares of shareholders who are non-controlling shareholders nor having a personal interest in said resolution; or (ii) the total number of Ordinary Shares of shareholders specified in clause (i) who voted against this resolution does not exceed two percent of the voting rights in the Company2. Since abstentions are not considered votes cast, they will have no effect on the outcome of this proposal. Broker non-votes will not impact the results of the vote on this proposal, but will be counted for purposes of determining whether there is a quorum.
The Board recommends a vote FOR approval of the proposed resolution.
| 2 | See footnote 1 above. |
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ITEM NO. 4 – APPROVAL OF COMPENSATION PAYABLE TO DIRECTORS IN OFFICE
The Companies Law provides that companies incorporated under the laws of the State of Israel, whose shares are listed for trade on a stock exchange or have been offered to the public in or outside of Israel, such as the Company, shall be required to receive the approval of their compensation committee, their board of directors and their shareholders, when approving the terms of directors’ engagement with the company.
In this Meeting, and subject to the approval of the Amended Policy under Item No. 3 above, the Company wishes to submit the Directors’ Compensation Plan (the “Directors Compensation Plan”) for the approval of its shareholders. The Directors Compensation Plan is designed to attract, retain and compensate highly qualified directors by providing them with competitive compensation and equity interests in the Company, to align their interests with those of the Company’s shareholders. Following the recommendation of the Compensation Committee and the approval of the Board, we recommend to approve the Directors Compensation Plan, in the form attached hereto as Exhibit B. In addition, in accordance with the terms of the Amended Policy (if approved) and the Directors Compensation Plan, and further subject to some directors agreeing to terminate certain option grants they hold, as shown in the table below, the Company wishes to grant the directors restricted shares (“Restricted Shares”) as further detailed in the table below.
Under the Companies Law, the terms of engagement with a controlling shareholder or a relative thereof require a special approval. For that purpose, a person will be deemed to be a controlling shareholder if the person has the power to direct the activities of the Company, other than by reason of being a director or other office holder of the Company, as well as a person that is holding 25% or more of the voting rights in the Company’s general meeting, if there is no additional shareholder holding more than 50% of the voting rights in the Company.
Ms. Hardardottir is a relative of a controlling shareholder in the Company and therefore, voting with respect to the terms of her engagement requires a special majority, as provided for below. In addition, the proposed Directors Compensation Policy shall apply, to the maximum extent possible, also to our External Directors. The Companies Law provides that compensation to External Directors needs to be approved by a special majority, as outlined below.
We urge our shareholders to review Item No. 4 “Approval of an Amended and Restated Compensation Policy” and the information under “Compensation of Directors and Executive Officers” for more information.
The information relating to the cancellation of options and grants of Restricted Shares and related terms thereof can be found below (the “Equity Grant Scheme”). Upon vesting of Restricted Shares, the grantee shall be required to pay the par value of the share no longer subject to restriction of NIS 0.1.
| Name of Grantee | Number of Restricted Shares to be Granted | Vesting Schedule | ||||
| Sandra Hardardottir (1) | 30,000 | 10,000 Restricted Shares fully vested upon grant; 20,000 Restricted Shares shall vest over 2 years, on an annual basis, Commencing on January 1, 2022. | ||||
| Michael Shanahan (2) | 30,000 | 10,000 Restricted Shares fully vested upon grant; 20,000 Restricted Shares shall vest over 2 years, on an annual basis, Commencing on January 1, 2022. | ||||
| Leonid Berkovitch (3) | 30,000 | 10,000 Restricted Shares fully vested upon grant; 20,000 Restricted Shares shall vest over 2 years, on an annual basis, Commencing on January 1, 2022. | ||||
| Bill Anderson (4) | 60,000 | 60,000 Restricted Shares shall vest over 3 years, on an annual basis, Commencing on January 1, 2022. | ||||
| Uri Arazy (5) | 30,000 | 30,000 Restricted Shares shall vest over 3 years, on an annual basis, Commencing on January 1, 2022. | ||||
| (1) | Subject to the election of Ms. Hardardottir as a director. |
| (2) | Subject to Mr. Shanahan’s agreement to the cancellation of an amount of 30,000 options. |
| (3) | Subject to Mr. Berkovitch’s agreement to the cancellation of an amount of 30,000 options. |
| (4) | Subject to the election of Mr. Anderson as a director and to his agreement to the cancellation of an amount of 30,000 options he owns. |
| (5) | Subject to the election of Mr. Arazy as a director. |
Item No. 4A – Approval of Compensation Payable to Directors in Officer, Not Including Compensation to Ms. Sandra Hardardottir
It is proposed that the following resolution be adopted at the Meeting:
“RESOLVED, subject to the approval of the Amended Policy, to approve the Directors Compensation Plan and the Equity Grant Scheme, and further approve that each director, excluding Ms. Sandra B. Hardardottir, shall be entitled to the compensation set forth in the Directors Compensation Plan without further shareholders’ approval.”
Required Vote
The affirmative vote of a majority of the Ordinary Shares voting on the matter is required to approve this resolution. The voting for each director shall be conducted separately. Since abstentions are not considered votes cast, they will have no impact on the outcome of this proposal. Broker non-votes will not impact the results of the vote on this proposal, but will be counted for purposes of determining whether there is a quorum.
The Board recommends a vote FOR approval of the proposed resolution.
Item No. 4B – Approval of Compensation Payable to Ms. Sandra Hardardottir
It is proposed that the following resolution be adopted at the Meeting:
“RESOLVED, subject to the approval of the Amended Policy, to approve that Sandra B. Hardardottir shall be entitled to the compensation set forth in the Directors Compensation Plan without further shareholders’ approval.”
Required Vote
The affirmative vote of a majority of the Ordinary Shares voting on the matter is required to approve this resolution, provided either (i) included in such majority is at least a majority of the Ordinary Shares of shareholders who are non-controlling shareholders nor having a personal interest in said resolution; or (ii) the total number of Ordinary Shares of shareholders specified in clause (i) who voted against this resolution does not exceed two percent of the voting rights in the Company3. Since abstentions are not considered votes cast, they will have no effect on the outcome of this proposal. Broker non-votes will not impact the results of the vote on this proposal, but will be counted for purposes of determining whether there is a quorum.
The Board recommends a vote FOR approval of the proposed resolution.
| 3 | See footnote 1 above. |
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ITEM NO. 5 – APPROVAL OF GRANT OF EQUITY TO MR. YEHUDA HOLTZMAN, CHIEF EXECUTIVE
OFFICER OF THE COMPANY
The Compensation Committee and the Board believe there is a need to provide and rewards for both short term and long-term performance, and therefore suggests to grant Mr. Yehuda Holtzman, Chief Executive Officer of the Company, 1,050,000 Restricted Shares, under the terms set forth in the table below. Upon vesting of Restricted Shares, the grantee shall be required to pay the par value of the share no longer subject to restriction of NIS 0.1.
| Name of Grantee | Number of Restricted Shares Granted | Vesting Schedule | ||||
| Yehuda Holtzman | 1,050,000 | (1) | 150,000 Restricted Shares fully vested upon grant; 400,000 Restricted Shares shall vest over 2 years, on an annual basis, and 500,000 Restricted Shares shall vest over 3 years, on an annual basis. | |||
| (1) | Subject to Mr. Holtzman’s agreement to the cancellation of an amount of 650,000 options. |
The Company believes that such compensation, as opposed to a grant of options, is better structured to motivate Mr. Holtzman to meet the Company’s objectives, thereby maximizing the total return to shareholders.
The Compensation Committee and the Board approved the terms of the grant to Mr. Yehuda Holtzman, and believe that it is in the best interest of the Company to have the Company’s shareholders approve such grant, subject to Mr. Holtzman’s agreement to cancelling all of the options he received before from the Company, totaling at 650,000 options. In addition, Mr. Holtzman is entitled to a grant of 100,000 Restricted Shares for every year he is in office (the “Annual Grant”) under the following terms: The Annual Grant will be allocated annually on January 1 of every year, and shall vest over a period of 3 years, on an annual basis.
The Compensation Committee and the Board further concluded that the terms of the grant are in compliance with the Amended Policy of the Company, which is pending approval as part of Item No. 3 of this Proxy Statement.
Therefore, it is proposed that the following resolution be adopted at the Meeting:
“RESOLVED, subject to the approval of the Amended Policy, to approve a grant of 1,050,000 Restricted Shares, as well as the Annual Grant, under the terms set forth herein, to Mr. Yehuda Holtzman, Chief Executive Officer of the Company.”
Required Vote
The affirmative vote of a majority of the Ordinary Shares voting on the matter is required to approve this resolution, provided either (i) included in such majority is at least a majority of the Ordinary Shares of shareholders who are non-controlling shareholders nor having a personal interest in said resolution; or (ii) the total number of Ordinary Shares of shareholders specified in clause (i) who voted against this resolution does not exceed two percent of the voting rights in the Company4. Since abstentions are not considered votes cast, they will have no effect on the outcome of this proposal. Broker non-votes will not impact the results of the vote on this proposal, but will be counted for purposes of determining whether there is a quorum
The Board recommends a vote FOR approval of the proposed resolution.
| 4 | See footnote 1 above. |
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ITEM NO. 6 – APPROVAL OF AMENDMENTS TO OUR ARTICLES OF ASSOCIATION
We are proposing to amend Article 4.2 in the Articles in order to change the terms of re-election of our non-External Directors, such that the non-External Directors of the Company will be up for re-election on an annual basis, rather than every three years, as reflected in the form of the Articles attached hereto as Exhibit C. The Companies Law regulates the term in which External Directors shall remain in office in publicly traded companies and therefore such proposed change to the Articles shall not apply to External Directors.
We believe that an annual re-election of directors will allow the Company, and its shareholders, to better monitor the performance of the members of the Board and is in line with best corporate practices for public companies.
It is proposed that the following resolution be adopted at the Meeting:
“RESOLVED, to approve the amendment to Article 4.2 of the Amended and Restated Articles of Association of the Company, as detailed in Exhibit C to the Proxy Statement.”
Required Vote
The affirmative vote of a majority of the Ordinary Shares voting on the matter is required to approve this resolution. Since abstentions are not considered votes cast, they will have no impact on the outcome of this proposal. Broker non-votes will not impact the results of the vote on this proposal, but will be counted for purposes of determining whether there is a quorum.
The Board recommends a vote FOR the approval of the proposed resolution.
ITEM NO. 7 – APPROVAL OF AN INCREASE IN THE COMPANY’S AUTHORIZED SHARE CAPITAL
Increase in our Authorized Share Capital
The Board has approved, subject to shareholders’ approval, an amendment to the Articles and Memorandum of Association that increases the number of Ordinary Shares authorized for issuance from 100,000,000 to 120,000,000. The purpose of this increase is to maintain our current flexibility to conduct future issuances of our Ordinary Shares in the ordinary course from time to time to fund our operations, consistent with our historical practice of raising financing through equity and debt issuances. We currently do not have any acquisitions or other major transactions planned that would require us to increase our authorized share capital, and our Board is not proposing the increase with the intent of using the newly authorized reserve as an anti-takeover device. If the increase is approved, after the increase, all Ordinary Shares issuable from our authorized share capital would have the same voting rights and rights to any dividends or other distributions by the Company as the Ordinary Shares currently issuable from our share capital.
Approval of Amendment to our Articles of Association and Memorandum of Association
We are therefore seeking approval of the shareholders to increase our authorized share capital by NIS 2,000,000 and accordingly to increase our authorized share capital by 20,000,000 Ordinary Shares (par value NIS 0.1 per share), from 100,000,000 (par value NIS 0.1 per share) to 120,000,000 (par value NIS 0.1 per share).
We are proposing to amend Article 2.1.1 of our Articles as follows (deletions are struck through and additions are underlined):
| “2.1.1 | The |
We are also proposing to amend our Memorandum of Association to reflect the above changes.
Certain Risks and Disadvantages Associated with the Share Capital Increase
If we issue additional Ordinary Shares after the increase in our authorized share capital, the dilution to the ownership interest of our existing shareholders may be greater than would occur had the increase in our authorized share capital not been effected. Future issuances of Ordinary Shares will dilute the voting power and ownership of our existing shareholders, and, depending on the amount of consideration received in connection with the issuance, could also reduce shareholders’ equity on a per-share basis. Although the purpose of the increase in authorized share capital is to maintain our capital-raising position, these additional Ordinary Shares may also be issued in the future for other purposes, such as compensation, giving rise to further opportunities for dilution. We currently do not have any acquisitions or other major transactions planned that would require us to increase our authorized share capital, and our Board is not proposing the increase with the intent of using the newly authorized reserve as an anti-takeover device. However, the authorized Ordinary Shares could, in theory, also be used to resist or frustrate a third-party transaction that is favored by a majority of the independent shareholders (for example, by permitting issuances that would dilute the share ownership of a person seeking to effect a change in the composition of the board or management of our Company or contemplating a tender offer or other transaction for the combination of the Company with another company). The newly available authorized shares resulting from the increase in our authorized share capital thus may have the potential to limit the opportunity for our shareholders to dispose of their Ordinary Shares at a premium.
It is proposed that the following resolution be adopted at the Meeting:
“RESOLVED, to approve an increase in the Company’s authorized share capital, by NIS 2,000,000, divided into 20,000,000 ordinary share of NIS 0.1 par value per share, to NIS 12,000,000, divided into 120,000,000 ordinary shares of NIS 0.1 par value per share, and to amend the Company’s Amended and Restated Articles of Association and Memorandum of Association accordingly.”
Required Vote
The affirmative vote of 75% of the Ordinary Shares voting on the matter is required to approve this resolution. Since abstentions are not considered votes cast, they will have no impact on the outcome of this proposal. As this proposal is deemed to be a routine matter, there will not be any broker non-votes on this proposal.
The Board recommends a vote FOR the approval of the proposed resolution.
11
ITEM NO. 5 - APPOINTMENT8 – RE-APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND
AUTHORIZATION OF AUDIT COMMITTEE DETERMINATION OF REMUNERATION
OurThe Audit Committee of the Board (the “Audit Committee”) and Board have recommended that Somekh Chaikin,Kesselman & Kesselman, Certified Public Accountants (Isr.), a member firm of KPMGPricewaterhouseCoopers International Limited (“Somekh ChaikinPwC”), be appointedre-appointed as our independent registered public accounting firm to perform the audit of our consolidated financial statements until the 20182022 annual general meeting of shareholders. Somekh ChaikinPwC confirmed that they have no relationship with the Company or with any affiliate of the Company, except as auditors. A representative of Somekh ChaikinPwC is not expected to be present at the Meeting.
Shareholder approval of the appointment of Somekh ChaikinPwC as our independent registered public accounting firm to serve until the 20182022 annual general meeting of shareholders is required under the Companies Law. Our Audit Committee and Board believe that such appointment is appropriate and in the best interests of the Company and its shareholders. Shareholder approval is further necessary under the Companies Law in order to delegate the authority to fix the remuneration of our independent registered public accounting firm. Subject to the approval of this proposal, the Board, with the recommendation of our Audit Committee, will fix the remuneration of Somekh ChaikinPwC in accordance with the volume and nature of their services to the Company.
2 See footnote 1 above.
Proposed Resolution
It is proposed that the following resolution be adopted at the Meeting:
“RESOLVED, to appoint Somekh Chaikin,re-appoint Kesselman & Kesselman, Certified Public Accountants (Isr.), a member firm of KPMGPricewaterhouseCoopers International Limited, to serve as our independent registered public accounting firm until the 20182022 annual general meeting of shareholders,and to authorize the Board, upon the recommendation of our Audit Committee, to determine the remuneration of Somekh ChaikinKesselman & Kesselman, Certified Public Accountants (Isr.), a member firm of PricewaterhouseCoopers International Limited, in accordance with the volume and nature of their services.””
Required Vote
The affirmative vote of a majority of the Ordinary Shares voting on the matter is required to approve this resolution. Abstentions will have no effect on the outcome of this proposal. Because this is a routine matter, there will not be any broker non-votes.
The Board recommends a vote FOR the proposed resolution.
12
ITEM NO. 69 - PRESENTATION OF 20162020 FINANCIAL STATEMENTS
The Company’s financial informationstatements for the year ended December 31, 2016,2020 is contained in our Annual Report on Form 10-K available at www.sec.gov (where the contents of the SEC’s website are not part of this proxy statement).
At the Meeting, the Company will review the audited consolidated financial statements for the year ended December 31, 2016,2020 and will answer appropriate questions relating thereto.
No vote will be required regarding this item.
CURRENT DIRECTORS13
In addition to the Director Nominees, the following is information with respect to the rest of our current directors serving on the Company’s Board.
Donna Seidenberg Marks was appointed as an External Director under the Companies Law on November 2, 2015, effective January 1, 2016 to hold office for a three-year term. Ms. Seidenberg Marks is a Certified Public Accountant with a wide variety of experience serving clients in various industries over her 37 years in the practice of public accounting. From March 2011 through March 2014, Ms. Seidenberg Marks served as a director at the Fuoco Group, LLC, a certified public accounting firm that provides audit, tax and consulting services to its clients throughout its five locations in Florida and New York. Prior to joining the Fuoco Group, Mrs. Seidenberg Marks was the managing partner of her own firm, Donna Seidenberg, PA and served as a Managing Director at American Express Tax and Business Services (which merged into the international accounting firm of RSM International). Her practice includes performing audits, reviews and compilations of financial statements, preparing tax returns, and rendering consulting services, including forensic accounting and expert witness testimony in mediations and litigation matters in her areas of specialization. Her experience also includes consulting on Sarbanes-Oxley implementation. Ms. Seidenberg Marks is a frequent speaker at local and national meetings of the Community Associations Institute for which she serves on its National Business Partners Council, and is a past President and Treasurer of its local chapter. Ms. Seidenberg Marks earned a B.A. in Business Administration degree in Accounting (magna cum laude) from the University of South Florida in 1978, and is a member of the Florida Institute of Certified Public Accountants. The Company believes that Ms. Seidenberg Marks’ professional and corporate experience, as well as her knowledge and familiarity with corporate finance and accounting as an experienced Certified Public Accountant, make her suitable to serve as a director of the Company.
Shlomi Cohen was elected as a director in December 2016 to hold office starting on December 15, 2016 until our next General Meeting following three years from his election. Mr. Cohen currently serves as the Company’s Chief Executive Officer. Prior to joining the Company, Mr. Cohen, served as president and Chief Executive Officer of RayV Technologies Ltd. from 2012 until it was acquired by Yahoo! in 2014. Prior to that and from 2010 to 2012, Mr. Cohen served as president of Europe Middle-East Africa for NICE Systems Ltd (Nasdaq: NICE). Mr. Cohen has also held sales positions with a number of leading technology companies, including Nokia (2007-2010), Siemens (2003-2007), BATM Advanced Communications (1998-2002) and Eldor Computers (1990-1995). Mr. Cohen holds an M.B.A. from the Bar Ilan University and a B.SC. in mechanical engineering from the Tel-Aviv University. The Company believes Mr. Cohen’s professional and corporate experience make him suitable to serve as a director of the Company.
EXECUTIVE OFFICERS
The following is information with respect to Company’s current executive officers who are not directors.
Shlomi Cohen is the Company’s Chief Executive Officer and a director nominee. For additional information, see page 11 above.
Yishay Curelaru was appointed as the Company’s Chief Financial Officer effective January 31, 2016. Prior to his appointment, Mr. Curelaru served as the Company’s controller and deputy Chief Financial Officer from July 2013, and oversaw the Company’s finance department in this capacity. Prior to joining the Company, Mr. Curelaru was a senior accountant at PricewaterhouseCoopers (PwC) beginning in 2011. Mr. Curelaru also served as a captain in the Special Forces of the Israeli Defense Forces from 2000 until 2005. Mr. Curelaru holds a B.A. in economics and accounting from the Ben-Gurion University of the Negev, and is a Certified Public Accountant in Israel.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, to the best knowledge and belief of the Company, as of October 1, 201725, 2021 (unless provided herein otherwise), with respect to holdings of our Ordinary Shares by (1) each person known by us to be the beneficial owner of more than 5% of the total number of shares of our Ordinary Shares outstanding as of such date; (2) each of our directors including the Director Nominees;and director nominees; (3) each of our Named Executive Officers (as defined below under “Summary Compensation Table”)(specified below); and (4) all of our directors and our executive officers as a group.
All information with respect to the ownership of any of the below shareholders has been furnished by such shareholder and, unless otherwise indicated below, we believe that persons named in the table have sole voting and sole investment power with respect to all of the shares shown as owned, subject to community property laws, where applicable. The shares owned by the directors and executive officers include the shares owned by their family members to which such directors and executive officers disclaim beneficial ownership, as provided for below. If a shareholder has the right to acquire shares by exercising options currently exercisable or exercisable within 60 days of the date of this table, these shares are deemed outstanding for the purpose of computing the percentage owned by the specific shareholder (that is, they are included in both the numerator and the denominator), but they are disregarded for the purpose of computing the percentage owned by any other shareholder.
The information in the table below is based on 41,134,37872,789,893 Ordinary Shares outstanding as of October 1, 2017.25, 2021. Unless otherwise indicated, the address of each of the individuals named below is: c/o On Track Innovations Inc., Z.H.R.5 Hatnufa St., Yokneam Industrial Zone, P.O. Box 32, Rosh Pina,Yokneam, Israel.
| Name of beneficial owner | Position | Number of Shares Beneficially | % of Class of Shares | |||||||
| William C. Anderson III (1)(2) | Director | 3,680,496 | 5.1 | |||||||
| Uri Arazy | Director | - | - | |||||||
| Zvi Atlas | External Director Nominee | - | - | |||||||
| Sandra B. Hardardottir (3) | Director | 1,699,790 | 2.3 | |||||||
| Leonid Berkovitch (4) | External Director | 10,000 | ** | |||||||
| Donna Marks (5)(6) | External Director | 20,000 | ** | |||||||
| Michael Shanahan (7) | Director | 10,000 | ** | |||||||
| Yehuda Holtzman (8) | Chief Executive Officer | 333,333 | ** | |||||||
| Assaf Cohen (9) | Chief Financial Officer | 116,667 | ** | |||||||
| Nehemia Itay (10) | VP of Hardware | 18,333 | ** | |||||||
| Amir Eilam (11) | VP, Research & Development | 23,333 | ** | |||||||
| Sagi Nataf (12) | VP Operations and Engineering | 18,333 | ** | |||||||
| All executive officers and directors as a group (9 persons) *** | 5,870,286 | 8.0 | ||||||||
| 5% Shareholders | ||||||||||
| Jerry L. Ivy, Jr. (13) | Shareholder | 33,355,494 | 40.8 | |||||||
| If a shareholder has the right to acquire shares by exercising options currently exercisable or exercisable within 60 days of the date of this table, these shares are deemed outstanding for the purpose of computing the percentage owned by the specific shareholder (that is, they are included in both the numerator and the denominator), but they are disregarded for the purpose of computing the percentage owned by any other shareholder. |
(**) Less than 1%.
| Name of beneficial owner | Position | Number of Shares Beneficially Owned | % of Class of Shares | |||||||
| Shlomi Cohen(1) | Chief Executive Officer and Director | 234,937 | * | |||||||
| Yishay Curelaru(2) | Chief Financial Officer | 36,333 | * | |||||||
| Nehemia Itay(3) | VP of Hardware Engineering | 188,302 | * | |||||||
| Amir Eilam (4) | VP, Research & Development | 56,667 | * | |||||||
| James Scott Medford (5) | Director | 10,000 | * | |||||||
| Michael Soluri | Director | - | * | |||||||
| William C. Anderson III (6) | Director | 110,000 | * | |||||||
| Donna Seidenberg Marks (7) | Director | 16,667 | * | |||||||
| All current executive officers and directors as a group (6 persons) | 407,937 | 1.0 | % | |||||||
| 5% Shareholders | ||||||||||
| Jerry L. Ivy Jr. (8) | Shareholder | 3,996,550 | 9.7 | % | ||||||
(***) Including Mr. Zvi Atlas, External Director nominee.
| (1) | Includes |
| (2) | Mr. Anderson is holding more than 5% of the Company’s share capital. |
| (3) | Includes 1,689,790 Ordinary Shares held by Ms. Hardardottir and includes options held by Ms. Hardardottir to purchase 10,000 Ordinary Shares currently exercisable or exercisable within 60 days of this table. Such shares are also included in the Ordinary Shares held by Mr. Jerry L. Ivy, Jr., as detailed in footnote 11 below. |
| (4) | Includes options held by Mr. |
| (6) | Ms. Marks submitted her resignation from the Board, effective December 1, 2021. |
| (7) | Includes options held by Mr. |
| Includes | |
| (10) | Consists of options held by Mr. Itay to purchase 18,333 Ordinary Shares currently exercisable or exercisable within 60 days of this table. |
| (11) | Consists of options held by Mr. Eilam to purchase 23,333 Ordinary Shares currently exercisable or exercisable within 60 days of this table |
| (12) | Consists of options held by Mr. Nataf to purchase 18,333 Ordinary Shares currently exercisable or exercisable within 60 days of this table |
| (13) | Information is based solely on Schedule |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE15
Based solely upon a review of Forms 3, 4 and 5, and amendments thereto, submitted to the SEC during the fiscal year ended December 31, 2016, we believe that during said year, our executive officers, directors and all persons who own more than ten percent of a registered class of our equity securities complied with all Section 16(a) filing requirements, except for Donna Seidenberg Marks, who filed an untimely Form 3 on January 28, 2016 andYishay Curelaruwho filed an untimely Form 3 on February 16, 2016.
CORPORATE GOVERNANCE
Independent Directors
FourFive out of our fivesix current directors on our Board, William C. Anderson, James Scott Medford, Ms.Uri Arazy, Leonid Berkovitch, Donna Seidenberg Marks and Michael SoluriShanahan, as well as Zvi Atlas, an External Director nominee, are independent directors as defined in SEC and NASDAQNasdaq Rules. Sandra B. Hardardottir is a family member of Mr. Cohen serves concurrently as directorIvy, from which the Company received payments exceeding the amounts deemed to preclude independence under Nasdaq rules (if such rules applied to us), and as Chief Executive Officer andtherefore, she is accordingly, not considered independent.
Financial Expertise
Under the Companies Law, our Board is required to determine how many of our non-External Directors should be required to have financial and accounting expertise. In determining such number, the Board must consider, among other things, the type and size of the company and the scope and complexity of its operations. Our Board has determined that at least one director (excluding an External Director) should be required to have financial and accounting expertise. Each member of the Audit Committee of our Board has financial and accounting proficiency as defined under the Companies Law.
Board Leadership Structure
Mr. CohenHoltzman is our Chief Executive Officer, and Mr. MedfordMs. Hardardottir is Chairman of our Board. As Chief Executive Officer of the Company, Mr. CohenHoltzman reports to the Company’s Board. None of our independent directors serves as the lead independent director. We believe that this leadership structure is appropriate given the current size and operations of the Company.
Risk Oversight
Our Board’s role in risk oversight includes risk analysis and assessment in connection with each financial and business review, update and decision-making proposal and deliberations.
The Board’s role in our risk oversight is consistent with our leadership structure, with our Chief Executive Officer, whose performance is assessed by the Board, and other members of senior management having responsibility for assessing and managing our risk exposure, and the Board providing oversight in connection with those efforts.
The Board, including the Audit Committee and Compensation Committee, periodically reviews and assesses the significant risks to the Company. Our management is responsible for the Company’s risk management process and the day-to-day supervision and mitigation of risks. These risks include strategic, operational, competitive, financial, legal and regulatory risks. Our Board leadership structure, together with the frequent interaction between our directors and management, assists in this effort. Communication between our Board and management regarding long-term strategic planning and short-term operational practices include matters of material risk inherent in our business.
The Board plays an active role, as a whole and at the committee level in overseeing management of the Company’s risks. Each of our Board committees is focused on specific risks within their areas of responsibility, but the Board believes that the overall enterprise risk management process is more properly overseen by all of the members of the Board. The Audit Committee is responsible, among other things, for overseeing the management of financial and accounting risks, risks related to the Company’s compliance with legal and regulatory requirements, risks in regardsregard to the independent auditor’s performance of its internal audit function, evaluation of any inadequacies in the business management of the Company and risks in related-party transactions. The Compensation Committee is responsible, among other things, for overseeing the management of risks relating to executive and employeesemployee compensation plans, incentive awards and other beneficial arrangements. While each committee is responsible for the evaluation and management of such risks, the entire Board is regularly informed through committee reports. The Board incorporates the insight provided by these reports into its overall risk management analysis.
The Board administers its risk oversight responsibilities through the Chief Executive Officer and the Chief Financial Officer, who, together with management representatives of the relevant functional areas review and assess the operations of the Company as well as operating management’s identification, assessment and mitigation of the material risks affecting our operations.
External Directors
Under the Companies Law, a company incorporated under the laws of the State of Israel withwhose shares listed on an exchange, including NASDAQ,were offered to and are traded by the public must appoint at least two External Directors; however, pursuantDirectors, unless they qualify and choose to anadopt the exemption provided under sectionspecified in Regulation 5D of the Israeli Companies Regulations (Relief for Public Companies with Shares Listed for Trading on a Stock Market Outside of Israel), 5760-2000 (the “Exemption Regulations”), a public company with securities listed on certain foreign exchanges, including NASDAQ, that satisfies the applicable foreign country laws and regulations that apply to companies organized in that country relating to the appointment of independent directors and composition of audit and compensation committees and has. The Company no controlling shareholder is exempt from the requirement to appoint External Directors or comply with the audit committee and compensation committee composition requirements under the Companies Law. On May 25, 2017, in conjunction with the expiration of Mr. Anderson’s term as External Director the Company adoptedlonger qualifies for the Exemption and appointed William C. Anderson III as a director (who is not an External Director), effective May 26, 2017, to serve until the next general meeting of shareholders of the Company at which directors are being elected.
Ms. Seidenberg Marks, the Company’s only remaining External Director, was elected by the general meeting of shareholders as the second External Director commencing as of January 1, 2016. Based on the information provided to the Company, Ms. Seidenberg Marks qualifies as External Director under the Companies Law.Regulations.
Qualifications
The Companies Law provides that a person may not be appointed as an External Director if the person is a relative of the controlling shareholder of the company or if the person (or any of the person’s relatives, partners, employers or anyone to whom the person is directly or indirectly subjected to or any entity under the person’s control) has or had during the two years preceding the date of appointment any affiliation with the company, its controlling shareholder, any of the controlling shareholder’s relatives, any other entity under the control of the company or the company’s controlling shareholder, and, where there is no controlling shareholder and no shareholder holding 25% or more of the voting power of the company, any affiliation to the chairman of the board of directors of the company, the company’s chief executive officer, any beneficial owner of 5% or more of the issued shares or the voting power of the company or the most senior executive officer of the company in the finance field.
The term affiliation includes:includes:
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“Office holder” is defined in the Companies Law as a chief executive officer, chief business manager, deputy general manager, vice general manager, any person who holds such position in the company, even if such person holds a different title, any director and other manager or officer who reports directly to the chief executive officer.
No person can serve as an External Director if his or her position or other business interests create, or may create, a conflict of interest with his or her positionresponsibilities as an External Director or may otherwise interfere with his or her ability to serve as an External Director. No person can serve as an External Director if the person (or any of the person’s relatives, partners, employers, anyone to whom the person is directly or indirectly subjected to or any entity under the person’s control) has business or professional relations with anyone the affiliation (as defined above) with whom is prohibited as described above,by the Companies Law, even if those affiliations are not of an ongoing nature, excluding negligible affiliations. External Directors are required to possess professional qualifications as set out in regulations promulgated under the Companies Law. In addition, the board of director of such company is required to determine how many of its non-External Directors should be required to have financial and accounting expertise. In determining such number, the board must consider, among other things, the type and size of the company and the scope and complexity of its operations.
If at the time an External Director is appointed, all current members of the Board, who are not controlling shareholders or family members thereof, are of the same gender, then that External Director must be of the other gender. Regulations promulgated under the Companies Law provide that the requirement of Israeli residency does not apply to the External Directors of companies whose shares are listed for trading outside of Israel.
Based on information provided to the Company, each of Ms. Marks and Mr. Berkovich, the Company’s External Directors, as well as Mr. Zvi Atlas, the Company’s External Director nominee, qualifies as an External Director under the Companies Law.
Committee Membership
Under the Companies Law, each committee of our Board must include at least one External Director and the Audit Committee and Compensation Committee must include all of the External Directors. The Company’s External Directors, Ms. Marks and Mr. Berkovitch are currently serving on the Company’s Audit Committee and Compensation Committee. Following the departure of Ms. Marks from the Board, and subject to the appointment of Mr. Atlas’ by the Company’s shareholders, Mr. Atlas shall serve on the Company’s Audit Committee and Compensation Committee.
Election, Term and Compensation
External Directors are elected by a majority vote at a shareholders’ meeting where included in suchat which either the majority is (i)of shares voted at the meeting, including at least a majority of the Ordinary Shares of shareholders who areshares held by non-controlling shareholders and do not have a personal interestdisinterested with respect to the interests of controlling shareholders voted at the meeting, vote in said resolution;favor of the election of the External Director, or (ii) the total number of Ordinary Sharesshares held by non-controlling shareholders disinterested with respect to the interests of controlling shareholders specified in clause (i) who voted against this resolutionthe election of the External Director does not exceed two percent of the aggregate voting rights in the Company.company.
The initial term of an External Director is three years commencing from the date of his or her election and under regulations that apply to Israeli companies whose shares that have been offered to the public outside of Israel or traded on a stock exchange outside of Israel, may be extended for consecutive additional three year periods (unlike other public companies, in whichgeneral, only two additional three year periods are allowed).allowed under the law. External Directors may only be removed by the same percentage of shareholders as is required for their election, or by a court, and then only if the External Directors cease to meet the statutory qualifications for their appointment or if they violate their duty of loyalty to the company. If an External Directorshipexternal directorship becomes vacant, our Board is required under the Companies Law to call a shareholders’ meeting promptly to appoint a new External Director.
An External Director is entitled to compensation as provided in regulations adopted under the Companies Law and is otherwise prohibited from receiving any other compensation, directly or indirectly, in connection with services provided as an External Director.
Alternate Directors
Under our current Articles, of Association, each of our directors may appoint, with the agreement of the Board and subject to the provisions of the Israeli Companies Law, by written notice to us, any person to serve as an alternate director. Under the Companies Law, neither a currentcurrently serving director nor a currently-serving alternate director or any person not eligible under the Companies Law to be appointed as a director may be appointed as an alternate director. An alternate director has all the rights and duties of the director appointing him, unless the appointment of the alternate provides otherwise, and the right to remuneration. The alternate director may not act at any meeting at which the appointing director is present. Unless the time period or scope of the appointment is limited by the appointing director, the appointment is effective for all purposes but expires upon the expiration of the appointing director’s term. Currently, none of our directors has appointed any alternate directors.
Directors’ Service Contracts
Currently, except for Shlomi Cohen who serves as our Chief Executive Officer (and as one of our directors), noneNone of our directors havehas any services contracts either with us or with any of our subsidiaries, which provide for benefits upon termination of employment or service.
Board Meetings and Committees
During 2016,2020, the Board held seven9 meetings (and adopted certain resolutions by way of nine5 unanimous written consents). A majority of the directors attended all of the meetings of the Board and the committees on which they served and none of our directors attended less than 75% of the meetings of the Board and the committees. Each of the directors is encouraged to attend the annual shareholder’s meeting. None of the fivesix directors currently serving on the Board attended the 20162020 annual shareholder’s meeting. Our Board has established an Audit Committee and a Compensation Committee.
Audit Committee
The current members of our Audit Committee are William C. Anderson III, Donna Seidenberg Marks and Michael Soluri. Donna SeidenbergLeonid Berkovitch. Ms. Marks serves as the Chairman of the Audit Committee. Our Board has determined that all of the above are independent Audit Committee members within the meaning of NASDAQNasdaq and SEC rules. Our Board has also determined that Donna SeidenbergMs. Marks is an “Audit Committee Financial Expert” as defined in Item 407(d)(5)(ii) of Regulation S-K under the Securities Exchange Act and that he has the requisite experience under NASDAQ rules.of 1934, as amended (the “Exchange Act”).
Our Audit Committee operates under a written charter that is posted on our website at at:
http://investors.otiglobal.com.investors.otiglobal.com.
Our Audit Committee provides assistance to our Board in fulfilling its legal and fiduciary obligations in matters involving our accounting, auditing, financial reporting, internal control and legal compliance functions by pre-approving the services performed by our independent accountants and reviewing their reports regarding our accounting practices and systems of internal control over financial reporting. Our Audit Committee also oversees the audit efforts of our independent accountants and takes those actions that it deems necessary to satisfy itself that the accountants are independent of management.
Under the Companies Law and NASDAQNasdaq rules (if such rules applied to us), our Audit Committee is responsible for (i) determining whether there are deficiencies in the business management practices of our Company, including in consultation with our internal auditor or the independent auditor, and making recommendations to the Board to improve such practices, (ii) determining whether to approve certain related party transactions (including transactions in which an office holder has a personal interest) and whether such transaction should be deemed as material or extraordinary, (iii) where the Board approves the working plan of the internal auditor, to examine such working plan before its submission to the Board and propose amendments thereto, (iv) examining our internal controls and internal auditor’s performance, including whether the internal auditor has sufficient resources and tools to dispose of its responsibilities, (v) examining the scope of our auditor’s work and compensation and submitting a recommendation with respect thereto to our Board or shareholders, depending on which of them is considering the appointment of our auditor, and (vi) establishing procedures for the handling of employee complaints as to the management of our business and the protection to be provided to such employees. In compliance with regulations promulgated under the Companies Law, our Audit Committee also approves our financial statements, thereby fulfilling the requirement that a board committee provide such approval.
Our Audit Committee held fourseven meetings during the fiscal year ended December 31, 20162020 (and adopted certain resolutions by waytwo written resolution in lieu of one unanimous written consent)a meeting).
Internal Auditor
Under the Companies Law, the Board must appoint an internal auditor who is recommended by the Audit Committee. The role of the internal auditor is to examine, among other things, whether the company’s actions comply with the law and orderly business procedure. Under the Companies Law, the internal auditor may not be an office holder or an interested party, as defined below, or a relative of an office holder or an interested party, or the company’s independent accountant or the independent accountant’s representative. The Companies Law defines an “interested party” as a holder of 5% or more of the issued shares or voting rights of a company, a person or entity who has the right to designate at least one director or the general manager of the company, and a person who serves as a director or general manager. Since March 5, 2012, Mr. Gali Gana, CPA, of Rosenblum Holtzman & Co., has served as our internal auditor.
Compensation Committee
The current members of our Compensation Committee are William C. Anderson III,Uri Arazy, Donna Seidenberg Marks and Michael Soluri. William C. Anderson IIILeonid Berkovitch. Mr. Berkovitch is the Compensation Committee’s Chairman. Our Board has determined that all Compensation Committee members are independent within the meaning of NASDAQNasdaq and SEC rules.
TheOur Compensation Committee operates under a written charter that is posted on our website at at:
http://investors.otiglobal.com.investors.otiglobal.com.
Under the Companies Law and NASDAQNasdaq rules (if such rules applied to us), our Compensation Committee is responsible for (i) proposing office holder compensation policies to the Board, (ii) proposing necessary revisions to any compensation policy and examining its implementation, (iii) determining whether to approve transactions with respect to compensation of office holders, and (iv) determining, in accordance with office holder compensation policies, whether to exempt an engagement with an unaffiliated nominee for the position of chief executive officer from requiring shareholder approval.
Subject to the provisions of the Companies Law, compensation of executive officers is generally determined and approved by our Compensation Committee and our Board. Shareholder approval is generally required when (i) approval by our Board and our Compensation Committee is not consistent with our Amended and Restated Executive Officers Compensation Policy, which was adopted by the annual meeting of shareholders on December 15, 2016, or (ii) the compensation is that of our Chief Executive Officer. In special circumstances, our Compensation Committee and Board may approve the compensation of an executive officer (other than a director, a chief executive officer or a controlling shareholder) or approve the compensation policy despite shareholder objection. Additionally, under certain circumstances, our Compensation Committee may exempt an engagement with a nominee for the position of chief executive officer from requiring shareholders’ approval or may otherwise postpone such shareholders’ approval.
A director or executive officer may not be present when the Board discusses or votes upon the terms of his or her compensation, unless the chairman of the Board (as applicable) determines that he or she should be present to present the transaction that is subject to approval. The Chief Executive Officer may not be present during voting or deliberations regarding his or her compensation.
We may from time to time engage the services of external compensation consultants on a case by case basis, though we did not engage any such compensation consultant for the fiscal year ended December 31, 2016. All compensation consultants we have engaged are independent for the purposes of NASDAQ rules.2020.
Our Compensation Committee held twofour meetings during the fiscal year ended December 31, 20162020 (and adopted certain resolutions by way of two unanimous written consents).
Nominating Committee; Director Candidates
We do not have a Nominating Committee or any committees of a similar nature, nor any charter governing the nomination process. Our Board does not believe that such committees are needed for a company our size. However, our independent directors will consider shareholder suggestions for additions to our Board.
Director nominees are recommended for our Board’s selection by a majority of our independent directors in a vote in which only our independent directors participate. Under the Companies Law, our directors are elected by the general meeting of shareholders, with the recommendation of the Board. There is no formal process or policy that governs the manner in which we identify potential candidates for the Board. Historically, however, the Board has considered several factors in evaluating candidates for nomination to the Board, including the candidate’s knowledge of the Company and its business, the candidate’s business experience and credentials, and whether the candidate would represent the interests of all the Company’s shareholders as opposed to a specific group of shareholders. Diversity is not considered material in identifying nominees for directors. We do not have a formal policy with respect to our consideration of Board nominees recommended by our shareholders because we are a small company. However, our independent directors will consider shareholders suggestions for additions to our Board. A shareholder who desires to recommend a candidate for nomination to the Board should do so by writing to us at Board of Directors, c/o Company Secretary,Chief Financial Officer, On Track Innovations Ltd., Z.H.R.5 Hatnufa St., Yokneam Industrial Zone, Rosh Pina,Yokneam, Israel, 1200000.2069200.
Deadline and Procedures for Submitting Board of Directors Nominations
Subject to our Articles of Association and the Companies Law, a shareholder wishing to nominate a candidate for election to the Board at the next Annual Meeting is required to give written notice containing the required information specified above addressed to the Board, c/o Company Secretary, On Track Innovations Ltd., Z.H.R.5 Hatnufa St., Yokneam Industrial Zone, Rosh Pina,Yokneam, Israel, 1200000,2069200, of his or her intention to make such a nomination. The notice of nomination and other required information must be received by the Company no later than the time required by the Companies Law.
Certain Prohibitions under our Insider Trading Policy
Our Insider Trading Policy provides, among other things, that our directors and employees may not engage in speculative transactions in our securities or derivatives thereof. In particular, our directors and employees are prohibited from short-selling the Company’s ordinary shares or engaging in transactions involving our shares based derivative securities.
Code of Ethics
We have adopted a Code of Business Conduct and Ethics that applies to our directors, executive and financial officers and all of our employees. The Code of Business Conduct and Ethics is publicly available on our website at http://investors.otiglobal.com and we will provide, at no charge, persons with a written copy thereof upon written request made to us. The information contained in, or accessible through, our website does not constitute part of this Proxy Statement.
Delinquent Section 16(a) Reports
Based solely upon a review of Forms 3 and 4, and amendments thereto, submitted to the SEC during the fiscal year ended December 31, 2020, the Company believes that during said year, the Company’s executive officers, directors and all persons who own more than ten percent of a registered class of our equity securities complied with all Section 16(a) filing requirements, except form 4 filed by Sandra Hardardottir on May 8, 2020, which was due May 7, 2020.
Communications with the Board of Directors
Shareholders who have questions or concerns should contact the members of the Board by writing to: Board of Directors, c/o Company Secretary,Chief Financial Officer, On Track Innovations Ltd., Z.H.R.5 Hatnufa St., Yokneam Industrial Zone, Rosh Pina,Yokneam, Israel, 1200000.2069200. All communications received in writing will be distributed to the members of the Board deemed appropriate, depending on the facts and circumstances outlined in the communication received.
21
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Summary Compensation Table
The following table sets forth the compensation earned during the years ended December 31, 20162020 and 20152019 by (i) our Chief Executive Officer,Officer; (ii) our Chief Executive Officer,Financial Officer; (iii) our VP of Hardware Engineering; (iv) orour VP, Research & Development;Development and (v) our former Chief Financial Officer (collectively,VP Operations. We refer to the “persons listed in (i) through (v) collectively as the Named Executive Officers”). Messrs. Itay and Eilam are not executiveOfficers. Certain of these officers but are included solely to comply with requirements under Israeli law.
| Name and Principal Position | Year | Salary ($) (1) | Bonus ($) | Option Awards ($) (2) | Non-equity Incentive Plan Compensation ($) | All Other Compensation ($) (3) | Total ($) | |||||||||||||||||||
| Shlomi Cohen | 2016 | 301,109 | 78,738 | 61,200 | 163,328 | 58,930 | 663,305 | |||||||||||||||||||
| Chief Executive Officer (4) | 2015 | 177,153 | 52,098 | 80,120 | - | 24,499 | 333,870 | |||||||||||||||||||
| Yishay Curelaru | 2016 | 118,338 | 7,915 | 36,500 | 20,524 | 43,842 | 227,119 | |||||||||||||||||||
| Chief Financial Officer (5) | 2015 | 63,162 | - | 3,427 | - | 15,894 | 82,483 | |||||||||||||||||||
| Nehemia Itay | 2016 | 139,713 | 10,263 | 9,900 | 25,547 | 43,487 | 228,910 | |||||||||||||||||||
| VP of Hardware Engineering (6) | 2015 | 214,932 | 34,015 | - | - | 45,516 | 294,463 | |||||||||||||||||||
| Amir Eilam | 2016 | 128,055 | 9,089 | 13,200 | 23,765 | 46,062 | 220,171 | |||||||||||||||||||
| VP, Research & Development (7) | 2015 | 154,494 | 30,054 | 12,000 | - | 47,627 | 244,175 | |||||||||||||||||||
| Shay Tomer | 2016 | 170,438 | 6,621 | - | 13,132 | 101,360 | 291,551 | |||||||||||||||||||
| Former Chief Financial Officer (8) | 2015 | 197,401 | 20,993 | 22,034 | - | 50,034 | 290,462 | |||||||||||||||||||
Summary Compensation Table
| Salary | Bonus | Stock-based Awards | Non-equity Incentive Plan Compensation | All other Compensation | Total | |||||||||||||||||||||
| Name and Principal Position | Year | ($) (1) | ($) | ($) (2) | ($) | ($) (3) | ($) | |||||||||||||||||||
| Yehuda Holtzman | 2020 | 273,844 | - | 67,612 | - | 79,811 | 421,268 | |||||||||||||||||||
| Chief Executive Officer (4) | 2019 | 28,194 | - | - | - | 7,873 | 36,067 | |||||||||||||||||||
| Assaf Cohen | 2020 | 173,155 | - | - | - | 43,639 | 216,794 | |||||||||||||||||||
| Chief Financial Officer (5) | 2019 | 152,018 | - | 13,650 | 28,054 | 44,799 | 238,521 | |||||||||||||||||||
| Nehemia Itay | 2020 | 169,683 | - | 1,022 | - | 42,988 | 213,693 | |||||||||||||||||||
| VP of Hardware Engineering (6) | 2019 | 167,129 | - | - | - | 44,052 | 211,182 | |||||||||||||||||||
| Amir Eilam | 2020 | 154,042 | - | 1,022 | - | 46,306 | 201,370 | |||||||||||||||||||
| VP, Research & Development (7) | 2019 | 150,688 | - | - | - | 48,213 | 198,901 | |||||||||||||||||||
| Sagi Nataf | 2020 | 112,348 | - | 1,022 | - | 38,316 | 151,687 | |||||||||||||||||||
| VP of Operations and Engineering (8) | 2019 | 103,774 | - | - | - | 39,747 | 143,521 | |||||||||||||||||||
| (1) | Salary payments which were in NIS were translated into U.S. Dollars according to |
| (2) | The fair value recognized for the option awards was determined as of the grant date in accordance with FASB ASC Topic 718 (see Note |
| (3) | This cost reflects social benefits (as required under applicable Israeli law), car expenses and termination payments. |
| (4) | The |
| (5) | The 2020 “All Other Compensation” of Mr. Cohen, as shown in the table above, is comprised of |
| (6) | The |
| (7) | The |
| (8) | The |
All of the incumbent Named Executive Officers and our directors mentioned in the table above and our directors are entitled to acceleration of the vesting of any unvested share options and restricted shares in the event of a change of control of the Company.
Pension, Retirement or Similar Benefit Plans
Except as required by applicable law (relating to severance payments to Israeli employees), none of our current officers or employees are entitled to receive any payments upon termination of employment.
Executive Officers Compensation Policy
In accordance with requirements and limitations set forth in the Companies Law, we adopted a Compensation Policy in 2013, which was formulatedthereafter amended by our Compensation Committee, approved by our Board and recommended to our shareholders whichand approved the adoption of the Compensation Policythereby at our annual general meeting held on December 6, 2013. Pursuant to the provisions of the Companies Law, on December 15, 2016, an Amended and Restated Compensation Policy2016. An updated compensation policy was not approved by our shareholders at our annual general meeting.meeting on September 27, 2019. However, our Board approved it notwithstanding such shareholders vote. In this Meeting, we brought our Amended Policy for the approval of our shareholders. See Item No. 3.
The CompensationAmended Policy sets rules and guidelines with respect to our compensation strategy for executive officers, and is designed to provide for the retention of, and to attract, highly qualified executives. The Policy is designed to balance competitive compensation of executive officers with our financial resources, while creating appropriate incentives considering, inter alia, risk management factors arising from our business, executive compensation benchmarks used in the industry, our size (including without limitation, sales volume and number of employees), the nature of our business and our then currentthen-current cash flow situation, in order to promote our long-term goals, work plan, policies and the interests of our shareholders.
The CompensationAmended Policy is designed to allow us to create a full compensation package for each of our executives based on common principles. With respect to variable compensation components, the CompensationAmended Policy is designed to allow us to consider each executive’s contribution in achieving our short-term and long-term strategic goals and in maximizing its profits from a long-term perspective and in accordance with the executive’s position.
The CompensationAmended Policy further provides for an annual performance bonus payable to executive officers. The payment of such bonus is tied to long-term corporate performance, rather than short-term stock market performance. Bonuses are paid in accordance with specific performance targets and based, among others, upon the following factors: (i) the Company’s achievement of certain financial performance metrics, consisting of annual revenue targets, EBITDA target, and free cash flow target, each based on our annual budget; (ii) achievement by the respective executive of certain predetermined objectives; and (iii) other discretionary considerations, taking into account tangible and intangible performance factors, including the executive’s relative contribution to the Company.
BonusSubject to the approval of the Amended Policy, bonus payments shall not exceed, in the case of a Chief Executive Officer, an aggregate amount equivalent to 1210 months’ base salary, in the case of a Chief Financial Officer, an aggregate amount equivalent to 6 months’ base salary, and for other executive officers, an aggregate amount equivalent to nine4 months’ base salary of the respective executive.
Employment Agreements
We maintain written employment and related agreements with all of our current executive officers. These agreements provide for monthly salaries and contributions by us to executive insurance and vocational studies funds. The employment agreements of certain executive officers provide for the achievement of an annual bonus, as described above. In addition, we may decide to grant our executive officers stockshare options from time to time. All of our executive officers’ employment and related agreements contain provisions regarding noncompetition, confidentiality of information and assignment of inventions. The enforceability of covenants not to compete in Israel is unclear.
We have the following written agreements and other arrangements concerning compensation with our current executive officers:
Agreement with Yehuda Holtzman. We have an employment agreement with Mr. Holtzman, which provides that Mr. Holtzman will serve as Chief Executive Officer of the Company and our subsidiaries, in consideration of a monthly gross salary (effective December 1, 2019 and as described below NIS 76,000) and other standard benefits. Mr. Holtzman also receives grants of options on an annual basis to promote retention and as an incentive, subject to vesting requirements. The issuance of such options is subject to the discretion and approval of both the Compensation Committee and the Board. According to the employment agreement, Mr. Holtzman is eligible to receive an annual bonus in an amount up to 10 months’ gross base salary. The employment agreement is for an unlimited duration, provided that each party may terminate it without cause upon serving the other party a written notice of three months, prior to termination. On November 22, 2020, as part of the cost reduction steps taken by our management, our Board and Compensation Committee approved that effective November 1, 2020, Mr. Holtzman’s monthly gross salary was decreased for a period of one year from NIS 76,000 to NIS 58,520, subject to his agreement. This decrease was subsequently cancelled effective June 1, 2021.
Agreement with Assaf Cohen. We have an employment agreement with Mr. Cohen, which provides that Mr. Cohen will serve as Chief Financial Officer of the Company and our subsidiaries, in consideration of a monthly gross salary (effective August 1, 2019 and as described below NIS 45,000; between January 1, 2019 and July 31, 2019 NIS 35,000; between March 1, 2018 and December 31, 2018 NIS 30,000) and other standard benefits. Mr. Cohen also receives grants of options on an annual basis to promote retention and as an incentive, subject to vesting requirements. The issuance of such options is subject to the discretion and approval of both the Compensation Committee and the Board. According to the employment agreement, Mr. Cohen is eligible to receive an annual bonus in an amount up to 4 months’ gross base salary. The employment agreement is for an unlimited duration, provided that each party may terminate it without cause upon serving the other party a written notice of six months (formerly was three months), prior to termination. Effective August 1, 2019, as approved by our Board and Compensation Committee, and pursuant to the amendment to Mr. Cohen’s employment agreement dated September 30, 2019, Mr. Cohen’s monthly gross salary is NIS 45,000 and the abovementioned written notice for termination is six months. In addition, pursuant to the amendment to Mr. Cohen’s employment agreement, as also approved by the Company’s shareholders, Mr. Cohen received a lump sum bonus, in the amount of NIS 100,000, for his services as the Interim Chief Executive Officer of the Company. On March 17, 2020, our Board and Compensation Committee approved an increase in Mr. Cohen’s 2020 maximum annual bonus from 4 months’ to 6 months’ gross base salary. On November 22, 2020, as part of the cost reduction steps taken by our management, our Board and Compensation Committee approved that effective November 1, 2020, Mr. Cohen’s monthly gross salary is decreased for a period of one year from NIS 45,000 to NIS 34,650. This decrease was subsequently cancelled effective June 1, 2021.
Outstanding Equity Awards Atat Fiscal Year-End
The following table shows options to purchase our ordinary sharesOrdinary Shares outstanding on the last day of the fiscal year ended December 31, 20162020, held by each of our Named Executive Officers (where as of December 31, 2016, Mr. Tomer had no unexercised options).Officers.
| Number of Securities Underlying Unexercised | ||||||||||||||
| Option Awards | ||||||||||||||
| Name | Number of securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options(#) unexercisable | Option exercise price($) | Option expiration date | ||||||||||
| Shlomi Cohen (1) | 66,667 | 133,333 | $ | 0.75 | 11/02/2020 | |||||||||
| - | 40,000 | $ | 0.44 | 02/14/2021 | ||||||||||
| - | 100,000 | $ | 0.84 | 03/22/2021 | ||||||||||
| Yishay Curelaru (2) | 5,334 | 2,666 | $ | 2.36 | 05/13/2019 | |||||||||
| 3,334 | 6,666 | $ | 0.74 | 11/11/2020 | ||||||||||
| - | 40,000 | $ | 0.84 | 03/22/2021 | ||||||||||
| - | 25,000 | $ | 1.07 | 11/30/2021 | ||||||||||
| Nehemia Itay (3) | 30,000 | - | $ | 1.46 | 07/20/2018 | |||||||||
| 6,667 | 3,333 | $ | 2.36 | 05/13/2019 | ||||||||||
| - | 15,000 | $ | 1.07 | 11/30/2021 | ||||||||||
| Amir Eilam (4) | 10,000 | - | $ | 1.2 | 05/30/2017 | |||||||||
| 20,000 | - | $ | 1.46 | 07/20/2018 | ||||||||||
| 6,667 | 3,333 | $ | 2.36 | 05/13/2019 | ||||||||||
| 5,000 | 10,000 | $ | 1.68 | 01/01/2020 | ||||||||||
| - | 20,000 | $ | 1.07 | 11/30/2021 | ||||||||||
Number of Securities Underlying Unexercised
| Option Awards | ||||||||||||||
| Name | Number of securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options (#) un-exercisable | Option exercise price ($) | Option expiration date | ||||||||||
| Yehuda Holtzman (1) | 150,000 | 300,000 | $ | 0.20 | 04/14/2025 | |||||||||
| - | 100,000 | $ | 0.35 | 04/14/2025 | ||||||||||
| Assaf Cohen (2) | 15,000 | - | $ | 1.07 | 11/30/2021 | |||||||||
| 15,000 | - | $ | 1.21 | 11/28/2022 | ||||||||||
| 13,333 | 6,667 | $ | 0.84 | 11/27/2023 | ||||||||||
| 33,333 | 66,667 | $ | 0.38 | 08/13/2024 | ||||||||||
| Nehemia Itay (3) | 15,000 | - | $ | 1.07 | 11/30/2021 | |||||||||
| - | 10,000 | $ | 0.28 | 03/17/2025 | ||||||||||
| Amir Eilam (4) | 20,000 | - | $ | 1.07 | 11/30/2021 | |||||||||
| - | 10,000 | $ | 0.28 | 03/17/2025 | ||||||||||
| Sagi Nataf (5) | 10,000 | 5,000 | $ | 0.84 | 11/27/2023 | |||||||||
| - | 10,000 | $ | 0.28 | 03/17/2025 | ||||||||||
| (1) | On |
| (2) | On November 30, 2016, 15,000 options were granted to Mr. Cohen under the 2001 Plan. The options vest in three equal annual installments, commencing November 30, 2017. On |
| (3) | On December 15, 2016, 15,000 options were granted to Mr. Itay under the 2001 Plan. The options vest in three equal annual installments, commencing November 30, 2017. On March 17, 2020, 10,000 options were granted to Mr. Itay under the 2001 Plan. The options vest in three equal annual installments, commencing March |
| On |
| (5) | On November 27, 2018, 15,000 options were granted to Mr. Nataf under the Plan. The options vest in three equal annual installments, commencing November |
Director Compensation for 20162020
The following table provides information regarding compensation earned by, awarded or paid to each person for serving as a director who was not a Named Executive Officer during the fiscal year ended December 31, 2016: 2020:
Name (1) | Fees Earned or Paid in Cash ($) (1) | Option Awards ($) (2) | Total ($) | |||||||||
| William C. Anderson III | 28,546 | - | 28,546 | |||||||||
| Donna Seidenberg Marks | 27,422 | 8,565 | 35,987 | |||||||||
| John A. Knapp Jr.(3) | 23,136 | - | 23,136 | |||||||||
| Mark Stolper(4) | 27,667 | - | 27,667 | |||||||||
| Dilip Singh(5) | 23,649 | - | 23,649 | |||||||||
| Fees Earned or Paid in Cash | Option Awards | Total | ||||||||||
| Name | ($) (1) | ($) | ($) | |||||||||
| Sandra B. Hardardottir | 13,442 (2) | 5,097 | 18,539 | |||||||||
| William C. Anderson III | 24,112 | - | 24,112 | |||||||||
| Leonid Berkovitch | 19,747 (3) | 3,813 | 23,560 | |||||||||
| Donna Marks | 28,602 | - | 28,602 | |||||||||
| Michael Shanahan | 19,338 (3) | 4,008 | 23,346 | |||||||||
| Eran Gilad (2) | 12,406 | - | 12,406 | |||||||||
| Scott Medford (2) | 10,617 | - | 10,617 | |||||||||
| Michael Soluri (2) | 13,805 | - | 13,805 | |||||||||
| (1) | This column represents the sums that our non-executive directors received according to the Israeli regulations as an annual fee as well as for attending Board and Board committee meetings. |
| (2) |
| Expected volatility: 97%-109% |
| ● | Risk-free interest rate: 0.22%-1.53% |
| ● | Expected life: Years 2.49 |
| 1. | Dividend yield of zero percent. |
| 2. | Expected average volatility represents a weighted average standard deviation rate for the price of the Company’s ordinary shares on the OTCQX market. |
| 3. | Risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. |
| 4. | Estimated expected lives are based on historical grants data. |
26
As of December 31, 2016,2020, our directors held options to purchase our Ordinary Shares as follows:
Name | Aggregate number of shares Underlying stock options | |||
| William C. Anderson III | ||||
| Donna | ||||
| Leonid Berkovitch | 30,000 | |||
| Michael Shanahan | 30,000 | |||
We reimburseFrom January 1, 2020, until November 22, 2020, we reimbursed our directors for expenses incurred in connection with attending boardBoard meetings and committee meetings and provideprovided the following compensation for directors: annual compensation of $16,586;NIS 49,110 (approximately $15,280); meeting participation fees of $859NIS 3,283 (approximately $1,020) per in-person meeting; meeting participation by telephone of $516NIS 1,971 (approximately $610) per meeting; and $430NIS 1,642 (approximately $510) per written resolution.
On November 22, 2020, as part of our management’s efforts to reduce costs, four of our board members, Ms. Sandra B. Hardardottir, Mr. Leonid Berkovitch, Ms. Donna Marks and Michael Shanahan, volunteered to reduce their compensation by 25%, such that the cash compensation paid to each of these directors effective November 22, 2020, shall be as follows: Annual compensation of NIS 36,833 (approximately $11,500), meeting participation fees of NIS 2,462 (approximately $770) per in-person meeting, meeting participation by telephone fees of NIS 1,478 (approximately $460) per meeting and NIS 1,232 (approximately $380) per written resolution. In addition, on November 22, 2020, our fifth director, William C. Anderson, volunteered to receive no compensation from the Company effective November 22, 2020. Our directors agreed to revisit the voluntary reduction in the directors’ fees in six months from the time the reduction took place.
Our executive directors do not receive additional separate compensation for their service on the Board or any committee of the Board. During 2016,2020, our non-executive directors were reimbursed for their expenses for each board meeting, and committee meeting attended and in addition received the foregoing compensation with respect to attendance inat such meetings. The aggregate amount paid by us to our non-executive directors for their service during 20162020 was $134,776.
See “Security Ownership of Certain Beneficial Owners and Management” for information on beneficial ownership of our shares by our directors and executive officers. We have no outstanding loans to any of our directors or executive officers.$142,471.
Under the Companies Law, an External Director is entitled to compensation as provided in regulations adopted under the Companies Law and is otherwise prohibited from receiving any other compensation, directly or indirectly, in connection with services provided as an External Director.
Certain Relationships and Related Person Transactions; and Director IndependenceTransactions
Our policy is to enter into transactions with related parties on terms that are on the whole no less favorable to us than those that would be available from unaffiliated parties at arm’s length.
Agreements with Directors and Officers
We have entered into employment agreements with all of our executive officers as mentioned above.above and indemnification agreements with all of our executive officers and directors. In addition, we have granted options to purchase our Ordinary Shares to our officers, as mentioned elsewhere in this proxy statement.directors and executive officers.
Other than described above, and except for a loan financing agreement between the Company and Jerry L. Ivy, Jr., Descendants’ Trust (“Ivy”), the share purchase agreement between the Company and Ivy, and the Chairman of the Board, Ms. Hardardottir, and the Director, Mr. Shanahan, who were designated by Ivy pursuant to the Share Purchase Agreement, none of our directors, executive officers or shareholders holding more than 5% of 5% shareholdersour outstanding Ordinary Shares, or members of any such person’s immediate family, has any relationship with the Company besides serving as directors.directors or executive officers.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have engaged Somekh ChaikinPwC, as our principal independent registered public accounting firm foruntil the fiscal year ending December 31, 2017. 2021 annual general meeting. Under Item No. 8 above, we are seeking shareholder approval to appoint PwC until our 2022 annual general meeting.
Our Audit Committee is generally responsible for the oversight of our independent auditors’ work. The Audit Committee’s policy is to pre-approve all audit and non-audit services provided by Somekh Chaikin.our independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services, as further described below. The Audit Committee sets forth the basis for its pre-approval in detail, listing the particular services or categories of services which are pre-approved, and setting forth a specific budget for such services. Additional services may be pre-approved by the Audit Committee on an individual basis. Once services have been pre-approved, Somekh Chaikinour independent registered public accounting firm and our management then report to the Audit Committee on a periodic basis regarding the extent of services actually provided in accordance with the applicable pre-approval, and regarding the fees for the services performed.
Our Audit Committee pre-approved all audit and non-audit services provided to us and to our subsidiaries during the periods listed below. The Audit Committee approves discrete projects on a case-by-case basis that may have a material effect on our operations and also considers whether proposed services are compatible with the independence of the independent auditors.
Pursuant to our pre-approval policy, the Audit Committee pre-approves and delegates to our Chairman of the Board the authority to approve the retention of ad-hoc audit and non-audit services from our independent auditors, beyond the scope approved by the Audit Committee as part of the annual audit plan.plan
Principal Accountant Fees and Services
The following fees were billed by Somekh Chaikin, a member firm of KPMG International,PwC and affiliate firms for professional services rendered thereby for the years ended December 31, 20162020 and 20152019 (in thousands):
| 2016 | 2015 | |||||||
| Audit fees (1) | $ | 167 | $ | 163 | ||||
| Audit-related fees (2) | $ | - | $ | - | ||||
| Tax fees (3) | $ | 13 | $ | 14 | ||||
| All other fees (4) | $ | - | $ | - | ||||
| Total | $ | 180 | $ | 177 | ||||
| 2020 | 2019 | |||||||
| Audit Fees (1) | $ | 155 | $ | 155 | ||||
| Audit-Related Fees | $ | - | $ | - | ||||
| Tax Fees (2) | $ | - | $ | 6 | ||||
| All Other Fees (3) | $ | 3 | $ | 5 | ||||
| Total | $ | 158 | $ | 166 | ||||
| (1) | The audit fees for the years ended December 31, |
| (2) |
| Tax fees are the aggregate fees billed (in the year) for professional services rendered for tax compliance and tax advice other than in connection with the audit. |
28
REPORT OF THE AUDIT COMMITTEE
In the course of our oversight of the Company’s financial reporting process, we have: (1) reviewed and discussed with management the audited financial statements for fiscal year 2016;ended December 31, 2020; (2) discussed with the independent auditor the matters required to be discussed by Codificationthe applicable requirements of Statements on Auditing Standard No. 1301, as adopted by the Public Company Accounting Oversight Board;Board (“PCAOB”) and the SEC; (3) received the written disclosures and the letter from the independent auditor required by applicable requirements of the standards of the Public Company Accounting Oversight BoardPCAOB regarding the independent auditor’s communications with the Audit Committee concerning
independence, (4) discussed with the independent auditor its independence and (5) considered whether the provision of non-audit services by the independent auditor is compatible with maintaining its independence and concluded that it is compatible at this time.
Based on the foregoing review and discussions, the Audit Committee recommended to the Board that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 20162020 that was filed with the SEC on March 28, 2017.31, 2021.
| By the Audit Committee | |
| of the Board of Directors of On Track Innovations Ltd. | |
| Donna | |
| William C. Anderson III | |
| Leonid Berkovitch |
SHAREHOLDER PROPOSALS FOR 20172022 ANNUAL MEETING
Shareholders who wish to present proposals appropriate for consideration at our 20182022 Annual Meeting of Shareholders (the “20182022 Annual Meeting”) must submit the proposal in proper form consistent with our Articles of Association and applicable law to us at our address as set forth on the first page of this proxy statement and in accordance with the applicable regulations under Rule 14a-8 of the Exchange Act by June 18, 2018,March 9, 2022, in order for the proposal to be considered for inclusion in our proxy statement and form of proxy relating to the 20182022 Annual Meeting. Shareholders who wish to present proposals appropriate for consideration at the 20182022 Annual Meeting outside of Rule 14a-8 must submit the proposal in proper form consistent with our Articles of Association and applicable law to us at our address as set forth on the first page of this proxy statement by July 27, 2018May 24, 2022 in order for the proposal to be considered for inclusion in our proxy statement and form of proxy relating to the 20182022 Annual Meeting. Any such proposals should contain the name and record address of the shareholder, the number of Ordinary Shares beneficially owned as of the record date established for the meeting, a description of, and reasons for, the proposal and all information that would be required to be included in the proxy statement file with the SEC if such shareholder was a participant in the solicitation subject to Section 14 of the Exchange Act. The proposal, as well as any questions related thereto, should be directed to our Secretary.
If a shareholder submits a proposal after the last date applicable under our Articles of Association and applicable law but still wishes to present the proposal at our 20182022 Annual Meeting (but not in our proxy statement), the proposal, which must be presented in a manner consistent with our Articles of Association and applicable law, must be submitted to our Secretary in proper form at the address set forth above so that it is received by our Secretary no later than seven days after the notice for such meeting.
We did not receive notice of any proposed matter to be submitted by shareholders for a vote at this Meeting and, therefore, in accordance with Exchange Act Rule 14a-4(c) any proxies held by persons designated as proxies by our Board and received in respect of this Meeting will be voted in the discretion of our management on such other matter which may properly come before the Meeting.
SHAREHOLDERS SHARING THE SAME ADDRESS
Only one set of proxy materials may be delivered to multiple shareholders sharing an address unless the Company has received contrary instructions from one or more of the shareholders. The Company will deliver promptly upon written or oral request a separate copy of the proxy materials to a shareholder at a shared address to which a single copy of the documents was delivered. Requests for additional copies should be directed to the Company’s Secretary,Chief Financial Officer, Mr. Tamir Ben-Yoseph,Assaf Cohen, by e-mail addressed to tamirb@otiglobal.com,assaf@otiglobal.com, by mail addressed to c/o Company Secretary,Chief Financial Officer, On Track Innovations Ltd., Z.H.R.5 Hatnufa St., Yokneam Industrial Zone, Rosh Pina,Yokneam, Israel, 1200000,2069200, or by telephone at +011 972-4-6868000. Shareholders sharing an address and currently receiving a single copy may contact the Secretary as described above to request that multiple copies be delivered in future years. Shareholders sharing an address and currently receiving multiple copies may request delivery of a single copy in future years by contacting the Secretary as described above.
OTHER MATTERS
As of the date of this proxy statement, our management knows of no matter not specifically described above as to any action which is expected to be taken at the Meeting. The persons named in the enclosed proxy, or their substitutes, will vote the proxies, insofar as the same are not limited to the contrary, in their best judgment, with regard to such other matters and the transaction of such other business as may properly be brought at the Meeting.
PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE AND NOT LATER THAN SATURDAY,MONDAY, NOVEMBER 18, 2017, AT 5:29, 2021, AT 10:00 P.M.A.M. ISRAEL TIME (10:(3:00 A.M. EASTERN TIME) IN THE ENCLOSED RETURN ENVELOPE. A PROMPT RETURN OF YOUR PROXY CARD WILL BE APPRECIATED AS IT WILL SAVE THE EXPENSE OF FURTHER MAILINGS.
| By | |
| /s/ | |
Rosh Pina,Yokneam, Israel
October 16, 2017
October 28, 2021
APPENDIXEXHIBIT A – MARKED COPY OF THE AMENDED AND RESTATED SHARE OPTION PLAN
(CHANGES ARE MARKED)COMPENSATION POLICY
On Track Innovations Ltd.
Amended and Restated Executive Officers Compensation Policy
Amended as of December [●], 2021
| 1. | PREAMBLE |
This Executive Compensation Policy (the “Policy”) of On Track Innovations Ltd. (the “Company” or “OTI”) is adopted in accordance with the requirements and limitations set forth in the Israeli Companies Law, 5759-1999 (the “Companies Law”). This Policy applies to all of OTI’s Office Holders, as such term is defined in the Companies Law (hereinafter referred to as the “Executives”).
The Policy refers to the terms of compensation of the Company’s Executives and the termination terms thereof.
| 2. | PURPOSE |
The purpose of this Policy is to set rules and guidelines with respect to OTI’s compensation strategy for Executives designed to retain and attract highly qualified Executives by providing competitive compensation (within the Company’s ability to fund compensation based on its financial resources), while creating appropriate incentives considering, inter alia, risk management factors arising from the business of the Company, the size of the Company (including without limitation, its sales volume and number of employees), the nature of its business and its then current cash flow situation, in order to promote OTI’s long-term goals, work plan, policies and the interests of the shareholders of the Company.
This Policy is also designed to allow the Company to create a full compensation package for each of its Executives based on common principles, taking into account the experience of each of the Executives, as well as the characteristics of their position and their performance.
With respect to variable compensation components, the Policy is designed to allow the Company to consider each Executive’s contribution in achieving the Company’s short-term and long-term strategic goals and in maximizing its profits from long-term perspective and in accordance with the Executive’s position.
By setting this Policy, the Company intends to increase the sense of solidarity of Executives with the Company and its activities, to increase the Executives’ motivation to advance the long-term business of the Company and to make it more innovative, efficient and profitable; and to achieve higher levels of performance by Executives, while rewarding Executives for their efforts, and enabling the Company to retain and attract highly-skilled qualitative human capital within or to the Company.
| 3. | Overview of Executives’ COMPENSATION COMPONENTS |
| a) | Directors – Non-Employee Directors, including External Directors (as defined in the Companies Law) and Independent Directors (as defined |
The limitations and conditions provided for herein with respect to the cash and equity compensation to the Non-Employee Directors, including External Directors shall become effective on January 1, 2022. Until then, the compensation to such directors shall be limited as provided for by the Policy as in force before the amendment thereof in December 2021.
| b) | Chief Executive Officer – The compensation of the Company’s Chief Executive Officers (the “CEO”) shall include a base salary, reimbursement of expenses incurred by him or her in the performance of his or her duties, performance bonus, compensation in equity and other social benefits usually granted to CEO’s in the high-tech industry, which shall be described further in this Policy. Such compensation, including performance targets and the maximum variable components of the CEO, shall be approved by the requisite organs in accordance with the Companies Law. |
| c) | Executives Subordinated to the CEO Not Acting as Directors (the “Subordinated Executives”) – The compensation of the Company’s Subordinated Executives shall include a base salary, reimbursement of expenses incurred by them in the performance of their duties, performance bonus, compensation in equity and other social benefits usually granted to Executives in the high-tech industry, which shall be further described in this Policy. Such compensation, including performance targets and the maximum variable components payable to each Executive, shall be presented and recommended by Company’s management and approved by the requisite organs in accordance with the Companies Law. |
| 4. | General Considerations |
While setting the compensation of each of the Executives, the Compensation Committee and the Board shall consider and refer to the following criteria, in accordance with the Companies Law:
| a) | The Executive’s education, skills, expertise, professional experience and achievements; |
| b) | The Executive’s position, responsibilities and his or her previous compensation arrangements; |
| c) | Executive’s expected contributions to the future growth and profitability of the Company; |
| d) | The ratio between the Executive’s employment terms and the salary of other Company employees and contractors, in particular the ratio between the average salary and the median salary of such employees and the effect of differences between such on work relations in the Company (for purposes of this section “contractors” and “salary”- as defined in the Companies Law); |
| e) | If the employment terms include variable components – the possibility of reducing such variable components at the discretion of the Board and the possibility of setting a limit to the realizable value of variable components of equity which are non-cash disposed; |
| f) | The Executive’s compensation in view of comparable situated executives and based on comparable industry data (including data of peer companies )5; |
| g) | If the employment terms include a severance arrangement – the Executive’s term of employment, the employment terms during the employment term, the Company’s performance during such term, the Executive’s contribution to achieve Company’s goals and/or for maximizing profits, and the circumstances of the Executive retirement. |
Without derogating from the foregoing general criteria, the Compensation Committee and the Board may consider additional benchmark information, as shall be required and available from time to time.
| 5. | FIXed COMPENSATION |
| 5.1. | BASE SALARY |
| a) | Directors – Non-Employee Directors, including External Directors and Independent Directors (the “Directors”), shall receive in cash annual |
In addition, the Directors shall receive reimbursement of expenses incurred by them in performance of their duties (where the Company may issue them credit or debit cards to cover such expenses). All the aforesaid compensations as shall be determined and approved by the Compensation Committee, the Board and the General Meeting (if required).
Notwithstanding the above, the compensation of the Company’s External Directors, if elected, shallnot exceed the maximum amounts setbe in accordance with the Companies Regulations (RulesonRegarding the Compensation and Expenses of an External Director), 5760-2000, as amended by the Companies Regulations (Relief for Public Companies Traded in Stock Exchange Outside of Israel), 5760-2000, as such regulations may be amended from time to time (such regulations, the “Compensation Regulations”).
| 5 | In order to set the fixed base salary and other compensation components range, compensations of similar job holders in relevant companies or reliable salary surveys will be reviewed on a case by case basis over time. Comparative studies will cover companies matching as many criteria as possible from the following list: (i) companies in the contactless cards business; (ii) publicly traded companies whose stock are traded on NASDAQ at a Market Cap/EBITDA/Revenue/Net Income/Free Cash Flow level similar to that of the Company; (iii) companies competing with the Company for managerial talent and for potential Executive in particular; companies with headcount similar to that of the Company. |
| b) | Chief Executive Officer – The CEO shall receive a base salary and reimbursement of expenses incurred in performance of his/her duties (where the Company may issue them credit or debit cards to cover such expenses), as shall be determined and approved by the Board and by any other requisite organs, in accordance with the Companies Law. The CEO’s base salary shall be designed to reward the CEO for the time and effort spent by him or her in the performance of his or her tasks and duties in the day-to-day management of the Company and shall be targeted to be competitive within the marketplace in which the Company competes. The base salary shall reflect the skills of the CEO such as education, expertise, professional experience and achievements, while taking into account his or her responsibilities and the requirements derived from the position. The CEO’s gross based annual salary shall not exceed NIS 1,800,000. |
| c) | Subordinated Executives – The Executives shall receive a base salary and reimbursement of expenses incurred in performance of their duties (where the Company may issue them credit or debit cards to cover such expenses), as shall be determined and approved by the Board. Executive’s base salary shall be designed to reward the Executive for the time and effort spent by him or her in the performance of his or her tasks and his day-to-day duties and shall be targeted to be competitive within the marketplace in which the Company competes. The base salary shall reflect the skills of the Executive, such as education, expertise, professional experience and achievements, while taking into account his or her responsibilities and the requirements derived from his or her position. The Executive’s gross based annual salary shall not exceed NIS 1,200,000. |
| d) | Without derogating the foregoing, the Compensation Committee and the Board shall be entitled at their own discretion to change the compensation of any of the Executives by up to 10% per annum of the previously approved compensation of said Executive (the “Non-Material Change”). |
| e) | Without derogating from the provisions of Section 5b above, as long as the Subordinated Executive’s gross based annual salary does not exceed NIS 1,200,000, a Non-Material Change to the compensation terms of the Subordinated Executives can be approved solely by the CEO and shall not require the Compensation Committee’s approval. |
| 5.2. | A LUMP SUM SIGN UP BONUS |
All Executives, excluding Non-Employee Directors, may be incentivized through lump sum sign up cash bonuses, designed to attract skilled and experienced executives in a competitive industry environment. The lump sum sign up bonus shall not exceed NIS 400,000 and shall not be calculated as part of the Executive’s fixed compensation.
| 5.3. | ADDITIONAL BENEFITS |
Executives, excluding Non-Employee Directors, shall be entitled to any and all basic social benefits provided by the applicable Israeli Law, including, among others and without limitation, advance notice period for termination of employment, annual leave, sickness leave, pension and/or managers insurance, education fund, convalescence payments (“D’mei Avraha”) and severance payments.
In addition to these benefits, the Executives may be entitled at Company’s account to other industry standards benefits and insurances, such as all or any of the following benefits:
| a) | Some social, incidental benefits (such as: pension and long term savings, life insurance, severance pay, vacation and sick leave) and prior termination notice are mandatory according to different local legislation, where some are provided according to market conventions and enable the Company to compete in the relevant labor market (such as education funds and company car in Israel) and others are meant to complement the base salary and compensate the Executives for expenses caused in connection with their job requirements (such as: travel expenses or allowances). To comply with the foregoing, the Company adopts the following compensation terms: |
| i. | The Company will provide all Executives with pension, long term disability and life insurance according to local practices and legislation and shall make such payments, contributions and deductions as required under applicable law and as customary for companies such as the Company. In Israel, the Company will provide all Executives educational fund as well. |
| ii. | The Company may subsidize Company cars for Executives (and may gross up taxes in connection therewith). |
| iii. | The Company will provide all Executives with mobile phones for their use and will bear all taxes related to the use of the phone according to local legislation. |
| iv. | The Company may cover any reasonable, direct costs associated with an Executive’s permanent move to a location decided by Company. |
| v. | Each Executive will be entitled to annual vacation according to prevailing Company procedures and policies, taking into consideration any relevant prior tenure and local legislation. |
| vi. | Each Executive will be entitled to sick leave according to Company procedures and any relevant local legislation. |
| vii. | Each Executive will be entitled to any additional benefits and perquisites according to Company procedures and any relevant local legislation. |
| viii. | Executives may be entitled to an unconditional advance notice period prior to Company termination of employer/employee relations (where Company may waive the actual work of Executives during the advance notice period) according to the following table: |
| Position | Months | |
| CEO, CFO | Up to 6 months | |
| VPs and other Executives | Up to 4 months |
| b) | All Executives, including Non-Employee Directors, shall be entitled to |
All insurance policies that will be purchased as aforesaid may include Entity Cover for Securities Claims, insuring the Company itself for claims filed against the Company for the violation of laws regulating securities. This cover shall include priorities for payment of any insurance benefits according to which the rights of the Executives to receive indemnity from the insurers shall take precedence over the right of the Company itself.
The Company shall be entitled to purchase any of the above insurances, including extending existing insurance policies, with the same insurer or another insurer, in Israel or abroad, provided that the terms of engagement are in arm’s length and that such engagement is not expected to have a material effect on the Company’s profitability, assets or liabilities.
| 6. | VARIABLE COMPENSATION |
| 6.1. | GENERAL |
Executives, other than Non-Employee Directors, may be incentivized through cash bonuses, designed to reward the Executives for personal achievement, reflecting his or her contribution to achieve the Company’s goals.
All Executives, including Non-Employee Directors, may be additionally incentivized by a long-term equity-based incentive through the Company’sStock Optionincentive equity plan(s) (“Incentive Equity Plan”), designed to create a proximate interests of maximizing shareholder value, as reflected in the increase in the value of Company’s shares, and provide the Executives with a stake in the Company’s success, thus linking the Executives’ long-term financial interests with the interests of the Company’s shareholders and shareholders’ value.
Such incentives will be made through an annual program that defines performance targets based on the role and scope of each Executive. Actual payments are driven by the business and individual performance and achievement vis-à-vis the performance targets set at the beginning of the year, with upside potential tied to achieving superior performance.
In determining the said annual performance targets for Executives and the cash bonus and long-term equity-based incentives payable to each Executive as aforementioned, consideration should be given to promote the Company’s long-term goals and to ensure that, at least with respect to the CEO, a material portion of the variable components be determined based on measureable criteria. Additional portion of the variable components (and with respect to Subordinated Executives, up to the entire portion of the variable components) may be based on non-measureable criteria taking into account the Executives’ contribution to the Company.
While determining the Executives performance targets, the Company may take into consideration diverse parameters such as, without limitation, financial results, sales results, efficiency metrics, internal and external customer satisfaction, shareholders value, execution of projects, attainment of milestones, etc.
| 6.2. | ANNUAL PERFORMANCE BONUS |
| 6.2.1. | Payment of the annual performance bonus (the “Bonus”) to Executives, other than Non-Employee Directors, shall be tied to long-term corporate performance, rather than short-term stock market performance, with the goal of eliminating abuses resulting from a short-term focus. |
| 6.2.2. | Such Bonus shall be made in accordance with each Executive’s performance targets and based, among others, upon the following factors: |
| a) | The Company’s achievement of certain financial performance metrics, consisting of annual revenue targets, earnings before interest, taxes, depreciation and amortization target and free cash flow target, each based on the Company’s annual budget (to be approved by the Board); |
| b) | Achievement of the Executive defined Management by Objectives (“MBOs”) which will be determined by the CEO with respect to the Subordinated Executive and by the Compensation Committee and the Board with respect to the CEO; and |
| c) | Discretionary and based upon achievement of the Executive performance goals, which shall be determined by the CEO with respect to the Subordinated Executive and by the Compensation Committee and the Board with respect to the CEO, taking into account tangible and intangible performance factors as it deems appropriate, including the Executive’s relative contribution to the Company. |
| 6.2.3. | In defining the Bonus the Company shall consider the weight and percentage of each of the factors for the calculation of the Bonus as prescribed in the following table. |
Position | Financial Factors | Defined MBOs | Discretionary | |||
| CEO, CFO | 80- 90% | 0 | 10 to 20%6 | |||
| VP of Sales | 50- 85% | up to 50% | up to 10% | |||
| Other Executives | 40- 70% | up to 40% | up to 15% |
| 6.2.4. | Notwithstanding sections 6.2.1 through 6.2.3, the Company shall be entitled to determine, that the entire Bonus for a Subordinated Executives be discretionary, while taking into account the Subordinated Executives’ contributions to the Company, provided that the Bonus amount does not exceed 9 gross base monthly salaries of the said Subordinated Executive and subject to the variable compensation limitations specified in Section 7 below. |
| 6.2.5. | Payment of the annual Bonus (if any) related to the financial factors will be made within 30 days after the publication of the financial statements for the year for which the Bonus is paid, unless the Executive’s employment is terminated prior to such date, in which case the Compensation Committee and the Board of Director may make appropriate adjustments, which may include payment at any time before the publication of the financial statements. Any such bonus may be paid in cash in a single lump sum or by equity compensation, or a combination of both. |
| 6.2.6. | The Executives annual Bonus shall not exceed the following amounts: |
| a) | CEO - the aggregate amount equivalent to 12 gross base monthly salaries of the CEO. |
| b) | Other Executives – the aggregate amount equivalent to 6 gross base monthly salaries of the Executive. |
| 6.3. | EQUITY BASED INCENTIVES |
| 6.3.1. | Equity-based compensation may be granted to Executives, subject to the Company |
| 6 | Subject to Section 7 below. |
A-5
All equity-based incentives granted to Executives who are not Directors shall be subject to vesting over a vesting period of three (3) years in order to promote long-term retention of the awarded Executives, with full acceleration upon a change of control event (referred to as a “Transaction” in the Incentive Equity Plan). Unless otherwise determined in a specificstock optionsincentive equity award agreement and unless accelerated upon a change of control event,optionsequity award grants to Executives shall vestgraduallylinearly over a period of three (3) years, vesting in portions of 1/3 of the total number ofoptionssecurities underlying an equity award each year,quarter orin portions of 1/12 if vesting on a quarterly basis or adjusted to any other period as shall be determined by the Board. Unless otherwise determined in a specificstock optionsincentive equity award agreement, the exercise price of the equity-based compensation, in case of stock options, shall be calculated according to the average closing price of the Company’s Ordinary Shareson Nasdaq during the last 30 days prior to the date of grant (the “PPS”) and in case of Restricted Shares (“RS”) shall be the par value thereof.
The Equity-based compensation granted to an Executive in a given 12 month period shall not exceed at the date of the grant, the aggregate amount ofsixty sevenone-hundred and fifty percent (67%)(two-thirds)150%) of the cost of the Executive’s annual salary, including benefits, calculated, in case of stock option, by the Black & Scholes model as the 0.33 (third) (on a vesting period of 3 years) of the grant, as the case may be, that is vested during the given year and in case of RS shall equal to the PPS on the day of the grant.
| 6.3.2. | Each Director shall receive an annual equity grant of RS reflecting a value of up to $24,000 (the “Annual Grant”). The Annual Grant shall vest upon the earlier to occur of: (i) the first anniversary of the date of grant; (ii) immediately prior to the consummation of a Transaction. In addition, immediately prior to the termination or expiration of the director’s office, other than in the event of Transaction, restricted shares that equal to the number of unvested restricted shares then outstanding multiplied by the number of whole months since the date of grant divided by 12 shall vest and the remaining restricted shares shall be forfeited or repurchased by the Company for no consideration. |
In addition, the Directors, other than the External Directors, if elected, shall receive annual position-based compensation, on an annual basis, according to the following table, payable in RS (the “Membership Grant”):
Board Chair | Member of a Board Committee | Additional Payment to Chair of a Board Committee |
| $16,000 | $4,000 | $2,000 |
The value of the RS shall be calculated as of the date of grant. The Membership Grant shall vest every six months in two equal installments as long as the grantees is serving as a director, subject to full acceleration immediately prior to the consummation of a Transaction, and partial vesting, pro-rated to periods of less than six months.
In connection with the Cash Compensation per Section 5,1 above, and provided that no more than 5 days have passed since the date when the director may purchase securities of the Company under the Company’s Insider Trading Policy as in effect from time to time, the director may convert the right to receive $10,000 out of the cash compensation into RS, under the following terms:
Number of restricted shares shall equal to $12,000 divided by the higher of (i) PPS on the first date when the director may purchase securities of the Company under the Company’s Insider Trading Policy as in effect from time to time; and (ii) the PPS on the date the director notified the Company of the election to convert into RS. The RS will vest every six months in two equal installments, commencing vesting on the date of the entitlement to cash compensation.
In addition, External Directors that qualify as financial or other experts will be entitled to an additional grant of RS, on an annual basis, as follows:
Financial Director – a grant that is worth $12,000
Other expert – a grant that is worth $10,000
The compensation to external directors is subject to the Israeli Companies Law and the applicable compensation regulations and shall be paid every six months, pro-rated for periods of less than six months subject to immediate vesting in the case of a Transaction.
General comment regarding grant of RS to Directors – all grants are made in accordance with, and subject to, the Incentive Option Plan and all applicable grant agreements.
In addition to the above, each director that is serving on the Board as of immediately prior to the shareholders voting on this Compensation Policy shall be entitled to receive up to 60,000 restricted shares in lieu of existing equity compensation promised or granted to such director in the past.
| 7. | RATIO BETWEEN FIXed COMPENSATION AND VARIABLE COMPENSATION |
Unless otherwise determined in a specific Executive employment agreement (to be approved by the Board), the maximum value of the variable compensation components shall be up to100200% of each Executive’s total fixed compensation package on an annual basis.
The total variable compensation, for each Executive, in one calendar year (not including the lump sum sign up bonus in section 5.12, but including the annual bonus in section 6.2) and any other compensation that is deemed as variable compensation, shall not exceed the above mentioned limitation in this section 7. Moreover, the total discretionary compensation of the CEO in one calendar year (not including the lump sum sign up bonus in section 5.12, but including and the discretionary component of the annual bonus in section 6.2) and any other compensation that is deemed to be discretionary compensation, shall not exceed the aggregate amount equivalent to 3 gross base monthly salaries of the CEO.
| 8. | Recoupment Policy |
The Company may seek reimbursement of all or a portion of any compensation paid to an Executive on the basis of financial data included in Company’s financial statements in any fiscal year that are found to be inaccurate and are subsequently restated.
In any such event, Company will seek reimbursement from the Executives to the extent such Executives would not have been entitled to all or a portion of such compensation, based on the financial data included in the restated financial statements.
The Compensation Committee will be responsible for approving the amounts to be recouped and for setting terms for such recoupment from time to time.
| 9. | exchange rates |
Monetary amounts in this Policy that are quoted in NIS,yetare subject to the applicable currency exchange rates.
| 10. | Review, Recommendation and Approval of the Policy |
This Policy was formulated by the Compensation Committee that approved it on August5, 20193, 2021 and October 13, 2021 and recommended the Board to approve it. OnAugust 6, 2019October 13, 2021 the Board approved this Policy and recommended the General Meeting to approve it. This Policy is submitted for approval by the General Meeting of the Company in anExtraordinaryAnnual General Meeting that is expected to be held inSeptember, 2019December 2, 2021.
The Compensation Committee shall review and evaluate this Policy from time to time, monitor its implementation, and recommend to the Board and the General Meeting to make any amendment or restatement to the Policy as it deems necessary from time to time.
The term of this Policy shall be 36 months as of the date of its adoption. Following such term (or before), this Policy will be examined by the Compensation Committee and will brought to the Board and General Meeting for approval.
Last Updated:August 5, 2019.December [●], 2021.
Exhibit B – Directors Compensation Plan
In lieu of the existing directors’ compensation the following shall apply with respect to directors who are not otherwise employees of the Company. The scheme herein will become effective as of January 1, 2022 (the “Effective Date”):
1. Cash compensation:
Each director shall be entitled to an annual payment in cash of $17,000, payable quarterly, pro-rated to periods of less than a quarter.
2. Annual Equity Grant – per Director
Each director shall be entitled to a grant of restricted shares of OTI as follows:
The number of shares subject to restriction: 24,000 divided by the PPS (calculated the same manner as it is calculated for employees, i.e., average closing price of the Company’s ordinary shares during the last 30 days prior to the date of grant, with a minimum price of $0.20 per share, “PPS”) on the date of grant (“Date of Grant”).
Terms relating to Grants of Equity – per Director:
Vesting: The earlier of (i) the first anniversary of the Date of Grant; (ii) immediately prior to the consummation of a Transaction (as such term is defined in the Company’s 2021 Incentive Equity Plan, the “Plan”).
Pro rata vesting: Immediately prior to the termination or expiration of the director’s office, other than in the event of Transaction, restricted shares that equal to the number of unvested restricted shares then outstanding multiplied by the number of whole months since the Date of Grant divided by 12 shall vest and the remaining restricted shares shall be forfeited or repurchased by the Company for no consideration.
3. Equity Grants – per Participation
Each director (other than external) shall be entitled to the following additional compensation, payable in restricted stock equal to the amount below divided by the PPS on the Date of Grant, on an annual basis:
Chairman of the Board: $16,000
Each committee membership: $4,000
Each committee chairman: additional $2,000
Terms relating to Grants of Equity – per Director:
Vesting: every six months as long as serving as a director, subject to full acceleration immediately prior to the consummation of a Transaction, and partial vesting, pro-rated to periods of less than six months.
4. Conversion of $10,000 of the cash compensation:
After the date of entitlement to cash compensation, and provided that no more than 5 days have passed since the date when the director may purchase securities of the Company under the Company’s Insider Trading Policy as in effect from time to time, the director may convert the right to receive $10,000 out of the cash compensation into restricted stock of the Company, under the following terms:
Number of restricted shares: $12,000 divided by the higher of (i) PPS on the first date when the director may purchase securities of the Company under the Company’s Insider Trading Policy as in effect from time to time; and (ii) the closing price of the Company on the OTC (or any other market where it is traded) on the date the director notified the Company of the election to convert into restricted shares.
Vesting: Quarterly, in four installments, commencing vesting on the date of the entitlement to cash compensation.
General comment regarding grant of restricted shares – all grants are made in accordance with, and subject to, the Plan and all applicable grant agreements.
External directors shall be entitled to 1 and 2 above. In addition, external directors that qualify as financial or other experts will be entitled to an additional equity grant, on an annual basis, under the same terms set forth in 2 above, as follows:
Financial Director: 12,000 divided by the PPS
Other expert: 10,000 divided by the PPS
The compensation to external directors is subject to the Israeli Companies Law and the applicable compensation regulations and shall be paid every six months, pro-rated for periods of less than six months.
EXHIBIT C – AMENDED AND RESTATED ARTICLES OF ASSOCIATION, AS AMENDED ON DECEMBER [●], 2021 – MARKED CHANGES
Amended and Restated
Articles of Association of
On Track Innovations Ltd.
A Company Limited by Shares
Under the Companies Law, 5759-1999
| 1. | General |
| 1.1 | Name of Company. |
The name of the Company is On Track Innovations Ltd.
| 1.2 | Goals of the Company. |
The goal of the Company is to engage in any lawful business.
| 1.3 | Interpretation |
| 1.3.1 | Any statement in the singular shall also include the plural and vice versa; any statement in the masculine shall also include the feminine and vice versa. |
| 1.3.2 | Except insofar as these Articles include special definitions of certain terms, any word and expression in these Articles shall have the meaning attributed thereto in the Companies Law, 5759-1999 (the “Companies Law”) unless this contradicts the written matter or the content thereof. |
| 1.3.3 | To prevent doubt it is clarified that regarding matters regulated in the Companies Law in such manner that the arrangements in these matters may be conditioned in the Articles, and in cases in which these Articles do not include different provisions from those in the Companies Law, the provisions of the Companies Law shall apply. |
| 1.3.4 | For the avoidance of doubt, the provisions of the Articles of Association of the Company as detailed below are in any event subject to the provisions of the Companies Law, the Securities Law, 5728-1968 (the “Securities Law”) and any other applicable law. |
| 1.4 | Limited Liability. |
The liability of the shareholders for the Company’s debts shall be limited to the full amount (nominal value with the addition of premium) required to be paid to the Company for the shares and which has not yet been paid.
| 1.5 | Donations. |
The Company is entitled to donate a reasonable sum of money for a fit purpose. The Board of Directors of the Company is entitled to determine, at its discretion, rules for the making of donations by the Company.
| 2. | Shares and Share Capital |
| 2.1 | Share Capital and Rights Attached to Shares |
| 2.1.1 | The registered capital of the Company is NIS |
| 2.1.2 | The ordinary shares shall entitle their owners to – |
| 2.1.2.1 | An equal right to participate in and vote at the General Meetings of the Company, whether Annual Meetings or Extraordinary Meetings. Each of the shares in the Company shall entitle its owner present at the meeting and participating in the vote in person, by proxy, or by means of a voting deed, to one vote; |
| 2.1.2.2 | An equal right to participate in the distribution of dividends, whether in cash or assets, benefit shares, or any other distribution, according to the proportionate nominal value of the shares held thereby; |
| 2.1.2.3 | An equal right to participate in the distribution of the surplus assets of the Company in the event of its liquidation in accordance with the proportionate nominal value of the shares held thereby. |
| 2.1.3 | The Board of Directors is entitled to issue shares and other convertible securities or securities that may be realized as shares up to the limit of the Company’s registered capital. For the purpose of calculating the limit of the registered capital, convertible securities or securities that may be realized as shares shall be considered to have been converted or realized as of their date of issue. |
| 2.2 | Share Certificates |
| 2.2.1 | The owner of a share registered in the registry of shareholders is entitled to receive from the Company, without payment and within a period of three months following the allocation or the registration of transfer, one share certificate stamped with the Company’s stamp regarding all the shares registered in his name, which certificate shall detail the number of shares. In the event of a jointly owned share, the Company shall issue one share certificate for all the joint owners of the share, and the delivery of such a certificate to one of the partners shall be considered delivery to them all. |
Each share certificate shall bear the signature of at least one Director, together with the Company stamp or its printed name.
| 2.2.2 | A share certificate that has been defaced, destroyed, or lost may be renewed on the basis of such proof and guarantees as shall be required by the Company from time to time. |
| 2.2.3 | Subject to the Companies Law, shares of the Company may be either certificated or uncertificated. |
| 2.3 | Reliefs relating to Shares that Have Not Been Fully Paid |
| 2.3.1 | If any or all of the remuneration the shareholder undertook to pay the Company in return for his shares has not been paid by such date and on such conditions as established in the conditions for the allocation of his shares and/or in the payment request as stated in Article 2.3.2 below, the Company is entitled, by way of a decision of the Board of Directors, to forfeit the shares whose remuneration has not been fully paid. The forfeiture of shares shall take place provided that the Company has sent the shareholder written warning of its intention to forfeit the shares after at least 7 days from the date of receipt of the warning, insofar as payment shall not be made during the period determined in the letter of warning. |
The Board of Directors is entitled, at any time prior to the date on which the forfeited share is sold, reallocated, or otherwise transferred, to nullify the forfeiture on such conditions as it shall see fit.
| 2.3.2 | If, in accordance with the conditions of allocation of the shares, there is no fixed date for the payment of any part of the price to be paid on account thereof, the Board of Directors is entitled, from time to time, to present payment requests to the shareholders on account of monies not yet removed for the shares they hold, and each shareholder shall be obliged to pay the Company the amount requested on the date determined as stated, provided that he shall receive prior notice of 14 days of the date and place of payment (a “Payment Request”). The notification shall specify that non-payment by or before the determined date and in the specified place may lead to the forfeiture of the shares regarding which payment is requested. A Payment Request may be nullified or postponed to another date, all as shall be decided by the Board of Directors. |
| 2.3.3 | Unless otherwise determined in the conditions of allocations of the shares, a shareholder shall not be entitled to receive a dividend or to exercise any right as a shareholder on account of shares that have not yet been fully paid. |
| 2.3.4 | Persons who are the joint owners of a share shall be liable jointly and severally for payment of the amounts due to the Company on account of the share. |
| 2.3.5 | The content of this section shall not derogate from any other relief of the Company vis-à-vis a shareholder who fails to pay his debt to the Company on account of his shares. |
| 2.4 | Transfer of Shares |
| 2.4.1 | The Company’s shares are transferable. |
| 2.4.2 | The transfer of shares must be made in writing, and it shall be recorded in the registry of shareholders only if – |
| 2.4.2.1 | A proper certificate for the transfer of shares, together with the certificates of the share intended for transfer, if such were issued, are delivered to the Company at its registered office. The certificate of transfer shall be drafted in such form approved by the Board of Directors and signed by the transferor and by a witness confirming the signature of the transferor. In the event of the transfer of shares that are not fully paid as of the date of transfer, the certificate of transfer shall also be signed by the recipient of the share and by a witness testifying to the signature of the recipient; or |
| 2.4.2.2 | A court order for the amendment of the registration shall be delivered to the Company; or |
| 2.4.2.3 | It shall be proved to the Company that lawful conditions pertain for the transfer of the right to the share. |
| 2.4.3 | The transfer of shares that have not been fully paid requires the authorization of the Board of Directors, which is entitled to refuse to grant its authorization at its absolute discretion and without stating grounds therefore. |
| 2.4.4 | The recipient of the transfer shall be considered the shareholder regarding the transferred shares from the moment of the registration of his name in the registry of shareholders. |
| 2.5 | Changes in Capital |
| 2.5.1 | The General Meeting is entitled to increase the Company’s registered share capital by creating new shares of an existing class or a new class, all as shall be determined in the decision of the General Meeting. |
| 2.5.2 | Subject to the provisions of the Companies Law, the General Meeting is entitled to decrease the Company’s registered share capital or nullify registered share capital that has not yet been allocated (provided that there is no commitment, including a conditioned commitment, by the Company to allocate the shares). |
| 2.5.3 | The General Meeting shall be entitled, subject to the provisions of any law: |
| 2.5.3.1 | To unify and redivide its share capital, or any part thereof, into shares of a nominal value greater than the nominal value of the existing shares. |
| 2.5.3.2 | To divide, by way of the redivision of any or all of the existing shares, its share capital into shares of a nominal value smaller than the nominal value of the existing shares. |
| 2.5.3.3 | To reduce its share capital and any reserved fund for the repayment of capital in such manner and on such conditions and with the receipt of such authorization as shall be required by the Companies Law. |
| 2.6 | Changes in the Rights of Share Classes |
| 2.6.1 | Unless otherwise stated in the conditions of issue of the shares, and subject to the provisions of any law, the rights of any share class may be changed following a decision of the Company’s Board of Directors, and with the authorization of the General Meeting of shareholders of that class. The provisions of the Company’s Articles of Association regarding General Meetings shall apply, mutatis mutandis, to a class meeting of class shareholders. |
| 2.6.2 | The rights granted to the holders of shares of a specific class issued with special rights shall not be considered to have been changed by virtue of the creation or issue of additional shares of equal grade, unless otherwise conditioned in the conditions of issue of the said shares. |
| 2.7 | Redeemable Securities |
The Company is entitled, subject to any law, to issue redeemable securities on such conditions as shall be determined by the Board of Directors, provided that the General Meeting shall approve the recommendation of the Board of Directors and the conditions established thereby.
| 3. | General Meetings |
| 3.1 | Authorities of General Meeting |
| 3.1.1 | Company decisions on the following matters shall be taken at the General Meeting – |
| 3.1.1.1 | Changes to the Articles; |
| 3.1.1.2 | Exercising vital authorities of the Board of Directors in the event that the Board of Directors is unable to perform its function; |
| 3.1.1.3 | Appointment of the auditing accountant of the Company and the cessation of employment thereof; |
| 3.1.1.4 | Appointment of Directors, including External Directors; |
| 3.1.1.5 | Authorization of actions and transactions requiring the authorization of the General Meeting in accordance with the provisions of the Companies Law and any other law; |
| 3.1.1.6 | Increasing and decreasing the registered share capital; |
| 3.1.1.7 | Merger as defined in the Companies Law. |
| 3.1.2 | Subject to the provisions of the law, the General Meeting is entitled to assume authorities granted to another organ in the Company, including the Board of Directors, for a particular matter or for a given period of time required under the circumstances. |
If the General Meeting has assumed authorities granted to the Board of Directors in accordance with the Companies Law, the shareholders shall bear the same rights, obligations, and liability as apply to the Board of Directors regarding the exercising of those same authorities, as detailed in section 50 of the Companies Law, as this shall be amended from time to time.
| 3.2 | Convening of General Meetings |
| 3.2.1 | General meetings shall be convened at least once a year at such a venue and on such a date as shall be determined by the Board of Directors, and subject to the provisions of the law, but not later than 15 months after the previous General Meeting. These General Meetings shall be called “Annual Meetings.” The remaining meetings of the Company shall be called “Extraordinary Meetings.” |
| 3.2.2 | The agenda at the Annual Meeting shall include discussion of the report of the Board of Directors and financial statements as required by law. The Annual Meeting shall appoint an auditing accountant; shall appoint the Directors to the extent required in accordance with these Articles; and shall discuss all other matters to be discussed at the Annual Meeting of the Company in accordance with these Articles or in accordance with the Companies Law, as well as any other matter as shall be determined by the Board of Directors. |
| 3.2.3 | The Board of Directors is entitled to convene an Extraordinary Meeting in accordance with its decision, and must convene a General Meeting if a written request is received from any of the following (a “Request to Convene”): |
| 3.2.3.1 | Two Directors or one-fourth of the incumbent Directors; |
| 3.2.3.2 | One or more shareholders holding at least five percent of the issued capital and at least one percent of the voting rights in the Company; or |
| 3.2.3.3 | One or more shareholders holding at least five percent of the voting rights in the Company. |
| 3.2.4 | Any Request to Convene must specify the goals for whose purpose the meeting is to be convened, and shall be signed by those requesting the convening and delivered at the Company’s registered office. The request may consist of a number of documents of identical format, each signed by one or more individuals making the request. |
| 3.2.5 | A Board of Directors required to convene an Extraordinary Meeting shall proceed to convene such meeting within twenty-one days from the date on which the Request to Convene was submitted thereto, for a date determined in an invitation in accordance with Article 3.2.6 below and subject to any law. |
| 3.2.6 | Notification of the members of the Company regarding the convening of a General Meeting shall be published or delivered to all the shareholders registered in the registry of shareholders in the Company in accordance with the requirements of the law. The notification shall include the agenda, the proposed decisions, and arrangements regarding voting in writing. |
| 3.3 | Discussion at General Meetings |
| 3.3.1 | The discussion at the General Meeting shall be opened only if a legal quorum is present at the time the discussion begins. A legal quorum is the presence of at least two shareholders holding at least one-third of the voting rights (including presence by means of proxy or through a voting deed) within half an hour from the time specified for the opening of the meeting. |
| 3.3.2 | If, at the end of half an hour from the time specified for the opening of the meeting, no legal quorum is present, the meeting shall be postponed by one week, to the same day, the same hour, and the same venue, or to a later date, if specified in the invitation to the meeting or in the notification of the meeting (the “Postponed Meeting”). Notification of a Postponed Meeting shall be made as stated in Article 3.2.6, mutatis mutandis, provided that notification and invitation regarding a Postponed Meeting postponed for a period of not more than 21 days shall be made not later than seventy-two hours prior to the Postponed Meeting. |
| 3.3.3 | The legal quorum for commencing a Postponed Meeting shall be the presence of any two shareholders (including presence by means of proxy or through a voting deed). |
| 3.3.4 | The chairperson of the Board of Directors shall serve as the chairperson of the General Meeting. If the chairperson of the Board of Directors is absent from the meeting after 15 minutes from the time specified for the meeting, or if he refuses to serve as the chairperson of the meeting, the chairperson shall be elected by the General Meeting. |
| 3.3.5 | A General Meeting with a legal quorum is entitled to decide on the postponement of the meeting to another date and to such venue as shall be determined and, in this case, notifications and invitations to the Postponed Meeting shall be made as stated in Article 3.3.2 above. |
| 3.4 | Voting at a General Meeting |
| 3.4.1 | A shareholder in the Company shall be entitled to vote at General Meetings in person or by means of a proxy or a voting deed. |
Shareholders entitled to participate in and vote at the General Meeting are the shareholders as of such date as shall be determined by the Board of Directors in the decision to convene the General Meeting, and subject to any law.
| 3.4.2 | In any vote, each shareholder shall have a number of votes equivalent to the number of shares in their possession entitling the holder to a vote. |
| 3.4.3 | A decision at the General Meeting shall be taken by an ordinary majority unless another majority is determined in the Companies Law or in these Articles. |
| 3.4.4 | The declaration by the chairperson of the meeting that a decision has been adopted unanimously or by a given majority, or rejected or not adopted by a given majority, shall constitute prima facie evidence of the content thereof. |
| 3.4.5 | If the votes at the meeting are equally divided, the chairperson of the meeting shall not have an additional or casting opinion and the decision presented for voting shall be rejected. |
| 3.4.6 | To the extent required by the Companies Law or otherwise resolved by the Board of Directors in its decision to convene the General Meeting, shareholders in the Company shall be entitled to vote on certain matters on the agenda of a General Meeting (including class meetings) by means of a voting deed. |
| 3.4.7 | In order to be considered tantamount to presence at the meeting, including for the matter of the presence of the legal quorum, a voting deed, stating the manner of voting as set forth in the Companies Law, must be delivered to the Company by such date prescribed by the Board of Directors, or, if no such date has been prescribed, up to 72 hours prior to the time of commencement of the meeting. |
| 3.4.8 | Appointment of a proxy shall be in writing, signed by the appointer (“Power of Attorney”). A corporation shall vote by means of its representatives, who shall be appointed in a document signed properly by the corporation (“Letter of Appointment.”) |
| 3.4.9 | A vote in accordance with the conditions of a Power of Attorney shall be lawful even if the appointer dies before the voting, or becomes legally incompetent, is liquidated, becomes bankrupt, nullifies the Letter of Appointment, or transfers the share regarding which it was given, unless written notification is received at the Company’s office prior to the meeting that the shareholder has died, become legally incompetent, been liquidated, become bankrupt, or has nullified the Letter of Appointment or transferred the shares as stated. Unless a longer period of validity is specified within, no Power of Attorney shall be valid following the elapse of 12 months from its execution. |
| 3.4.10 | The Letter of Appointment and the Power of Attorney, or a copy authorized by an attorney, shall be deposited at the Company’s registered offices at least 72 hours prior to the time determined for the meeting or for the Postponed Meeting at which the person mentioned in the document intends to vote in accordance therewith. |
| 3.4.11 | A shareholder in the Company shall be entitled to vote at the Company’s meetings by means of several proxies appointed thereby, provided that each proxy shall be appointed on account of different sections of the shares held by the said shareholder. There shall be no impediment to each proxy as stated voting in a different manner in the Company’s meetings. |
| 3.4.12 | If a shareholder is legally incompetent, he is entitled to vote by means of his trustees, the recipient of his assets, his natural guardian or other legal guardian, and these are entitled to vote in person or by proxy or a voting deed. |
| 3.4.13 | When two or more persons are the joint owners of a share, in a vote on any matter the vote of the person whose name is registered first in the registry of shareholders as the owner of that share shall be accepted, whether in person or by proxy, and he is entitled to deliver voting deeds to the Company. |
| 4. | The Board of Directors |
| 4.1 | Authorities of the Board of Directors |
The Board of Directors shall set the Company’s policy, supervise the execution of the functions and actions of the General Manager, and, within this, shall act and shall enjoy all the authorities detailed in section 92 of the Companies Law. In addition, any authority not granted in the Companies Law or in these Articles to another organ may be exercised by the Board of Directors, in addition to the authorities and functions of the Board of Directors in accordance with the content of any law.
| 4.2 | Appointment of Board of Directors and Cessation of Office Thereof |
| 4.2.1 | The number of Directors in the Company shall be determined from time to time by the Annual Meeting, provided that this shall not be fewer than 5 and not more than 10 Directors, including External Directors. The number of External Directors in the Company shall not be less than the number determined in the Companies Law. |
| 4.2.2 | Other than External Directors (who shall be elected and serve in office in strict accordance with the provisions of the Companies Law), the Directors in the Company shall be elected at |
| 4.2.3 | In addition to the content of Article 4.2.2 above, the Board of Directors is entitled to appoint a Director in place of a Director, other than an External Director, whose position has become vacant, or appoint new additions to the Board of Directors up to the maximum number of Directors set forth in Article 4.2.1 above. The appointment of a Director by the Board of Directors shall remain valid through the next |
| 4.2.4 | A Director whose period of office has expired may be reelected; an External Director may be reelected for additional periods of office in strict accordance with the provisions of the Companies Law. |
| 4.2.5 | The office of a Director shall commence on the date of appointment or on a later date if so determined in the decision of appointment. |
| 4.2.6 | The Board of Directors shall elect one of its members as the chairperson of the Board of Directors. The elected chairperson shall run the meetings of the Board of Directors and shall sign the minutes of the discussion. If no chairperson is elected, or if the chairperson of the Board of Directors is not present after 15 minutes from the time set for the meeting, the Directors present shall choose one of their number to serve as the chairperson at that meeting, and the chosen member shall run the meeting and sign the minutes of the discussion. |
| 4.2.7 | The chairperson of the Board of Directors shall not be the General Manager of the Company or a relative thereof unless the conditions stipulated in section 121(C) of the Companies Law apply. |
| 4.2.8 | The General Meeting is entitled to remove any Director (other than an External Director) from their office prior to the end of the period of their office, whether the Director was appointed thereby in accordance with Article 4.2.2 above or was appointed by the Board of Directors in accordance with Article 4.2.3 above, provided that the Director shall be given a reasonable opportunity to state their case before the General Meeting. |
| 4.2.9 | Any Director is entitled, with the agreement of the Board of Directors and subject to the provisions of the Companies Law, to appoint a substitute for themselves (a “Substitute Director”), provided that a person who is not competent shall not be appointed to serve as a Substitute Director, nor a person who has been appointed as a Substitute Director for another Director and/or a person who is already serving as a Director in the Company, and further provided that a Substitute Director must posses the same qualifications as required of the appointing Director. |
The appointment or cessation of office of a Substitute Director shall be made in a written document signed by the Director who appointed him; in any case, however, the office of a Substitute Director shall be terminated if one of the cases stipulated in the paragraphs in Article 4.2.10 below shall apply, or if the office of the member of the Board of Directors for whom he serves as a substitute shall become vacant for any reason.
A Substitute Director is considered tantamount to a Director and all the legal provisions and the provisions of these Articles shall apply, with the exception of the provisions regarding the appointment and/or dismissal of a Director as established in these Articles.
| 4.2.10 | The office of a Director shall become vacant prior to expiration of his period of office in any of the following cases: |
| 4.2.10.1 | He resigns from his office by means of a letter signed in his hand, submitted to the Company and detailing the reasons for his resignation; |
| 4.2.10.2 | He is removed from his office by the General Meeting; |
| 4.2.10.3 | He is convicted of an offense as stated in section 232 of the Companies Law; |
| 4.2.10.4 | In accordance with the decision of the administrative enforcement committee, as stated in section 232A of the Companies Law; |
| 4.2.10.5 | In accordance with a court decision as stated in section 233 of the Companies Law; |
| 4.2.10.6 | He is declared legally incompetent; |
| 4.2.10.7 | He is declared bankrupt and, if the Director is a corporation – it opted for voluntary liquidation or a liquidation order was issued against it. |
| 4.2.11 | In the event that the position of a Director becomes vacant, the remaining Directors shall be entitled to continue to act, provided the number of Directors remaining shall not be less than the minimum number of Directors as stated above. If the number of Directors falls below the above-mentioned minimum number, the remaining Directors shall be entitled to act solely in order to fill the place of the Director that has become vacant as stated in Article 4.2.3 above, or in order to convene a General Meeting of the Company, and pending the convening of the General Meeting of the Company as stated they may act to manage the Company’s affairs solely in matters that cannot be delayed. |
| 4.2.12 | The conditions of office of the members of the Board of Directors shall be authorized in accordance with the provisions of the Companies Law. |
| 4.3 | Meetings of the Board of Directors |
| 4.3.1 | The Board of Directors shall convene for a meeting in accordance with the needs of the Company, and at least once every three months. |
| 4.3.2 | The chairperson of the Board of Directors is entitled to convene the Board at any time. In addition, the Board of Directors shall hold a meeting on such subject as shall be specified in the following cases: |
| 4.3.2.1 | In accordance with the request of one Director; |
| 4.3.2.2 | If a notification or report by the General Manager require an action on the part of the Board of Directors; |
| 4.3.2.3 | If the auditing accountant has informed the chairperson of the Board of Directors – or, in the event that no chairperson was appointed for the Board of Directors, has informed the Board of Directors – of substantial defects in the accounting control of the Company. |
| 4.3.3 | Notification of the meeting of the Board of Directors shall be delivered to all members of the Board a reasonable period of time (taking into account the circumstances and urgency of the matter) prior to the date of convening of the Board. Notification shall be delivered to the address of the Director as forwarded to the Company in advance, and shall stipulate the time of the meeting and the venue at which it shall convene, as well as reasonable detail of all subjects on the agenda. |
Notwithstanding the above, the Board of Directors is entitled to convene a meeting without notification, in urgent matters, with the consent of the majority of the Directors.
| 4.3.4 | The agenda of the meetings of the Board of Directors shall be determined by the chairperson of the Board, or if no chairperson has been appointed the Directors convening the meeting, and shall include: Subjects determined by the chairperson of the Board; subjects deriving from the report of the General Manager and/or the auditing accountant; or any subject a Director or the General Manager have requested to be included on the agenda a reasonable period of time prior to the convening of the meeting of the Board. |
| 4.3.5 | The legal quorum for the commencement of a meeting of the Board of Directors shall be at least a majority of number of Directors in office at the time of the meeting. If, within half an hour from the time set for the commencement of the meeting, no quorum is present, the meeting shall be postponed to another date as decided by the chairperson of the Board, or, in his absence, by the Directors present at the convened meeting, provided that reasonable prior notification be given to all Directors regarding the date of the Postponed Meeting. The legal quorum for the opening of a Postponed Meeting shall be any two Directors. |
| 4.3.6 | The Board of Directors is entitled to hold meetings by use of any means of communication, providing that all the participating Directors can hear each other simultaneously. |
| 4.3.7 | The Board of Directors is entitled to take decisions without actually convening, provided that all the Directors entitled to participate in the discussion and to vote on the subject brought for decision agree thereto. If decisions are made as stated in this section, the chairperson of the Board of Directors shall record minutes of the decisions stating the manner of voting of each Director on the subjects brought for decision, as well as the fact that all the Directors agreed to take the decision without convening. |
| 4.4 | Voting on the Board of Directors |
| 4.4.1 | Each Director shall have one vote when voting on the Board of Directors. |
| 4.4.2 | Decisions of the Board of Directors shall be taken by a majority vote. The chairperson of the Board of Directors shall not have any additional or casting opinion, and in the event of a tie vote, the decision brought for voting shall be rejected. |
| 5. | Committees of the Board of Directors |
| 5.1 | The Board of Directors is entitled to establish committees and to appoint members thereto (“Board’ Committee”). If Board’ Committees are established, the Board of Directors shall determine, in the conditions of empowerment thereof, whether specific authorities of the Board of Directors shall be delegated to the Board’ Committees, in such manner that the decision of the Board’ Committee shall be considered tantamount to a decision of the Board of Directors, or whether the decision of the Board’ Committee shall merely constitute a recommendation, subject to the authorization of the Board of Directors; provided that authorities to make decisions in the matters stated in Article 112 of the Companies Law shall not be delegated to a committee. |
| 5.2 | A person who is not a Director shall not serve in a Board’ Committee to which the Board of Directors has delegated authorities. Persons who are not members of the Board of Directors may serve in a Board’ Committee whose function is merely to advise or submit recommendations to the Board of Directors. |
| 5.3 | The provisions included in these Articles relating to the meetings of the Board of Directors and voting therein shall apply, mutatis mutandis and subject to the decisions of the Board of Directors regarding the procedures for the meetings (if any) of any Board’ Committee comprising two or more members. |
| 6. | General Manager |
| 6.1 | The Board of Directors of the Company shall appoint one or more General Managers. The General Manager shall be responsible for the routine management of the Company’s affairs within the framework of the policy set by the Board of Directors and subject to its guidelines. |
| 7. | Exemption, Insurance, and Indemnification |
| 7.1 | Exemption |
Subject to the provisions of the Companies Law and the Securities Law, the Company hereby releases, in advance, its Office Holders from liability to the Company for damage that arises from the breach of the Office Holder’s duty of care to the Company.
| 7.2 | Insurance |
Subject to the provisions of the Companies Law and the Securities Law, the Company may enter into a contract for the insurance of the liability, in whole or in part, of an Office Holder, with respect to an obligation imposed on such Office Holder due to an act performed by him in his capacity as such, arising from any of the following:
| 7.2.1 | a breach of duty of care to the Company or to any other person; |
| 7.2.2 | a breach of the duty of loyalty to the Company provided that the Office Holder acted in good faith and had reasonable grounds to assume that the act would not harm the interests of the Company; |
| 7.2.3 | a financial liability imposed on such Office Holder in favor of any other person, including in favor of an injured party as set forth in section 52LIV(a)(1)(a) of the Securities Law, as well as expenses, including reasonable litigation expenses and attorney’s fees, expended by an Office Holder or which were imposed on an Office Holder by a court in proceedings filed against the Office Holder under Chapters VIII’3, VIII’4 or IX’1 of the Securities Law; and |
| 7.2.4 | any other incident for which it is or shall be permitted to insure the liability of an officer. |
| 7.3 | Indemnification |
Subject to the provisions of the Companies Law and the Securities Law, the Company may undertake in advance to indemnify, or may indemnify retroactively, an Office Holder of the Company with respect to any of the following liabilities or expenses that arise from an act performed by the Office Holder by virtue of being an Office Holder of the Company:
| 7.3.1 | a financial liability imposed on an Office Holder in favor of another person by any judgment, including a judgment given as a result of a settlement or an arbitrator’s award which has been confirmed by a court, provided however that an undertaking to indemnify the Office Holder for such liabilities shall be restricted to those events that the Board may deem foreseeable in light of the Company’s actual activities, at the time of giving of such undertaking, and to a specific sum or a reasonable criterion under such circumstances as determined by the Board; |
| 7.3.2 | reasonable litigation expenses, including attorney’s fees, incurred by him as a result of an investigation or proceeding instituted against him by an authority empowered to conduct an investigation or proceedings, which are concluded without the filing of an indictment against the Office Holder and without the levying of a monetary obligation in lieu of criminal proceedings upon the Office Holder, or which are concluded without the filing of an indictment against the Office Holder but with levying a monetary obligation in substitute of such criminal proceedings upon the Office Holder for a crime that does not require proof of criminal intent; |
| 7.3.3 | reasonable litigation expenses, including attorney’s fees, expended by an Office Holder or which were imposed on an Office Holder by a court in proceedings filed against the Office Holder by the Company or in its name or by any other person or in a criminal charge on which the Office Holder was acquitted or in a criminal charge on which the Office Holder was convicted for an offense which did not require proof of criminal intent; |
| 7.3.4 | a financial liability imposed on an Office Holder in favor of an injured party as set forth in section 52LIV(a)(1)(a) of the Securities Law, as well as expenses, including reasonable litigation expenses and attorney’s fees, expended by an Office Holder or which were imposed on an Office Holder by a court in proceedings filed against the Office Holder under Chapters VIII’3, VIII’4 or IX’1 of the Securities Law; and |
| 7.3.5 | any other obligation or expense for which it is or shall be permitted to indemnify an officer. |
| 7.4 | The provisions of this 7 are not intended, and shall not be interpreted, to restrict the Company in any manner in respect of the procurement of insurance or in respect of indemnification (i) in connection with any person who is not an Office Holder, including, without limitation, any employee, agent, consultant or contractor of the Company who is not an Office Holder, or (ii) in connection with any Office Holder to the extent that such insurance and/or indemnification is not specifically prohibited under the Companies Law; provided that the procurement of any such insurance or the provision of any such indemnification shall be approved by the Board. |
| 7.5 | Any modification of the provisions of this 7, and any amendment to the Companies Law, the Securities Law or any other applicable law, shall be prospective in effect and shall not affect the Company’s obligation or ability to indemnify an Office Holder for any act or omission occurring prior to such modification or amendment, unless otherwise provided by the Companies Law, the Securities Law or such applicable law. |
| 8. | Internal Auditor |
| 8.1 | The Board of Directors of the Company shall appoint an internal auditor in accordance with the proposal of the audit committee. A person who is an interested party in the Company, an office holder therein, or the relative or either of the above, as well as the auditing accountant or any person on his behalf, shall not serve as an internal auditor in the Company. |
| 8.2 | The Board of Directors shall determine which office holder shall be organizationally accountable for the internal auditor and, in the absence of such determination; this shall be the chairperson of the Board of Directors. |
| 8.3 | The internal audit plan prepared by the auditor shall be submitted to the audit committee for authorization; however, the Board of Directors is permitted to determine that the plan shall be examined by the audit committee and submitted to the Board of Directors for authorization. |
| 9. | Auditing Accountant |
| 9.1 | The General Meeting shall appoint an auditing accountant for the Company. The auditing accountant shall serve in office through the end of the following Annual Meeting, or for a longer period as determined by the Annual Meeting, provided that the period of office shall not be extended beyond the end of the third Annual Meeting following that at which the auditing accountant was appointed. |
| 9.2 | The fee of the auditing accountant for the auditing operations shall be determined by the General Meeting, which may delegate such authority to the Board of Directors. |
| 10. | Signing in the Company’s Name |
| 10.1 | The rights to sign in the Company’s name shall be determined from time to time by the Board of Directors of the Company. |
| 10.2 | The Company’s authorized signatory shall do so together with the Company’s stamp, or alongside its printed name. |
| 11. | Dividend and Benefit Shares |
| 11.1 | The decision by the Company to allocate a dividend and/or to allocate benefit shares shall be taken by the Company’s Board of Directors. |
| 11.2 | Unless determined otherwise by the Board of Directors, it shall be permitted to pay any dividend by way of check or payment order to be sent by mail in accordance with the registered address of the shareholder or the personal eligible thereto or, in the case of joint registered owners of the same share, to that shareholder whose name is mentioned first in the registry of shareholders with regard to the joint ownership. Any such check shall be made out to order of the person to whom it is sent. A receipt from a person whose name, as of the date of declaration of the dividend, is registered in the registry of shareholders as the owner of any share or, in the case of joint owners, of one of the joint owners, shall serve as authorization regarding all payments made in connection with that share and regarding which the receipt was received. |
| 11.3 | For the purpose of executing any decision in accordance with the provisions of this section, the Board of Directors is entitled to resolve as it sees fit any difficulty that emerges regarding distribution of the dividend and/or the benefit shares, including determining the value for the purpose of the said division of certain assets, and to determine that payments in cash shall be made to members on the basis of the value so determined; to determine provisions regarding fractions of shares; or to determine that sums of less than NIS 50 shall not be paid to a shareholder. |
| 12. | Accounts |
| 12.1 | The Company shall maintain accounts and shall prepare financial statements in accordance with the Companies Law. |
| 12.2 | The account ledgers shall be held at the Company’s registered offices or in any other place as the Directors shall see fit, and shall always be open for inspection by the Directors. |
| 13. | Notifications |
| 13.1 | Subject to any law, a notification or any other document that shall be delivered by the Company, and which it is entitled or required to issue in accordance with the provisions of the Articles or any law, shall be delivered by the Company to any person in one of the following manners as decided by the Company in each individual case: (A) By dispatch by registered mail in a letter addressed in accordance with the registered address of that shareholder in the registry of shareholders, or in accordance with such address as stated by the shareholder in a letter to the Company as the letter for the delivery of notifications or other documents; (B) By dispatch by facsimile or other electronic form, in accordance with the number or address stated by the shareholder for the delivery of such notifications; or (C) By way of publication in applicable distribution site. |
| 13.2 | Any notification to be made to shareholders shall be made, regarding jointly owned shares, to that person whose name is mentioned first in the registry of shareholders as the holder of that share, and any notification made in this manner shall be sufficient notification for the holders of that share. |
| 13.3 | Any notification or other document sent in accordance with the provisions of Article 13 above shall be considered to have reached its destination: |
| (A) | Within 3 business days – if sent by registered mail in Israel; (B) On the first business day after its dispatch, if delivered by hand or sent by facsimile or other electronic method; or (C) On the date of publication on applicable distribution site. |
In proving delivery, it shall be sufficient to prove that the letter sent by mail included the notification and that the document was addressed properly and was delivered to the post office as a letter bearing stamps, or as a registered letter bearing stamps, and, regarding a facsimile or other electronic method, it shall be sufficient to produce a dispatch confirmation sheet from the dispatching machine.
| 13.4 | Any record made in an ordinary manner in the company’s registry shall be considered prima facie evidence of dispatch as recorded in that registry. |
| 13.5 | When it is necessary to provide prior notification of a certain number of days, or when notification is valid for a certain period, the date of delivery shall be included in reckoning the number of days or the period. |
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C-13
On Track Innovations ltd.
THE 2001 SHARE OPTION PLAN
As Amended and Restated On November 30, 2011, further
Amended and Restated on October 22, 2013,and further Amended and Restated on November 21, 2017
The Plan, as amended from time to time, shall be known as the On Track Innovations Ltd. 2001 Share Option Plan (the “Plan”).
The purpose of the Plan is to afford an incentive to officers, directors, employees and consultants of On Track Innovations Ltd. (the“Company”), or any subsidiary of the Company which now exists or hereafter is organized or acquired by the Company, or any affiliate, to acquire a proprietary interest in the Company, to continue as employees, directors and consultants, to increase their efforts on behalf of the Company, to promote the success of the Company’s business and to attract new employees, directors or consultants, whose services are considered valuable. All options granted hereunder, whether together or separately, shall be hereinafter referred to as the “Options”.
As used in this Plan, the following words and phrases shall have the meanings indicated:
ZHR Industrial Zone, PO Box 32, Rosh Pina, Israel 12000 | T: +972-4-6868000 | F: +972-4-6938887 | info@otiglobal.com
WWW.OTIGLOBAL.COM
If the Shares are listed on any established stock exchange or a national market system, including without limitation the Neuer Market, Nasdaq National Market system, or The Nasdaq SmallCap Market of the Nasdaq Stock Market , the Fair Market Value shall be the closing sales price for such Shares (or the closing bid, if no sales were reported), as quoted on such exchange or system for the last market trading day prior to time of determination, as reported in any official publication of such stock exchange, including, but not limited, to any official web site, theWall Street Journal, or such other source as the Board deems reliable (hereinafter:“the closing sale price”). In a case where the shares are listed on more than one stock exchange or a national market system, the Fair Market Value shall be the closing sale price for such shares in the stock exchange or the national market system with the greatest value of trading in the company’s stock.
If the Shares are regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value shall be the mean between the high bid and low asked prices for the Shares on the last market trading day prior to the day of determination, or;
In the absence of an established market for the Shares, the Fair Market Value thereof shall be determined in good faith by the Committee.
The Plan shall be administered by the committee established by the Board of Directors of the Company. Notwithstanding the above, the Board shall automatically have an authority if no Committee shall be constituted or if such Committee shall cease to operate for any reason.
The Committee shall consist of such number of members (not less than two (2) in number) as may be fixed by the Board. The Committee shall select one of its members as its chairman (the“Chairman”) and shall hold its meetings at such times and places as the Chairman shall determine. The Committee shall keep records of its meetings and shall make such rules and regulations for the conduct of its business as it shall deem advisable.
Any member of such Committee shall be eligible to receive Options under the Plan while serving on the Committee, unless otherwise specified herein and subject to the approval of the Board.
To the extent permitted under any applicable laws, the Committee shall have the authority in its discretion, subject to and not inconsistent with the express provisions of the Plan, to administer the Plan and to exercise all the powers and authorities either specifically granted to it under the Plan or necessary or advisable in the administration of the Plan, including, without limitation, the authority: (i) to grant Options; (ii) to determine the kind of consideration payable (if any) with respect to Options; (iii) to determine the period during which Options may be exercised, and whether in whole or in installments; (iv) to determine the persons to whom, and the time or times at which Options shall be granted (such persons are referred to herein as “Grantees”); (v) to determine the number of shares to be covered by each Option; (vi) to interpret the Plan; (vii) to prescribe, amend and rescind rules and regulations relating to the Plan; (viii) to determine the terms and provisions of the agreements (which need not be identical) entered into in connection with Options granted under the Plan (the “Agreements”); (ix) to cancel or suspend Options, as necessary; (x) to designate the type of Options to be granted to a Grantee ;(xi) to determine the Fair Market Value (as defined above) of the shares; and (xii) to make all other determinations deemed necessary or advisable for the administration of the Plan.
The Board shall fill all vacancies, however caused, in the Committee. The Board may from time to time appoint additional members to the Committee, and may at any time remove one or more Committee members and substitute others.
Subject to applicable laws, no member of the Board or Committee shall be liable for any action taken or determination made in good faith with respect to the Plan or any Option granted hereunder.
All decisions and selections made by the Committee pursuant to the provisions of the Plan shall be made by a majority of its members except that no member of the Committee shall vote on, or be counted for quorum purposes, with respect to any proposed action of the Committee relating to any Option to be granted to that member. Any decision, made by the Committee, and reduced to writing, shall be executed in accordance with the provisions of the Company’s Articles of Association, as same may be in effect from time to time. The interpretation and construction by the Committee of any provision of the Plan or of any Option thereunder shall be final and conclusive unless otherwise determined by the Board.
Subject to the Company’s Articles of Association and the Company’s decision, and to all approvals legally required, each member of the Board or the Committee shall be indemnified and held harmless by the Company against any cost or expense (including counsel fees) reasonably incurred by him, or any liability (including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act in connection with the Plan unless arising out of such member’s own fraud or bad faith, to the extent permitted by applicable law. Such indemnification shall be in addition to any rights of indemnification the member may have as a director or otherwise under the Company’s Articles of Association, any agreement, any vote of shareholders or disinterested directors, insurance policy or otherwise.
The persons eligible for participation in the Plan as recipients of Options shall include any employees, directors, consultants and service providers of the Company or of any Subsidiary or Affiliate of the Company. The grant of an Option hereunder shall neither entitle the Grantee to participate nor disqualify him from participating in, any other grant of Options pursuant to the Plan or any other option or stock plan of the Company or any of its affiliates.
The Company shall initially reserve 13,200,000 authorized but unissued Ordinary Shares (the“Shares”) for purposes of the Plan, subject to adjustment as set forth inSection 9 below. Any of such Shares which may remain unissued and which are not subject to outstanding Options at the termination of the Plan shall cease to be reserved for the purpose of the Plan, but until termination of the Plan the Company shall at all times reserve sufficient number of Shares to meet the requirements of the Plan.
If any outstanding Option under the Plan should, for any reason expire, be canceled or be terminated without having been exercised in full, the Shares allocable to the unexercised, canceled or terminated portion of such Option shall (unless the Plan shall have been terminated) become available for subsequent grants of Options under the Plan.
Each Option granted pursuant to the Plan shall be evidenced by a written agreement between the Company and the Grantee (the“Option Agreement”), in such form as the Committee shall approve from time to time. The Option Agreements shall comply with and be subject to the following terms and conditions specified below:
Each Option Agreement shall state the number of Shares to which the Option relates.
Each Option Agreement shall specifically state the type of Option granted to the Grantee.
Each Option Agreement shall state the Purchase Price. The purchase price of each Share subject to an Option or any portion thereof shall be determined by the Committee in its sole and absolute discretion in accordance with applicable law, subject to any guidelines as may be determined by the Board from time to time (the“Purchase Price”). The Purchase Price shall be subject to adjustment as provided in Section 9 hereof.
The Purchase Price shall be payable upon the exercise of the Option in a form satisfactory to the Committee, including without limitation, by cash or cheque. The Committee shall have the authority to postpone the date of payment on such terms as it may determine.
Notwithstanding anything to the contrary contained herein, in connection with any underwritten public offering by the Company of its shares, the Grantee who purchased Shares shall not, directly or indirectly, sell or otherwise transfer, hypothecate, pledge, grant or otherwise dispose of the Options (whether vested or not vested), the exercised Shares, or Shares issued by the virtue of the exercised Shares, whether in accordance withSection 9(Adjustments) of the Plan or as bonus shares, without the prior written consent of the Company or its underwriters. Such restriction shall be in effect for the period as requested by the Company or such underwriters.
In order to enforce the above restriction, the Company may impose stop-transfer instructions with respect to the exercised Shares
The Option Agreements evidencing Options under the Plan shall contain such other terms and conditions, not inconsistent with the Plan, as the Committee may determine.
Notwithstanding anything to the contrary herein, the Grantee shall be entitled to full acceleration of the unvested options upon termination of engagement with the Grantee by the Company or by the Grantee due to a Transaction in circumstances related to the Transaction, as further determined by the Committee.
For the purpose of this section, the term “Transaction” shall mean any of the following events: (i) a transaction in which at least 50% of the issued and outstanding share capital or voting rights in the Company prior to such transaction will be transferred; (ii) the consolidation, merger or reorganization of the Company with or into any other entity, in which the shareholders of the Company hold, immediately after such transaction, less than fifty percent (50%) of the outstanding share capital of the Company or the surviving company; (iii) the sale or other disposal of all or substantially all of the assets of the Company.
Unless otherwise provided in the option agreement, upon the occurrence of any of the following described events, Grantee’s rights to purchase Shares under the Plan shall be adjusted as hereafter provided:
The Committee may permit the voluntary surrender of all or a portion of any Option granted under the Plan or any option granted under any other plan, program or arrangement of the Company or any subsidiary (“Surrendered Option”), to be conditioned upon the granting to the Grantee of a new Option for the same number of shares of Ordinary Shares as the Surrendered Option, or may require such voluntary surrender as a condition precedent to a grant of a new Option to such Grantee. Subject to the provisions of the Plan, such new Option shall be exercisable at the price, during such period and on such other terms and conditions as are specified by the Committee at the time the new Option is granted.
With respect to all Shares (in contrary to unexercised Options) issued upon the exercise of Options purchased by the Grantee, the Grantee shall be entitled to receive dividends in accordance with the quantity of such Shares, and subject to any applicable taxation on distribution of dividends.
Subject to applicable laws, Options may be granted pursuant to the Plan from time to timewithin a period of five (5) years from February 28, 2011until December 31, 2021. Upon such Plan termination, all outstanding options on such date shall thereafter continue to have force and effect in accordance with the terms set in the option agreement.
Unless otherwise provided in the plan and/or in any Appendix of the Plan, no Option, purchasable hereunder, whether fully paid or not, shall be assignable, transferable, given as a gift, pledged or any right with respect to them given to any third party whatsoever, and during the lifetime of the Grantee each and all of such Grantee’s rights to purchase Shares hereunder shall be exercisable only by the Grantee.
Any such action made directly or indirectly, for an immediate validation or for a future one, shall be void.
Any purported assignment, transfer or pledge of an Option in contradiction to the provision of this section shall cause the option to immediately expire.
Any tax consequences arising from the grant or exercise of any Option, from the payment for Shares covered thereby or from any other event or act (of the Company, and/or its Subsidiaries, or the Grantee), hereunder, shall be borne solely by the Grantee. The Company and/or its Subsidiaries, or any other person required by any applicable law, shall withhold taxes according to the requirements under the applicable laws, rules, and regulations, including withholding taxes at source. Furthermore, the Grantee shall agree to indemnify the Company and/or its Subsidiaries and hold them harmless against and from any and all liability for any such tax or interest or penalty thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax from any payment made to the Grantee, unless the said liability is a result of default of the Company.
The Committee shall not be required to release any Share certificate to a Grantee until all required payments have been fully made.
The Board may at any time, amend, alter, suspend or terminate the Plan. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Grantee (with respect to an outstanding option), unless mutually agreed otherwise between the Grantee and the Committee, which agreement must be in writing and signed by the Grantee and the Company. Termination of the Plan shall not affect the Committee’s ability to exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to the date of such termination.
The holders of Options shall not have any of the rights or privileges of shareholders of the Company in respect of any Shares purchasable upon the exercise of any Options, nor shall they be deemed to be a class of shareholders or creditors of the Company for purpose of any applicable laws, until the issuance of such Shares by the Company.
Subject to any applicable law, grants of Options are not considered a part of the compensation package and therefore will not be included in any payment made to the employee such as remuneration and compensation for termination of employment.
Nothing in the Plan or in any Option granted or Agreement entered into pursuant hereto shall confer upon any Grantee the right to continue in the employ of the Company or any subsidiary or to be entitled to any remuneration or benefits not set forth in the Plan or such Agreement or to interfere with or limit in any way the right of the Company or any such subsidiary to terminate such Grantee’s employment or services. Options granted under the Plan shall not be affected by any change in duties or position of a Grantee as long as such Grantee continues in the employ of the Company or any subsidiary.
The Plan and all determinations made and actions taken pursuant hereto shall be governed by and construed and enforced in accordance with the laws and jurisdiction as shall be determined in any Appendix of the Plan.
However, the relationship of the participants as shareholders of the Company, including without limitation all of their rights and duties arising under the Company’s Articles of Association, shall be governed by the laws of the State of Israel, and the company and each participant hereby irrevocably submits to the exclusive jurisdiction of the Courts of Israel located in Tel Aviv, in respect of any dispute or matter arising out of or connected with such relationship and the Articles of Association.
The adoption of the Plan by the Board shall not be construed as amending, modifying or rescinding any previously approved incentive arrangements or as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock Options otherwise then under the Plan, and such arrangements may be either applicable generally or only in specific cases. For the avoidance of doubt, prior grant of options to Grantees of the Company under their employment agreements, and not in the framework of any previous option plan, shall not be deemed an approved incentive arrangement for the purpose of this Section.
Notwithstanding anything herein to the contrary, the terms and conditions of the Plan may be amended with respect to a particular country by means of an addendum to the Plan in the form of an Appendix, and to the extent that the terms and conditions set forth in the Appendix conflict with any provisions of the Plan, the provisions of the Appendix shall govern. Terms and conditions set forth in the Appendix shall apply only to options issued to Grantees under the jurisdiction of the specific country that is subject of the Appendix and shall not be apply to options issued to Grantees not under the jurisdiction of such country. The adoption of any such Appendix shall be subject to the approval of the Board.
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
ON TRACK INNOVATIONS LTD.
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice & Proxy Statement and Form 10-K are available atwww.proxyvote.com.
A copy of the Notice and Proxy Statement are also available at the On Track Innovations Ltd. website at
http://www.otiglobal.com/agm
If you have not voted by phone or internet, please sign, date and mail your proxy card in the envelope provided as soon as possible.
E33670-P98002
ON TRACK INNOVATIONS LTD.
Annual Meeting of Shareholders
November 21, 2017
THE FOLLOWING PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ON TRACK INNOVATIONS LTD.
The undersigned shareholder of On Track Innovations Ltd. (the "Company") hereby appoints Shlomi Cohen and Yishay Curelaru, or either of them, as proxy and attorney of the undersigned, for and in the name(s) of the undersigned, to attend the Annual Meeting of Shareholders of the Company (the "Shareholders Meeting") to be held at the Company's offices at Z.H.R. Industrial Zone, Rosh-Pina, Israel on Tuesday, November 21, 2017, at 5:00 p.m., Israel Time, and any adjournment thereof, to cast on behalf of the undersigned all the votes that the undersigned is entitled to cast at such meeting and otherwise to represent the undersigned at the Shareholders Meeting with all powers possessed by the undersigned if personally present at the Shareholders Meeting, including, without limitation, to vote and act in accordance with the instructions set forth on the reverse side. The undersigned hereby acknowledges receipt of the Notice of an Annual Meeting of Shareholders and revokes any proxy heretofore given with respect to such meeting.
THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL BE CAST AS INSTRUCTED ON THE REVERSE SIDE. IF THIS PROXY CARD IS EXECUTED BUT NO INSTRUCTION IS GIVEN WITH RESPECT TO PROPOSALS NO. 1A, 1B, 1C, 2, 3, 4 AND 5 SPECIFIED HEREIN, THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL BE CAST "FOR" PROPOSALS NO. 1A, 1B, 1C, 2, 3, 4 AND 5.
Continued and to be signed on the reverse side