UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐

Check the appropriate box:

ON TRACK INNOVATIONS LTD.

(Name of Registrant as Specified In Its Charter)

Filing Fee (Check all boxes that apply):

PRELIMINARY PROXY STATEMENT – SUBJECT TO COMPLETION – [●], 2022

On Track Innovations Ltd.

5 Hatnufa St., Yokneam Industrial Zone

Yokneam, Israel, 2069200

MERGER PROPOSED – YOUR VOTE IS VERY IMPORTANT

Dear On Track Innovations Ltd. Shareholders:

We cordially invite you to attend an extraordinary general meeting of shareholders of On Track Innovations Ltd. (“OTI”, the “Company” or “we”) to be held at the principal business office of Gornitzky & Co., located at Vitania Tel Aviv Tower, 20 Haharash St., Tel Aviv, Israel 6761310, on [●],May 10, 2022 at 10:00 am (Israel time) (the “Shareholder Meeting” or “Meeting”).

At the meeting you will be asked to consider and vote upon the following proposals:

The Company’s shareholders will have the opportunity to hear from representatives of the Company’s management, who will be available at the meeting to answer questions from shareholders.

A copy of the Merger Agreement was attached as Exhibit 2.1 to OTI’s Current Report on Form 8-K that was filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 17, 2022 and is also attached as Annex A to the enclosed Proxy Statement.

The board of directors of the Company (the “Board”) has unanimously determined that the Merger Agreement, the Merger, the Merger Consideration and all other transactions and arrangements contemplated by the Merger Agreement are in the best interests of OTI’s shareholders.

OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL AND ADOPTION OF THE MERGER PROPOSAL, VOTE “FOR” THE APPROVAL OF THE ADVISORY PROPOSAL AND VOTE “FOR” THE APPROVAL OF THE AJOURNMENT PROPOSAL. OUR BOARD MADE ITS DETERMINATION AFTER EVALUATING THE MERGER IN CONSULTATION WITH OTI’S MANAGEMENT AND LEGAL ADVISORS AND CONSIDERING A NUMBER OF FACTORS. IN CONSIDERING THE RECOMMENDATION OF OUR BOARD, YOU SHOULD BE AWARE THAT THE EXECUTIVE OFFICERS OF OTI HAVE CERTAIN INTERESTS IN THE MERGER THAT MAY BE DIFFERENT FROM OR IN ADDITION TO THE INTERESTS OF OTI SHAREHOLDERS GENERALLY. SEE “NON-BINDING ADVISORY VOTE ON TRANSACTION-RELATED COMPENSATION FOR OTI’S EXECUTIVE OFFICERS” BEGINNING ON PAGE 62 OF THE ACCOMPANYING PROXY STATEMENT FOR A MORE DETAILED DESCRIPTION OF THESE INTERESTS.

Provided that a quorum is present, the adoption and approval of the Merger Proposal at the shareholder meeting requires the affirmative vote of the holders of 75% of our ordinary shares present, in person or by proxy, at the meeting (or any adjournment or postponement thereof), excluding abstentions and broker non-votes and excluding any votes of our ordinary shares held by the Parent, Merger Sub or by any person holding at least 25% of the means of control of the Parent or Merger Sub, or any person or entity acting on behalf of the Parent, Merger Sub or any family member of, or entity controlled by any of the foregoing (any such person or entity - a “Merger Sub Affiliate”).

In order for your vote to be counted, you must affirm on the proxy card or voting instruction form that you are not a Merger Sub Affiliate. If you do not so affirm, your vote will not count towards the tally for the merger proposal.

Your ordinary shares can be voted at the shareholder meeting only if you are present or represented by a valid proxy or proxy card. Only holders of record of the OTI’s ordinary shares at the close of business on [●],April 4, 2022, which the Board has set as the record date for the shareholder meeting, are entitled to attend and vote at the shareholder meeting or any adjournment or postponement thereof. Even if you plan to attend the shareholder meeting, we encourage you to submit your proxy prior to the shareholder meeting. Shares held through a bank, broker or other nominee that is a shareholder of record of OTI or that appears in the participant list of a securities depository, may also be voted via a proxy card in accordance with the instructions provided with the proxy card you received from the bank, broker or other nominee.

Important Notice Regarding the Availability of Proxy and Merger Materials
for the Meeting to be held on [●],

Important Notice Regarding the Availability of Proxy and Merger Materials for the Meeting to be held on May 10, 2022: The proxy statement, containing detailed information about the Merger, the Merger Proposal and the shareholder meeting, and the proxy card are also available at http://www.otiglobal.com/egm 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., Hatnufa 5, Yokneam Industrial Zone, Yokneam, Israel, 2069200, attention: CFO. The proxy statement, containing detailed information about the Merger, the Merger Proposal and the shareholder meeting, and the proxy card are also available at http://www.otiglobal.com/egm 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., Hatnufa 5, Yokneam Industrial Zone, Yokneam, Israel, 2069200, attention: CFO.

Thank you for your cooperation and continued support.

On Track Innovations Ltd.

5 Hatnufa St., Yokneam Industrial Zone

Yokneam, Israel, 2069200

NOTICE AND PROXY STATEMENT OF EXTRAORDINARY GENERAL MEETING OF
SHAREHOLDERS

TO BE HELD ON [●],MAY 10, 2022

Dear On Track Innovations Ltd. Shareholders:

We cordially invite you to attend the extraordinary general meeting of shareholders of On Track Innovations Ltd. (“OTI”, the “Company” or “we”) to be held at the principal business office of Gornitzky & Co., located at Vitania Tel Aviv Tower, 20 Haharash St., Tel Aviv, Israel 6761310, on [●],May 10, 2022 at 10:00 AM (Israel time) (the “shareholder meeting” or “meeting”). As previously announced on March 17, 2022, on March 17, 2022 we entered into the Merger Agreement (defined below) under which we will be acquired, by way of a merger, by Nayax Ltd., a company incorporated under the Laws of the State of Israel, whose shares are traded on the Tel Aviv Stock Exchange (the “Parent”).

At the meeting you will be asked to consider and vote upon the following proposals:

OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE MERGER PROPOSAL, THE ADVISORY PROPOSAL AND THE ADJOURNMENT PROPOSAL. OUR BOARD MADE ITS DETERMINATION AFTER EVALUATING THE MERGER IN CONSULTATION WITH OTI’S MANAGEMENT AND LEGAL ADVISORS AND CONSIDERING A NUMBER OF FACTORS. IN CONSIDERING THE RECOMMENDATION OF OUR BOARD, YOU SHOULD BE AWARE THAT THE EXECUTIVE OFFICERS OF OTI HAVE CERTAIN INTERESTS IN THE MERGER THAT MAY BE DIFFERENT FROM OR IN ADDITION TO THE INTERESTS OF OTI SHAREHOLDERS GENERALLY. SEE “NON-BINDING, ADVISORY VOTE ON TRANSACTION-RELATED COMPENSATION FOR OTI’S EXECUTIVE OFFICERS” BEGINNING ON PAGE 62 OF THE ACCOMPANYING PROXY STATEMENT FOR A MORE DETAILED DESCRIPTION OF THESE INTERESTS.

Further information regarding the Merger Proposal is included in the Proxy Statement, which is being mailed to the Company’s shareholders beginning on [●],April 13, 2022. A copy of the Merger Agreement was attached as Exhibit 2.1 to OTI’s Current Report on Form 8-K that was filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 17, 2022, and is attached as Annex A to the Proxy Statement. The Proxy Statement has been furnished to the SEC on Schedule 14A and is available to the public on the SEC’s website at http://www.sec.gov, on the Company’s website at www.otiglobal.com, and at the Company’s registered office at 5 Hatnufa St., Yokneam Industrial Zone, Yokneam, Israel, upon prior notice and during regular working hours until the date of the meeting. A form of proxy card is enclosed with the Proxy Statement.

Provided that a quorum is present (as further detailed below), the adoption and approval of the Merger Proposal requires the affirmative vote of the holders of 75% of our ordinary shares present, in person or by proxy, at the meeting (or any adjournment or postponement thereof), and the adoption of the Advisory Proposal and the Adjournment Proposal at the shareholder meeting require each the affirmative vote of the holders of a majority of our ordinary shares present, in person or by proxy, at the meeting (or any adjournment or postponement thereof), for all proposals, excluding abstentions and broker non-votes and, in the case of the Merger Proposal excluding any votes of our ordinary shares held by the Parent, Merger Sub or by any person holding at least 25% of the means of control of the Parent or Merger Sub, or any person or entity acting on behalf of the Parent, Merger Sub or any family member of, or entity controlled by any of the foregoing (any such person or entity - a “Merger Sub Affiliate”).

Quorum

The presence (in person or by proxy) of any two or more shareholders holding, in the aggregate, at least 33 1/3% of the voting rights in the Company constitutes a quorum for purposes of the meeting. In the absence of the requisite quorum of shareholders at the meeting, the meeting will be adjourned to the same day in the immediately following week and will be held at the same time and place, unless otherwise determined at the meeting in accordance with the Company’s amended and restated articles of association. At such adjourned meeting the presence of at least two shareholders, in person or by proxy (regardless of the voting power represented by their shares) will constitute a quorum.

Your ordinary shares can be voted at the shareholder meeting only if you are present or represented by a valid proxy or proxy card. Only holders of record of the Company’s ordinary shares at the close of business on [●],April 4, 2022, which is the record date for the shareholders meeting (the “Record Date”), are entitled to attend and vote at the shareholder meeting or any adjournment or postponement thereof. As of that date, there were [●]75,775,393 ordinary shares outstanding and entitled to vote. Each ordinary share outstanding on the Record Date will entitle its holder to one vote upon each of the proposals to be presented at the meeting.

Proxies

Shareholders may elect to vote their shares once, by telephone, over the internet on our proxy agent’s website at www.proxyvote.com, by attending the shareholder meeting in person, or by executing and delivering to OTI a proxy as detailed below. Even if you plan to attend the shareholder meeting, we encourage you to submit your proxy prior to the shareholder meeting. Shares held through a bank, broker or other nominee that is a shareholder of record of OTI or that appears in the participant list of a securities depository, may also be voted via a proxy card in accordance with the instructions provided with the proxy card you received from the bank, broker or other nominee. In the alternative, you may obtain a legal proxy from such bank, broker or other nominee to vote your ordinary shares in person at the meeting. The proxy card must be received by the Company at the office of our proxy agent, Broadridge Financial Solutions Inc. at Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717 or at the Company’s registered office no later than 10:00 a.m. (Israel time) on [●],May 7, 2022, which is 3:00 a.m. (Eastern time) on [●],May 7, 2022, to be validly included in the tally of ordinary shares voted at the meeting.

IT IS IMPORTANT THAT YOUR ORDINARY SHARES BE REPRESENTED AT THE MEETING.

Proxies are being solicited by our Board and proxy cards are being mailed together with this Proxy Statement. Certain of our officers, directors, employees and agents may solicit proxies by telephone, facsimile, electronic mail or other personal contact. However, such parties will not receive additional compensation for those activities. We will bear the cost of the solicitation of proxies, including the cost of preparing, assembling and mailing the proxy materials, and will reimburse the reasonable expenses of brokerage firms and others for forwarding such proxy materials to the beneficial owners of our ordinary shares. In addition, we have engaged [●]Alliance Advisors, LLC. to assist in the solicitation of proxies and to provide related informational support, for a fee of $[●]$10,000 plus reimbursement for reasonable expenses.

All ordinary shares represented by properly executed proxies received by the Company at Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717 or at the Company’s registered office no later than 10:00 a.m. (Israel time) on [●],May 7, 2022, which is 3:00 a.m. (Eastern time) on [●],May 7, 2022, will, unless such proxies have been revoked prior to the shareholder meeting or superseded, be voted at the meeting in accordance with the directions on the proxies. No postage will be required if your proxy card is mailed in the United States in the envelope provided.

A shareholder returning a proxy may revoke it by communicating such revocation in writing to us or by executing and delivering a later-dated proxy. Shares represented by any proxy in the enclosed form (including a proxy serving as revocation of an earlier proxy), or shares that are subject to a written revocation, if the proxy or revocation is properly executed and received by the Company at Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717 or at its registered office by 10:00 a.m. (Israel time) on [●],May 7, 2022, or 3:00 a.m. (Eastern time) on [●],May 7, 2022, will be voted (or not voted, as appropriate) as indicated therein with respect to the Merger Proposal, Advisory Proposal and as determined by OTI Board of Directors concerning any other matter that may be presented to the shareholder meeting, as described above.

Submission of Position Notices

A shareholder may address the other shareholders in writing through the Company in an attempt to influence the manner in which the shareholders will vote with regard to any proposal. Position notices must be submitted to the Company no later than the close of the business in Israel on [●],April 29, 2022. Any position notice submitted to the Company at a later date will be ignored.

Request to Include Item on Agenda

A shareholder holding, or shareholders holding together, at least one percent of the voting rights represented at the meeting are entitled to request that the Board of Directors include an item on the agenda, provided the item is suitable to be dealt with at the meeting. Such request must have been submitted to the Company within 7 days after the publication of the notice of the meeting.

Required Vote

Provided that a quorum is present, the adoption and approval at the shareholders meeting of the Merger Proposal requires the affirmative vote of the holders of 75% of our ordinary shares present, in person or by proxy, at the meeting (or any adjournment or postponement thereof), and the approval of the Advisory Proposal and the Adjournment Proposal require each the affirmative vote of the holders of a majority of our ordinary shares present, in person or by proxy, at the meeting (or any adjournment or postponement thereof), excluding abstentions and broker non-votes and in the case of the Merger Proposal also excluding votes of any Merger Sub Affiliate (as defined above).

If a shareholder of record signs, dates and returns the proxy card without indicating how the shareholder intends to vote with respect to a proposal, then the ordinary shares will be voted in favor of such proposal.

Pursuant to Section 320(c) and Section 327 to the Israeli Companies Law (the “Companies Law”), the approval of the Merger Proposal requires the affirmative vote of the holders of 75% of the ordinary shares present, in person or by proxy, at the meeting where a quorum is present and voting on the proposal, not including abstentions and broker non-votes and excluding any votes of our ordinary shares held by the Parent, Merger Sub or by any person holding at least 25% of the means of control of the Parent or Merger Sub, or any “Merger Sub Affiliate”.

In order for your vote to be counted, you must affirm on the proxy card or voting instruction form that you are not a Merger Sub Affiliate. If you do not so affirm, your vote will not count towards the tally for the Merger Proposal.

Voting through Agent

A shareholder may appoint a voting agent to vote in his or her place by way of signing a writ of appointment in accordance with OTI’s Articles of Association.

TABLE OF CONTENTS

QUESTIONS AND ANSWERS ABOUT THE SHAREHOLDER MEETING AND THE MERGER

The following are some of the questions regarding the Merger Agreement, the Merger and the shareholder meeting that you, as a shareholder of OTI, may have, and answers to those questions. These questions and answers, as well as the summary following the questions and answers, may not address all questions that are important to you, are not meant to be a substitute for the information contained in the remainder of this Proxy Statement, its annexes and the additional documents referred to herein, and this information is qualified in its entirety by the more detailed descriptions and explanations contained elsewhere in this document, its annexes and the additional documents referred to herein. We encourage you to read carefully the more detailed information contained elsewhere in this Proxy Statement, the annexes to this Proxy Statement and the documents we refer to in this Proxy Statement.

Except as otherwise specifically noted in this Proxy Statement, “we,” “our,” “us” and similar words in this Proxy Statement refer to On Track Innovations Ltd. and “shares” and “ordinary shares” refer to the ordinary shares of On Track Innovations Ltd. In addition, we refer to On Track Innovations Ltd. as “OTI” or the “Company,” to Nayax Ltd. as the “Parent” and to OTI Merger Sub Ltd. as “Merger Sub”. All references to the “Merger” refer to the Merger of Merger Sub with and into OTI, with OTI continuing as the surviving company and becoming a wholly-owned subsidiary of the Parent, and all references to the “Merger Agreement” refer to the Agreement and Plan of Merger, dated as of March 17, 2022, as it may be amended from time to time, by and among OTI, the Parent and Merger Sub, a copy of which is included as Annex A to this Proxy Statement. OTI, following the completion of the Merger, is sometimes referred to in this Proxy Statement as the “Surviving Corporation”. All references to “dollars” or “$” refer to United States dollars.

Even if you plan to attend the shareholder meeting in person, to ensure that your shares will be represented at the shareholder meeting we encourage you to sign, date and return the enclosed proxy card in the accompanying prepaid reply envelope. If you attend the shareholder meeting and vote in person by ballot, your vote will revoke any proxy previously submitted.

If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your broker or other agent cannot vote on any of the proposals, including the Merger Proposal, without your instructions. If you hold your shares in “street name,” you may not vote your shares in person at the shareholder meeting unless you obtain a “legal proxy” from your bank, broker or other nominee.

[●]Alliance Advisors, LLC

200 Broadacres Drive, 3rd Floor

Bloomfield, New Jersey 07003

Shareholders Call Toll Free: 844-557-9028

or

Assaf Cohen, CFO
5 Hatnufa St., Yokneam Industrial Zone,

Yokneam, Israel, 2069200

assaf@otiglobal.com

RISK FACTORS

In addition to the other information included in this Proxy Statement, including the matters addressed under “Cautionary Statements Regarding Forward-Looking Statements” beginning on page 19 of this Proxy Statement, you should consider carefully the following risk factors in determining how to vote at the shareholder meeting. The following is not intended to be an exhaustive list of the risks related to the Merger and you should read and consider the risk factors described under Part 1, Item 1A. “Risk Factors” of OTI’s Annual Report on Form 10-K for the year ended December 31, 2020, which OTI filed with the SEC on March 31, 2021.

Failure to complete the Merger could results in our bankruptcy.

As further detailed under “The Merger-Background of the Merger” starting on page 26 in this Proxy Statement, prior to entering into a term sheet with the Parent on January 19, 2022, attached as Annex C to this Proxy Statement (the “Term Sheet”), the Company filed a petition with the Israeli court due to its inability to pay its debts. Considering the Company’s state of insolvency prior to the signing of the Term Sheet, and further considering the Company’s debts to the Parent (created, among other things, by the provision of the Loan), failure to complete the Merger is likely to lead to the Company’s inability to pay off its debts in which case the Company may be forced to file a bankruptcy or winding-up petition with the Israeli court,, or an involuntary bankruptcy petition will be filed against the Company by a creditor, in accordance with the Israeli Insolvency and Economic Rehabilitation Law-2018.Law-2018. In the event such petition is not dismissed, such petition may have an adverse effect on various aspects including, but not limited to, the Company’s ability to continue operating is business, the value of the Company’s ordinary shares and the shareholder’s ability to sell their holdings in the Company. It should be noted, that as part of the Loan Agreement and the Merger Agreement, until the termination of the Merger Agreement in accordance with the terms set forth therein, the Company is unable to incur debt or sell its securities without the prior written consent of the Parent, which will also impair the Company’s ability to raise funds if needed.

Failure to complete the Merger could negatively impact our share price, business, financial condition, results of operations or prospects.

The Merger is subject to the satisfaction or waiver of certain closing conditions described under “The“The Merger Agreement-Conditions to the Merger”Merger” beginning on page 16 of this Proxy Statement, including, among others, the following:

No assurance can be given that each of the conditions will be satisfied. In addition, the Merger Agreement may be terminated under the circumstances described under “The“The Merger Agreement-Termination of the Merger Agreement”Agreement” beginning on page 59 of this Proxy Statement. If the conditions are not satisfied or waived in a timely manner and the Merger is delayed, payment of the Merger Consideration will also be delayed. Due to the Company’s inability to pay its debts, which led to the Board’s determination of its insolvency and its petitioning to the Israeli court prior to entering into the Term Sheet, such delay may cause the Company to return to court and re-file a petition in accordance with the Israeli Insolvency and Economic Rehabilitation Law-2018 (“Insolvency Law”). If the Merger is not completed (including in the case the Merger Agreement is terminated), our ongoing business may be adversely affected.

We also could be subject to litigation related to any failure to complete the Merger. If the Merger is not completed, these risks may materialize and may adversely affect the price of our ordinary shares, our business, financial condition, results of operations or prospects.

Some of our directors and officers have interests that may be perceived as different from the interests of our shareholders, and these persons may be deemed to have conflicts of interest in recommending to our shareholders to approve the Merger.

Some of the members of the management and our Board may have interests that may be perceived as different from, or in addition to, their interests as shareholders, which are described under “The Merger-Interests of Certain of OTI’s Executive Officers and Directors in the Merger”Merger” beginning on page 38 of this Proxy Statement. These interests could cause members of our Board or our management to be perceived as having a conflict of interest in recommending approval of the Merger. The Board was aware of these interests and considered them, among other things, in evaluating and approving the Merger Agreement and the Merger and in recommending that the OTI shareholders adopt the merger agreement. See “Non-Binding,“Non-Binding, Advisory Vote on Transaction-Related Compensation for OTI’s Named Executive Officers”Officers” beginning on page 62 of this Proxy Statement.

The fact that there is a Merger pending could harm our business and results of operations.

While the Merger is pending, we are subject to a number of risks that may harm our business and results of operations, including:

Our current employees may be uncertain about their future roles and relationships with OTI following completion of the Merger. This uncertainty may adversely affect our ability to attract and retain key personnel.

Our Board and committees do not currently meet the requirements mandated under the Israeli Companies Law.

Due to the resignation of three members of the Board during December of 2021, including the resignation of an external director on December 26, 2021, the resignation of the Board’s chairperson on December 28, 2021 and the resignation of an additional director on December 30, 2021, the Board’s composition does not meet the Companies Law’s requirements for a public company’s composition of the board of directors. Section 114 of the Companies Law mandates that a public company is required to appoint an audit committee, while Section 115 of the Companies Law provides that the audit committee should be comprised of a minimum of three members, including all acting external directors of the board and at least a majority of independent directors. Furthermore, Section 115 also mandates that the chairman of the board will not be a member of the audit committee. Section 118A of the Companies Law further mandates a requirement for public companies to appoint a compensation committee, while applying the same requirements as to the composition thereof. Following the resignation of three members of the Board, there are only three members remaining on the Company’s Board, one of which was appointed chairman in accordance with the requirements of Section 94(a) of the Companies Law. Due to the fact that a chairman may not serve as a member of the audit or compensation committees, and that such committees must include two members who are external directors, while the Company has one external director only, the Board cannot meet the Companies Law’s requirements with respect to the structure of such committees.

In addition, the external director that provided his resignation from the Board on December 26, 2021, was appointed by the Company’s shareholders on the 2021 annual meeting conducted on December 2, 2021. Section 239(b) of the Companies Law determines that an external directors of a public company shall be appointed at a general meeting of shareholders. Due to this requirement of Section 239(b), the Company is currently unable to appoint an alternate external director in order to bring itself to be in compliance with the requirements of the Companies Law. An additional factor which prevents the Company from being able to comply with requirements of the Companies Law is the fact that due to the financial state of the Company, the acting directors receive minimal compensation while they deal with a greater exposure to complaints relating to their fiduciary duties, which are duties of directors set under the Companies Law and the Israeli case law. Although the Companies Law does not require audit committee approval for the Merger, if the Company is required to obtain such committee approval, the Company may not be able to do so.

In addition, the Company’s Articles of Association (“Articles”) provide under Article 4.2 that the number of the directors on the Board shall not be fewer than five. Article 4.2.11 provides that if the number of directors falls below the minimum number, the remaining directors shall be entitled to act solely in order to (i) fill in the vacant position, (ii) in order to convene a general meeting of the Company’s shareholders or (iii) act to manage the Company’s affairs solely in matters that cannot be delayed.

Failure to complete the Merger will require us to repay the loan provided by the Parent and the loan provided to us by U-Back, supported by a guarantee provided by the Parent.

As contemplated by the Senior Secured Convertible Loan Agreement entered into between the Parent and the Company on January 27, 2022 (“Loan Agreement”), attached as Annex B to this Proxy Statement, and described in the Company’s Current Report on Form 8-K filed on January 31, 2022, the Parent extended a loan to the Company in the amount of $5,500,000 (the “Loan”). The Loan is subject to 10% interest per year, and the accumulated interest and value added tax, if any, is payable quarterly commencing on April 1, 2022. The Loan matures on the second anniversary of the closing of the Loan Agreement and may not be prepaid by the Company. At any time after the earlier of (i) an Event of Default (as defined under the Loan Agreement) or (ii) the completion of the Merger Agreement, and prior to the repayment of the Loan, the Parent is entitled, at its sole discretion, to convert the Loan into ordinary shares of the Company at a price per share equals to $0.043. Failure to complete the Merger could either create dilution to the existing shareholders due to the Parent’s conversion of the Loan into ordinary shares while also making the Parent a controlling shareholder in the Company, or, if not converted, will require the repayment of the Loan. In addition, on March 1, 2022, the Parent provided U-Bank a guarantee for the repayment of the U-Bank Loan. Failure to complete the Merger will lead to a requirement for the repayment of the U-Bank Loan. In any event where the Company will be required to repay the Loan or the U-Bank Loan, the Company will need to either raise additional funds, which may be difficult considering the Company’s inability to raise funds without the prior written approval of the Parent unless the Merger Agreement is terminated, as stipulated under the Merger Agreement and the Loan Agreement, and further considering the circumstances. Failure to raise funds may lead to difficulties paying suppliers and service providers of the Company as well as may hamper the repayment of loans (including the Loan) and any other debt incurred towards the Parent, and may, eventually, lead to either a creditor approaching the Israeli court petitioning to declare the Company insolvent in accordance with the Insolvency Law, or require the Company to file such petition.

Our obligation to pay a termination fee or reimburse Parent’s expenses under certain circumstances and the restrictions on our ability to solicit or engage in negotiations with respect to other acquisition proposals may discourage other transactions that may be favorable to our shareholders.

Until the Merger is completed or the Merger Agreement is terminated, with limited exceptions, the Merger Agreement prohibits us from entering into, soliciting or engaging in negotiations with respect to acquisition proposals or other business combinations. In certain circumstances, OTI is required to pay the Parent a termination fee of $1,500,000, as described in the section of this Proxy Statement captioned “The“The Merger Agreement -Termination Fee Payable by the Company”Company”. Furthermore, non-completion of the Merger would be considered an “event of default” under the Loan Agreement, which can result in either the Parent’s requirement for an immediate repayment of the Loan, or an increase of the interest on the Loan amount to 16% interest, at the Parent’s sole discretion.

If the Merger is not consummated by July 1, 2022, the Parent may choose to terminate the transaction contemplated by the Merger Agreement under certain circumstances.

The Merger is subject to the satisfaction or waiver of certain closing conditions described under “The Merger Agreement-Conditions to the Merger”Merger” beginning on page 58 of this Proxy Statement and set forth in the Merger Agreement. The fulfillment of certain of these conditions is beyond our control, such as the receipt of shareholder approval of the Merger by our shareholders. If the Merger has not been completed by the termination date, the Parent may terminate the Merger Agreement, except that the right to terminate the Merger Agreement in this circumstance will not be available to the Parent if its material breach of the Merger Agreement has been the principal cause of or resulted in the failure of the Merger to occur on or before such date and such action or failure constitutes a breach of the Merger Agreement.

If we experience significant delays in completing the Merger, we may need to seek additional capital to finance the business.

As agreed under the Term Sheet, the Parent has provided the Company with the Loan, while stating that additional loans may be provided, provided a guarantee to U-Bank for the U-Bank Loan and further assisted the Company by providing certain suppliers of the Company with guarantees for the purpose of ensuring that the Company is able to operate its business. If we experience significant delays in completing the Merger, we may be in default under the Loan Agreement which may lead to the Parent’s requirement for an immediate repayment of the Loan as well as its unwillingness to further support the Company and therefore, we may need to seek additional capital to finance the Company and its operations and for the possible repayment of the Loan, which additional capital may not be available when needed on acceptable terms, or at all. The failure to obtain such additional capital may have a material adverse effect on the Company and on our ability to complete the Merger.

Failure to meet the Standards for Continued Qualification for the OTCQX International Tier as per the OTCQX Rules for International Companies could result in moving the Company’s securities to the OTC Pink and eventually cause limited liquidity and a lower price per share.

On February 16, 2022, the Company received a notice from the OTC Markets Group stating that the Company has failed to meet the standards for continued qualification for the quotation of the Company’s shares on the OTC Markets, as its per share minimum bid price was lower than $0.10 and its market capitalization has stayed below $5,000,000 for more than 30 consecutive days. The Company was given a cure period of 180 days during which the Company should meet the applicable criteria for 10 consecutive trading days. In the event where such criteria are not met during the cure period, the Company’s securities will be moved from the OTCQX International to OTC Pink, which might result in a more limited liquidity and price of our securities, and might make it harder for you to sell your shares. You may be unable to sell your securities unless a market can be established or sustained.

SUMMARY

This summary highlights selected information from this document and may not contain all of the information that is important to you. To understand the Merger fully, you should read carefully this entire document, its annexes and the documents we refer to. See “Where You Can Find More Information” beginning on page 67 of this Proxy Statement. The Merger Agreement is attached as Annex A to this Proxy Statement and is incorporated by reference into this Proxy Statement. We encourage you to read it in its entirety, as it is the most important legal document that governs the Merger.

Parties Involved in the Merger

On Track Innovations Ltd.

OTI is a developer of contactless payment solutions, Near Field Communication (NFC) technology based, for the unattended market. Since 1990, we have been providing systems, devices and services to operators and integrators with solutions and components that are simple to implement. To date, OTI has deployed over one million payment solutions to our focused unattended markets: self-service kiosk, micro-markets and vending machines, entertainment and gaming, ATM, Mass Transit Ticketing Validation, and fuel payments. OTI operates through regional offices, supporting clients and payment industry partners with its unique contactless payment solutions. OTI’s ordinary shares are currently quoted on the OTCQX® market, or OTCQX, under the symbol OTIVF.OTIVF.

Nayax Ltd.

Nayax Ltd. is a global commerce enablement and payments platform designed to help merchants scale their business. Nayax offers a complete solution including localized cashless payment acceptance, management suite, and consumer engagement tools, enabling merchants to conduct commerce anywhere, at any time. With foundations and global leadership in serving unattended retail, Nayax has transformed into a comprehensive solution focused on its customers’ growth across channels. Today, Nayax has 8 global offices, over 550 employees, connections to more than 80 merchant acquirer and payment method integrations and is a recognized payment facilitator worldwide. Nayax’s mission is to improve our customers’ revenue potential and operational efficiency. For more information, please visit www.nayax.com,, which is not incorporated into this Proxy Statement.

OTI Merger Sub Ltd.

OTI Merger Sub Ltd. is a wholly owned direct subsidiary of Nayax Ltd. and was formed on March 7, 2022, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement.

See “The“The Merger Proposal-Parties Involved in the Merger”Merger” beginning on page 26 of this Proxy Statement.

OTI’s Reasons for Approval of the Merger; Recommendation of the Board of Directors

After careful consideration, the Board has:

Accordingly, the Board recommends that you vote “FOR” the Merger Proposal.

In reaching its decision to approve the Merger Proposal and to recommend that OTI’s shareholders vote to approve the Merger Proposal, OTI’s Board consulted with OTI’s management and its legal advisors and considered a number of strategic, financial and other factors, including, among others, the desire to prevent the Company from entering into a state of insolvency and the very limited time frame in which such preventative actions should be taken, as described under “The“The Merger-Reasons for Approval of the Merger; Recommendation of the Board of Directors”Directors” beginning on page 35 of this Proxy Statement.

Interests of Certain Persons; Share Ownership of OTI’s Directors and Executive Officers

When considering the recommendation by OTI’s Board to vote “FOR” the Merger Proposal, you should be aware that executive officers and directors of OTI have interests in the Merger that may be perceived as different from, or in addition to, your interests, including:

If the Merger Proposal is approved, the ordinary shares held by our directors and executive officers will be treated in the same manner as outstanding ordinary shares held by all other shareholders. For more information, see the sections of this Proxy Statement captioned “The“The Merger-Interests of Certain of OTI’s Executive Officers and Directors in the Merger”Merger” beginning on page 38 of this Proxy Statement and “The“The Merger-Effects of the Merger on Company Share Plans and Warrants”Warrants” beginning on page 39 of this Proxy Statement.

As of the Record Date for the shareholder meeting, the current directors and executive officers of OTI, as a group, beneficially owned in the aggregate approximately [●]4,620,496 ordinary shares of the Company, constituting [●]%6.1% of the outstanding ordinary shares, not including options as these are out of the money.

See “Share“Share Ownership of Certain Beneficial Owners, Directors and Executive Officers of OTI”OTI” beginning on page 65 of this Proxy Statement.

As noted above, our executive officers will receive certain compensation and realize value on equity held in connection with the Merger. The Company’s board was aware of and considered these interests, among other matters, in reaching its decisions to (i) approve the Merger, (ii) approve and declare advisable the Merger Agreement, and (iii) resolve to recommend the adoption of the Merger Agreement by OTI shareholders. See “Non-Binding, Advisory Vote on Transaction-Related Compensation for OTI’s Executive Officers”Officers” beginning on page 62 of this Proxy Statement.

The Merger Agreement

The Merger Agreement is attached as Annex A to this Proxy Statement. You should read the Merger Agreement carefully in its entirety. It is the most important legal document governing the Merger. See “The“The Merger Agreement”Agreement” beginning on page 48 of this Proxy Statement.

The Loan Agreement

The Loan Agreement is attached as Annex B to this Proxy Statement. You should read the Loan Agreement carefully in its entirety. The Loan Agreement was entered into by the Parent and the Company to facilitate the Loan to the Company, as stipulated under the Term Sheet. The Merger Agreement incorporates certain provisions of the Loan Agreement and therefore the two should be read together for a complete understanding of the Merger and its stages. See “The“The Merger-Background of the Merger”Merger” beginning on page 26 of this Proxy Statement.

Event of Default under the Loan Agreement

Under the terms of the Loan Agreement, the Company is required to either (i) immediately repay the Parent the Loan or (ii) the annual interest rate on the Loan amount shall be increased to 16%, at the Parent’s sole discretion, under certain circumstances detailed therein, including the following circumstances:

Structure of the Merger

The Merger is being effected as a merger between OTI and Merger Sub under the Companies Law. In the Merger, Merger Sub, a wholly-owned subsidiary of the Parent, will be merged with and into OTI, with OTI surviving the Merger and becoming a wholly-owned subsidiary of the Parent. See “The“The Merger Agreement”Agreement” beginning on page 48 of this Proxy Statement.

Merger Consideration

At the Effective Time (as such term is defined under the Merger Agreement) of the Merger, by virtue of the Merger and without any additional action on the part of OTI, the Parent, Merger Sub or the holders of any of the ordinary shares, each ordinary holder of a certificate (or evidence of shares in book-entry form) which immediately prior to the Effective Time represented any of the Company’s ordinary shares (other than ordinary shares held in the treasury of OTI, reserved for future grants under the Company share plans or owned by the Parent or any direct or indirect wholly-owned subsidiary of OTI or of the Parent (if any), which will be canceled and retired without any conversion or consideration paid in respect thereof and will cease to exist), shall cease to have any rights with respect thereto, except the right to receive its pro rata portion of the Merger Consideration per each ordinary share, in cash, without interest and less applicable withholding taxes.

See “The“The Merger-Effects of the Merger on Our Ordinary Shares”Shares” beginning on page 39 of this Proxy Statement and “The“The Merger Agreement-Merger Consideration”Consideration” beginning on page 49 of this Proxy Statement.

Treatment of Options and Restricted Shares Outstanding under our Company Equity and Share Plans

At the Effective Time, each option shall be terminated for no cost, without receiving consent from the holder of such option.

At the Effective Time, each vested and unvested restricted share will be accelerated and such shares shall participate in the Merger, without any increase to the Merger Consideration.

Voting and Support Agreement

Jerry L. Ivy Jr. Descendants’ Trust (“Ivy”), the Company’s controlling shareholder, and its affiliates, who collectively hold approximately 34.8% of the outstanding ordinary shares of the Company on the date of the Merger Agreement, have entered into a voting and support agreement with the Parent, pursuant to which Ivy agreed to vote, or cause his affiliates to vote, its ordinary shares:

See “The“The Voting and Support Agreement.Agreement.”

The Meeting

Date, Time, Place and Agenda. The shareholder meeting is scheduled to be held at the offices of the Company’s legal counsel, Gornitzky & Co., located at Vitania Tel Aviv Tower, 20 Haharash St., Tel Aviv, Israel 6761310, on [●],May 10, 2022 at 10:00 AM (Israel time). The meeting is being held for the purpose of considering a proposal to approve the acquisition of OTI by the Parent, including approval of the Merger Agreement, the Merger, the Merger Consideration, and all other transactions and arrangements contemplated under the Merger Agreement.

Other than the Merger Proposal and the Advisory Proposal, we do not currently expect there to be any other matters on the agenda at the shareholder meeting; however, if any other matter is properly presented at the shareholder meeting, including voting on the adjournment or postponement of the shareholder meeting, the persons named in the enclosed proxy card will vote upon such matters in accordance with their discretion.

Record Date. OTI has fixed [●],April 4, 2022 as the record date for the shareholder meeting. If you owned ordinary shares at the close of business on the record date, you are entitled to vote on matters that come before the shareholder meeting. There are [●]75,775,393 ordinary shares entitled to be voted at the shareholder meeting.

Required Vote. Provided that a quorum is present, the adoption and approval of the Merger Proposal at the shareholder meeting requires the affirmative vote of the holders of 75% of our ordinary shares present, in person or by proxy, at the meeting (or any adjournment or postponement thereof), excluding abstentions and broker non-votes and excluding any votes of our ordinary shares held by the Parent, Merger Sub or by any person holding at least 25% of the means of control of the Parent or Merger Sub, or any person or entity acting on behalf of the Parent, Merger Sub or any family member of, or entity controlled by a Merger Sub Affiliate. Approval of the Advisory Proposal and the Adjournment Proposal require each the affirmative vote of a majority of the votes cast thereon.

In order for your vote to be counted with respect to the Merger Proposal, you must affirm on the proxy card or voting instruction form that you are not a Merger Sub Affiliate. If you do not so affirm, your vote will not count towards the tally for the Merger Proposal. See “The“The Extraordinary General Meeting - Required Vote for the Merger Proposal”Proposal” beginning on page 23 of this Proxy Statement.

Conditions to the Merger

The parties will complete the Merger only if the parties satisfy or waive several conditions. The conditions include, among others:

Conditions to Each Party’s Obligations.

Conditions to Parent’s and Merger Sub’s Obligations.

Conditions to OTI’s Obligations.

See “The“The Merger Agreement-Conditions to the Closing of the Merger”Merger” beginning on page 58 of this Proxy Statement.

Termination of the Merger Agreement

The Parent and OTI can agree to terminate the Merger Agreement by mutual written consent at any time prior to the Effective Time of the Merger. In addition, the Parent can terminate the Merger Agreement if any of the following, among other things, occurs:

In addition, the Company can terminate the Merger Agreement if the Merger Agreement was voted against, or if the required majority was not obtained for the approval of the Merger in this extraordinary meeting of shareholders.

See The“The Merger Agreement-Termination of the Merger Agreement”Agreement” beginning on page 59 of this Proxy Statement.

No Solicitation of Acquisition Proposals

The Merger Agreement contains detailed provisions restricting OTI’s right to solicit acquisition proposals.

See “The“The Merger-Reasons for the Merger”Merger” beginning on page 35 of this Proxy Statement.

Termination Fees

The Company is required to pay the Parent a termination fee of $1,500,000, if the Merger Agreement is terminated under any of the following circumstances:

See “The“The Merger Agreement- Termination Fee Payable by the Company”Company” beginning on page 60 of this Proxy Statement.

Expenses

Except as otherwise provided in the Merger Agreement, all fees and expenses incurred in connection with the Merger Agreement and the other transactions contemplated by the Merger Agreement will be paid by the party incurring such fees and expenses.

See “The“The Merger Agreement-Fees and Expenses”Expenses” beginning on page 60 of this Proxy Statement.

Absence of Appraisal Rights

Under Israeli law, holders of ordinary shares are not entitled to statutory appraisal rights in connection with the Merger.

Regulatory Approvals

See “The“The Merger-Regulatory Matters”Matters” beginning on page 46 of this Proxy Statement.

Material U.S. Federal and Israeli Income Tax Consequences

The receipt by a U.S. holder of cash in exchange for the OTI ordinary shares in connection with the Merger will be a taxable transaction for U.S. federal income tax purposes. Generally, a U.S. holder will recognize gain or loss equal to the difference between the amount of cash it receives in connection with the Merger and its aggregate adjusted tax basis in the OTI ordinary shares that it exchanges therefor.

The receipt of cash in exchange for the OTI ordinary shares in connection with the Merger is generally a taxable transaction for Israeli income tax purposes and requires the withholding of applicable Israeli tax at source. However, certain exemptions from Israeli tax withholding may be applicable to non-Israeli holders of our ordinary shares under certain provisions of the Israeli Income Tax Ordinance (New Version) 1961, as amended, and we intend to submit an application to the ITA in order to clarify the withholding mechanism. We cannot assure you that our application will be accepted.

See “The“The Merger-Material U.S. Federal and Israeli Income Tax Consequences”Consequences” for a summary discussion of material U.S. federal income tax consequences of the Merger to U.S. holders and material Israeli tax consequences in connection with the Merger. You should consult your tax advisor about the particular tax consequences of the Merger to you.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements. Forward-looking statements are subject to risks and uncertainties. These forward-looking statements include, without limitation, statements contained in the sections entitled “Questions“Questions and Answers about the Shareholder Meeting and the Merger”Merger” beginning on page 1 of this Proxy Statement, “Summary”“Summary” beginning on page 12 of this Proxy Statement and “The Merger”“The Merger” beginning on page 26 of this Proxy Statement, and in statements containing words such as “believes”, “estimates”, “anticipates”, “intends”, “continues”, “contemplates”, “expects”, “may”, “will”, “could”, “should” or “would” or other similar words or phrases. These statements, which are based on information currently available to us, are not guarantees and involve risks and uncertainties that could cause actual results to materially differ from those expressed in, or implied by, these statements. These forward-looking statements speak only as of the date on which the statements were made and we expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statement included in this document or elsewhere. In addition to other factors and matters contained in this document, these statements are subject to risks, uncertainties, and other factors, including, among others:

Because these forward-looking statements involve risks and uncertainties, actual results could differ materially from those expressed or implied by the forward-looking statements in this document. The business, financial condition or results of operations of OTI could be materially adversely affected by any of these factors. OTI does not undertake any obligation to revise or update any forward-looking statements to reflect any event or circumstance that arises after the date of this document, except as required by law. The cautionary statements made in this document should be read as being applicable to all related forward-looking statements wherever they appear in this document.

MARKET PRICE AND DIVIDEND DATA

Markets

Since October 31, 2019, our ordinary shares, formerly listed on the Nasdaq Capital Market, have been quoted on the OTCQX Market under the symbol “OTIVF”.

Dividends

We have never declared or paid any cash dividends on our ordinary shares. We have retained any future earnings to finance operations and to expand our business and, therefore, may not pay any cash dividends on ordinary shares in the future.

THE EXTRAORDINARY GENERAL MEETING

General; Date; Time and Place

This document is furnished in connection with the solicitation of proxies by OTI’s Board for use at the shareholder meeting. The shareholder meeting will be held at the principal business office of Gornitzky & Co., located at Vitania Tel Aviv Tower, 20 Haharash St., Tel Aviv, Israel 6761310, on [●],May 10, 2022 at 10:00 AM (Israel time), unless it is postponed or adjourned.

Purpose of the Shareholder Meeting

At the shareholder meeting you will be asked to consider and vote upon a proposal to approve the acquisition of OTI by the Parent, including the (i) approval of the Merger Proposal: (a) the Merger Agreement; (b) the Merger on the terms and subject to the conditions set forth in the Merger Agreement and in accordance with Sections 314-327 of the Companies Law, following which Merger Sub will cease to exist as a separate legal entity and OTI will become a wholly-owned subsidiary of the Parent; (c) the consideration to be received by the shareholders of OTI in the Merger, consisting of $4,500,000 in the aggregate, in cash, without interest and less any applicable withholding taxes, for each ordinary share owned immediately prior to the Effective Time; and (d) all other transactions and arrangements contemplated by the Merger Agreement; (ii) approval on a non-binding, advisory basis, of certain compensation that may be paid or become payable to OTI’s executive officers and/or directors in connection with the Merger and the agreements and understandings pursuant to which such compensation may be paid or become payable which we refer to as the Advisory Proposal; and (iii) approval of a proposal to adjourn the extraordinary general meeting to a later date or dates if necessary to solicit additional proxies if there are insufficient votes to approve the Merger at the time of the extraordinary general meeting, which we refer to as the Adjournment Proposal.

In addition to the Merger Proposal, the Advisory Proposal and the Adjournment Proposal, you also will be asked to consider and, as applicable, vote upon, any other business that may properly come before the shareholder meeting or any adjournment or postponement of the shareholder meeting, including voting on the adjournment or postponement of such meetings. OTI currently does not contemplate that any other matters will be considered at the shareholder meeting.

Shareholders Entitled to Vote; Record Date

Shareholders of record who held the OTI ordinary shares at the close of business on [●],April 4, 2022 (the “Record Date”) are entitled to vote at the shareholder meeting. In addition, shareholders who, as of the Record Date, held ordinary shares through a bank, broker or other nominee which is a shareholder of record of OTI or which appears in the participant list of a securities depository, are considered to be beneficial owners of shares held in street name. These proxy materials are being forwarded to beneficial owners by their bank, broker or other nominee that is considered the holder of record. Beneficial owners have the right to direct how their shares should be voted and are also invited to attend the shareholder meeting, but may not actually vote their shares in person at the meeting unless obtaining, prior to the meeting, a legal proxy from such bank, broker or other nominee that authorizes them to vote their shares.

As of the Record Date, there were [●]75,775,393 ordinary shares issued, outstanding and entitled to vote at the shareholder meeting.

Recommendation of the Board of Directors

After careful consideration, the Board has:

ACCORDINGLY, THE OTI BOARD UNANIMOUSLY RECOMMENDS THAT OTI’S SHAREHOLDERS VOTE “FOR” THE ADOPTION OF THE MERGER AGREEMENT, “FOR” THE NON-BINDING, ADVISORY VOTE ON CERTAIN COMPENSATION ARRANGEMENTS AND “FOR” THE ADJOURNMENT PROPOSAL.

Quorum and Voting

Pursuant to OTI’s amended and restated articles of association, the quorum required for the shareholder meeting consists of at least two shareholders present, in person or by proxy, who hold or represent in the aggregate at least 33 1/3% of the voting power in OTI. If a quorum is not present within 30 minutes from the time appointed for the shareholder meeting, the shareholder meeting will stand adjourned either (a) to the same day in the next week, at the same time and place, unless such day falls on a statutory holiday (either in Israel or in the U.S.), in which case the meeting will be adjourned to the first business day afterwards which is not a statutory holiday, (b) to such later day and at such time and place as indicated in the notice of such meeting, or (c) to such later day than the date pursuant to clause (a) above if the Company has sent to the shareholders a prior notice of no less than 72 hours before the date set for the postponed meeting. At the adjourned meeting, any matter that was to be addressed during the shareholder meeting will be addressed, provided at least two shareholders are present in person or by proxy, regardless of the voting power in OTI held by them.

If you are a beneficial owner of shares and do not specify how you want to vote on your proxy card, your bank, broker or other nominee will not be permitted to instruct the depositary to cast a vote with respect to the Merger Proposal or the Advisory Proposal. Banks, brokers and other nominees who hold shares in “street name” for clients typically have authority to vote on “routine” proposals even when they have not received instructions from beneficial owners, absent specific instructions from the beneficial owner of the ordinary shares to the contrary. However, banks, brokers and other nominees are not allowed to exercise their voting discretion with respect to the approval of non-routine matters, such as adoption and approval of a merger and the proposal to approve, on a non-binding, advisory basis, the merger-related executive compensation. On the proposals, if a beneficial owner does not provide instructions to his, her or its bank, broker or other nominee, the ordinary shares will not be voted (referred to as a “broker non-vote”). Broker non-votes and abstentions will be treated as neither votes “for” nor “against” any matter, although they will be counted as present in determining whether a quorum is present. If your ordinary shares are held of record by a bank, broker, or other nominee, we urge you to give instructions to your bank, broker, or other nominee as to how your ordinary shares should be voted so that you thereby participate in the voting on the proposals.

Each ordinary share is entitled to one vote on the proposals or any other item that comes before the shareholder meeting. If two or more persons are registered as joint holders of any ordinary share, the right to attend the shareholder meeting will be conferred upon each of such joint owners, but the right to vote at the shareholder meeting and/or the right to be counted as part of the quorum thereat will be conferred exclusively upon the more senior among the joint holders attending the shareholder meeting, in person or by proxy. For this purpose, seniority will be determined by the order in which the names appear in OTI’s shareholder register.

Required Vote for the Merger Proposal

Provided that a quorum is present, the adoption and approval of the Merger Proposal at the shareholder meeting requires the affirmative vote of the holders of 75% of our ordinary shares present, in person or by proxy, at the meeting (or any adjournment or postponement thereof), excluding abstentions and broker non-votes.

Pursuant to Section 320(c) and Section 327 to the Companies Law, the approval of the Merger Proposal requires the affirmative vote of the holders of 75% of ordinary shares present, in person or by proxy, at the meeting where a quorum is present and voting on the proposal, not including abstentions and broker non-votes and excluding any votes of our ordinary shares held by the Parent, Merger Sub or by any person holding at least 25% of the means of control of the Parent or Merger Sub, or any person or entity acting on behalf of the Parent, Merger Sub or any family member of, or entity controlled by a Merger Sub Affiliate.

In order for your vote to be counted, you must affirm on the proxy card or voting instruction form that you are not a Merger Sub Affiliate. If you do not so affirm, your vote will not count towards the tally for the merger proposal.

The Required Vote for the Advisory Proposal and the Adjournment Proposal

The proposal to approve, on a non-binding, advisory basis, the merger-related executive compensation, as well as the proposal to approve the Adjournment Proposal, requires the affirmative vote of a majority of votes cast thereon. For purposes of each such proposal, if your ordinary shares are present at the special meeting but are not voted on this proposal, or if you have given a proxy and abstained on this proposal, or if you fail to submit a proxy or to vote in person at the special meeting, as applicable, the ordinary shares held by you or your bank, brokerage firm or other nominee will not be counted in respect of, and will not have an effect on, the proposal to approve, on a non-binding, advisory basis, the merger-related executive compensation or the Adjournment Proposal, as the case may be.

Voting Results

The preliminary voting results will be announced at the shareholder meeting (when completed, if such meeting is adjourned). The final voting results will be tallied by Broadridge and will be published following the shareholder meeting on a Current Report Form 8-K filed with the SEC.

Voting of Proxies

If you are a record shareholder, your signed proxy card must be received by the Company at Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717 or at the Company’s registered office, by 10:00 a.m. (Israel time) on [●],May 7, 2022, or 3:00 a.m. (Eastern time) on [●],May 7, 2022, to be counted towards the tally of ordinary shares so voted. In the alternative, a proxy card may be presented in person to the chairman of the shareholder meeting at such meeting in order to be counted towards the tally of votes at the meeting. If you are a record shareholder and attend the shareholder meeting, you may vote in person, and if you so vote, your proxy will not be used.

Even if you plan to attend the shareholder meeting, if you hold your ordinary shares in your own name as the shareholder of record, please vote your ordinary shares using a proxy. DO NOT enclose or return your share certificate(s) with your proxy. Properly executed proxies that do not contain voting instructions will not be voted in respect of the proposals.

Shares Held in Street Name. If your ordinary shares are held in a stock brokerage account or by a bank, broker or other nominee, you are considered the “beneficial holder” of the ordinary shares held for you in what is known as “street name.” If that is the case, you may instruct your bank, broker or other nominee how to vote by completing and returning the proxy card provided by your bank, broker or other nominee. If you plan to attend the shareholder meeting, you will need a proxy from your bank, broker or other nominee in order to be given a ballot to vote the ordinary shares.

Voting through Agent

A shareholder may appoint a voting agent to vote in his or her place by way of signing a writ of appointment in accordance with the Company’s Articles of Association.

Revoking or Changing Your Vote

Shares Registered in Your Name. Any proxy you give pursuant to this solicitation may be revoked by you at any time before it is voted. Proxies may be revoked by one of three ways:

Any written notice of revocation or subsequent proxy submitted to us (other than at the shareholder meeting) should be delivered to our principal business office, located at 5 Hatnufa St., Yokneam Industrial Zone, Yokneam, Israel 2069200, to the attention of Assaf Cohen, or via email to assaf@otiglobal.com, in accordance with the required timing described in the bullet-points above.

Shares Held in Street Name. If your ordinary shares are held in a stock brokerage account or by a bank or other nominee, in order to change your voting instructions, you must follow the directions from your broker, bank or other nominee to change those instructions.

The Proxy

Amir Eilam and Assaf Cohen will serve as the proxy for shareholders of OTI under the enclosed form of proxy with respect to the matters to be voted upon at the shareholder meeting.

Share Ownership of OTI Directors and Executive Officers

As of the Record Date for the shareholder meeting, directors and executive officers of OTI beneficially owned, in the aggregate, approximately [●]%6.1% of the ordinary shares outstanding.

Solicitation of Proxies

In addition to solicitation by mail, directors, officers and employees of OTI may solicit proxies for the shareholder meeting from OTI shareholders personally or by telephone, facsimile and other electronic means without compensation other than reimbursement for their actual expenses. Arrangements also will be made with bankers, brokers and other nominees and fiduciaries for the forwarding of solicitation material to the beneficial owners of ordinary shares held of record by those persons, and OTI will, if requested, reimburse the record holders for their reasonable out-of-pocket expenses in so doing. In addition, we have engaged [●]Alliance Advisors, LLC. to assist in the solicitation of proxies and to provide related informational support, for a fee of $[●]$10,000 plus reimbursement for reasonable expenses.

PLEASE DO NOT SEND IN ANY OTI SHARE CERTIFICATES WITH YOUR PROXY CARDS.

Request to Include Item on the Agenda

A shareholder holding, or shareholders holding together, at least one percent of the voting rights represented at the meeting are entitled to request that the Board of Directors include an item on the agenda, provided the item is suitable to be dealt with at the meeting. Such request must have been submitted to the Company within 7 days after the publication of the notice of the meeting.

Attending the OTI Shareholder Meeting

Only OTI shareholders, including joint holders, who held shares of record as of the close of business on [●],April 4, 2022, and other persons holding valid proxies for the shareholder meeting are entitled to attend the shareholder meeting. All shareholders and their proxies should be prepared to present photo identification. In addition, if you are a record holder, your name is subject to verification against the list of record holders on the record date prior to being admitted to the shareholder meeting. OTI shareholders who are not record holders but hold shares through a bank, broker or other nominee in “street name” should be prepared to provide proof of beneficial ownership on the record date, such as a recent account statement prior to [●],April 4, 2022, or similar evidence of ownership. A “street name” holder who wishes to vote his, her or its ordinary shares at the shareholder meeting will furthermore need to present a signed, legal proxy from the bank, broker or other nominee through which the ordinary shares are held. If you do not provide photo identification or comply with the other procedures outlined above upon request, you will not be admitted to the shareholder meeting.

Contact for Questions and Assistance in Voting

If you have a question about the Merger or how to vote or revoke a proxy you should contact:

Alliance Advisors, LLC

200 Broadacres Drive, 3rd Floor

Bloomfield, New Jersey 07003

Shareholders Call Toll Free: 844-557-9028

or

Assaf Cohen

5 Hatnufa St.,

Yokneam Industrial Zone,

Yokneam, Israel 2069200

assaf@otiglobal.com

Other Matters

OTI is not aware of any other business to be acted upon at the shareholder meeting. If, however, other matters are properly brought before the shareholder meeting or any adjournment or postponement of the shareholder meeting, the persons named as proxy holders will each have discretion to act on those matters, including to vote in their discretion to adjourn or postpone the shareholder meeting or any adjournment or postponement thereof.

THE MERGER PROPOSAL

PARTIES INVOLVED IN THE MERGER

On Track Innovations Ltd.

5 Hatnufa St., Yokneam Industrial Zone

Yokneam, Israel 2069200

OTI is a developer of contactless payment solutions, NFC technology based, for the unattended market. Since 1990, we have been providing systems, devices and services to operators and integrators with solutions and components that are simple to implement. To date, OTI has deployed over one million payment solutions to our focused unattended markets: self-service kiosk, micro-markets and vending machines, entertainment and gaming, ATM, Mass Transit Ticketing Validation, and fuel payments. OTI operates through regional offices, supporting clients and payment industry partners with its unique contactless payment solutions. OTI’s ordinary shares are currently quoted on the OTCQX under the symbol OTIVF.

Nayax Ltd.

3 Arik Einstein St.

Herzliya, Israel 465907

Nayax Ltd. is a global commerce enablement and payments platform designed to help merchants scale their business. Nayax offers a complete solution including localized cashless payment acceptance, management suite, and consumer engagement tools, enabling merchants to conduct commerce anywhere, at any time. With foundations and global leadership in serving unattended retail, Nayax has transformed into a comprehensive solution focused on its customers’ growth across channels. Today, Nayax has 8 global offices, over 550 employees, connections to more than 80 merchant acquirer and payment method integrations and is a recognized payment facilitator worldwide. Nayax’s mission is to improve our customers’ revenue potential and operational efficiency. For more information, please visit www.nayax.com.www.nayax.com.

OTI Merger Sub Ltd.

3 Arik Einstein St.

Herzliya, Israel 465907

OTI Merger Sub Ltd. is a wholly owned direct subsidiary of Nayax Ltd. and was formed on March 7, 2022, solely for the purpose of engaging in the transactions contemplated by the Merger Agreement and has not engaged in any business activities other than in connection with the transactions contemplated by the Merger Agreement.

THE MERGER

Background of the Merger

The following is a summary of the material events leading up to the execution of the Merger Agreement. Throughout the period described below, prior to and in between our formal meetings of the Board, Yehuda Holtzman, former Chief Executive Officer of the Company, Amir Eilam, the current Chief Executive Officer of the Company, and Assaf Cohen, Chief Financial Officer of the Company, updated the members of the Board on the relevant events and developments.

The Company’s management team and Board actively monitor and assess developments in related industries. In addition, our management team and Board regularly consider and evaluate options for achieving the Company’s long-term strategic goals and enhancing shareholder value as an independent company, as well as potential strategic alternatives to enhance shareholder value.

On October 24, 2018, the Company received a written notice from the Nasdaq Stock Market LLC. (“Nasdaq”) indicating that the Company was not in compliance with the Nasdaq listing rules, as the Company’s closing bid price for its ordinary share was below $1.00 per share for more than 30 consecutive days. On October 22, 2019, and due to the Company’s continued non-compliance with the Nasdaq listing rules, the Company received a notice stating that its securities will be delisted from Nasdaq. Following the delisting of the Company’s securities from Nasdaq, as of October 31, 2019, the Company’s shares were quoted on the OTCQX Markets.

On December 23, 2019, in connection with OTI’s need to raise funds to operate its business, and after examination of different fund raising possibilities, including loans and other investments in equity, and after considering the difficulties in approving certain possible investments due to Mr. Jerry Ivy’s holdings in the Company, OTI entered into a share purchase agreement (the “SPA”) with Jerry L. Ivy Jr. Descendants’ Trust (“Ivy”), Mr. William C. Anderson, then a member of OTI’s Board and currently acting as chairman of OTI’s Board, and Mr. James Scott Medford, then a member of OTI’s Board and its chairman (collectively, the “SPA Investors”), determined by the Board, after negotiations on the terms thereof, to be in the best interest of the Company and as reported on Current Report on Form 8-K that was filed with the SEC on December 26, 2019. As part of the SPA, the Company sold an aggregate amount of 12,500,000 shares (the “SPA Shares”) at a price per share of $0.20, raising an aggregate amount of $2,500,000, made in two tranches. The SPA also determined that Ivy will be entitled to appoint two members to the Board. Furthermore, Ivy was also granted with information rights affording Ivy the right to receive any information or report concerning operations and performance similar to and concurrent with the Company’s reports to its Board as well as pre-emptive rights, according to which if the Company offers, or intends to offer, any equity securities (including any convertible instruments), except certain exempt issuances, the Company is required to first offer such securities to Ivy.

Starting in March 2020, the COVID-19 pandemic has adversely affected the Company in various ways, including, but not limited to, a decrease in the Company’s revenues (compared to the forecast), derived from a decrease in sales of mass transit ticketing in the Polish market, mainly due to lockdowns and other restrictions imposed due to the COVID-19 pandemic, longer components’ procurement lead time, a shortage in components, postponement of sales, slower execution of transactions, increases in prices of components and other matters. In addition, the longer lead time and the rising prices for components required the Company to purchase a larger amount of components in advance, causing a larger expense on such components than the one that was estimated. Since 2020, the Company has taken measures to reduce costs and balance its financials, including, among other things, applying salary reductions.

On April 14, 2020, the shareholders of the Company approved the closing of the second tranche under the SPA, which led to Ivy becoming a controlling shareholder in the Company, as he then held 26% of the Company’s share capital, as well as the appointment of certain directors to the Board, including Mr. Michael Shanahan, who was nominated by Ivy in accordance with the terms of the SPA, and was appointed on January 21, 2020. On May 5, 2020, the Board also appointed Ms. Sandra Bjork Hardardottir, a relative of Ivy, as a director on the Board, which appointment was also made by Ivy pursuant to the terms of the SPA.

On December 5, 2020, the Board resolved that, based on information provided by the management of the Company, the Company was in an urgent need to raise additional funding to secure its ability to maintain its business. Furthermore, the Company’s management had been searching for alternative funding, and reached the conclusion that a convertible loan from Ivy, under the terms further described below, was an appropriate option. Further to the management’s analysis, the Board resolved that it was in the best interests of the Company to receive a loan from Ivy. On December 9, 2020, the Company entered into the Loan Agreement with Ivy (the “Ivy Loan Agreement”) under which Ivy extended a loan to the Company in the amount of up to $1,500,000, payable in two trenches (the “Ivy Loan Amount”). The Ivy Loan Amount was secured pursuant to a debenture by a first priority floating charge over all the tangible or intangible assets and other property of the Company as of the date of the Ivy Loan Agreement or thereafter acquired. Under the Ivy Loan Agreement, it was agreed that the Company will use the Ivy Loan Amount to pursue strategic options, including the engagement of an investment bank to identify opportunities for a sale of the Company. Accordingly, on December 2, 2020, the Company signed an engagement letter with an investment bank (the “Investment Bank”) to act as the Company’s exclusive financial adviser for the purpose of effecting a sale of the Company. It was also agreed that the Ivy Loan Amount and all accrued interest would mature and be payable in full by June 17, 2021, provided that the maturity date could be extended. The Ivy Loan Amount bore interest at a rate of 8.0% per annum, provided, however, that upon an extension of the maturity period beyond the initial maturity date, the interest would automatically increase, effective as of such maturity date, to the rate of 10.0% per annum. Pursuant to the Ivy Loan Agreement, at any time prior to the repayment in full of the Ivy Loan Amount, together with interest accrued and all other amounts outstanding under the Loan Agreement (the “Secured Amount”), Ivy would be entitled, at its sole discretion, to demand to convert (the “Conversion Right”) the entire Secured Amount into ordinary shares, at a price per share reflecting certain discount, changing depending on the time of conversion. In addition, the Ivy Loan Agreement stated that the Company would maintain its then-current level of debt in Bank Leumi Le’Iseael (“BLL”), subject to certain exceptions, and would not create or permit to subsist any of the security interests stated thereon on any of the Company’s assets and property, except for certain permitted security interests and future fixed changes on assets of the Company.

On January 26, 2021, the Ivy Loan Agreement was amended to allow for an additional lender, Mr. James Scott Medford, who was no longer, at that point, a member of the board, to join Ivy and lend an additional $100,000 bringing the Ivy Loan Amount to an aggregate amount of up to $1,600,000. On March 2, 2021, the Ivy Loan Agreement and the terms thereof were approved by the shareholders of the Company. The Loan Agreement was subsequently extended twice, as further detailed below, extending the maturity date to January 28, 2022.

On March 29, 2021, as part of the Company’s efforts to mitigate the losses caused by the COVID-19 pandemic and for other reasons, and pursuant to the Board’s determination, after reviewing the terms of the agreement, that it was in the best interest of the Company to sell the Company’s shares in OTI’s Polish subsidiary, ASEC S.A. (“ASEC”), the Company entered into an agreement for the sale of shares in ASEC, by and between the Company and Vector Software SP. Z O.O (“VS”), under which VS purchased from the Company 100% of the issued and outstanding share capital of ASEC for $3,000,000, of which approximately $2,100,000 was used to repay loans provided to ASEC by Polish banks, while the remainder was used to finance OTI’s continuing business.

In discussions conducted in February and March of 2021, OTI’s management presented the Board with cash-flow projections showing a need for additional funding to secure the quarterly cash-flow fluctuation and provide a buffer for the market uncertainty and litigation settlements. The idea of conducting a rights offering was brought up as a way of raising funds while allowing the Company’s existing shareholders to avoid dilution, offering them terms parallel to those of Ivy (i.e., setting a price per share equal to the conversion price per share of the Ivy Loan Amount under the Ivy Loan Agreement at the time of the rights offering). Following an extensive discussion on the terms of the proposed rights offering, the Board approved the conducting of the rights offering. Between April and May of 2021, the Company conducted a rights offering (the “Rights Offering”), pursuant to a prospectus dated April 20, 2021, under which the Company offered its shareholders the ability to exercise subscription rights and purchase, for every subscription right held by them as of April 14, 2021, one ordinary share of the Company, at a purchase price of $0.174 per share, before the expiration of the Rights Offering that took place on May 19, 2021. For the purpose of securing a full subscription, Ivy provided the Company with a commitment letter pursuant to which he committed to fully exercise his rights, while additionally requesting to exercise additional rights un-subscribed for, for up to approximately $2,825,000 in the aggregate, subject to the limitation that such holdings, including those of Ivy’s affiliates, will not exceed 45% or more of the Company’s issued and outstanding share capital following the conclusion of the Rights Offering. The Rights Offering was oversubscribed and generated $3,300,000 in gross proceeds to the Company, and the issuance of an aggregate of 18,965,517 ordinary shares at a price of $0.174 per share, out of which 10,896,304 were issued to Ivy and its affiliates, bringing Ivy and its affiliates to own 35.9% of the Company’s issued and outstanding share capital.

Starting on December 2, 2020, the Investment Bank engaged by the Company to assist the Company in identifying potential buyers to the Company. For that purpose, the Company established a data room, allowing interested parties bound by confidentiality and showing interest to review the Company. During that time, the Investment Bank, following the approval of Mr. Yehuda Holtzman, the former CEO of the Company, approached many potential buyers, anonymously (i.e., without exposing the Company), and examined the interest of such potential buyers to purchase the Company. Out of dozens of potential buyers approached by the Investment Bank, during March and April of 2021, 8 companies signed a non-disclosure agreement, allowing further discussions for such potential purchase.

On May 12, 2021, the Investment Bank presented a draft of one initial non-binding term-sheet to the Board, which was still under negotiations. The Investment Bank explained that the reason for having only one offer made was the fact that the market was slowing down in comparison to the previous quarter, while adding that buyers were looking for aggressive revenue growth. The Company received no other offers term sheets. As part of the discussions with the Board, the Investment Bank added that the Company could make efforts to demonstrate higher revenues, but this would require additional time.

On the Maturity Date of the Ivy Loan Agreement, Ivy had not yet converted the Ivy Loan Amount, which meant that, unless extended, the Company needed to repay the Ivy Loan Amount. Based on information provided to the Board by the Company’s management, the Board determined that the Company should continue to preserve its available cash. Furthermore, the management reported that efforts to find alternative financing options to refinance the Ivy Loan Amount under terms that are better than the terms of the Ivy Loan Agreement were not fruitful and no favorable alternative was found. Following the approval of the Board, and the agreement of Ivy, being the majority of the lenders, to exercise its option to extend the maturity date, the parties entered into a notice of exercise of option and agreement (the “Extension Agreement”), according to which the maturity date was extended until December 17, 2021.

On June 18, 2021, the Investment Bank updated the management that the party that provided the initial draft for a non-binding term-sheet had informed the Investment Bank that due to reasons such as pricing, path to profitability and a long path to the U.S. market, it decided not to move forward with the offer to acquire the Company.

On August 10, 2021, the Company entered into settlement agreements with two companies, Merwell Inc. (“Merwell”) and SuperCom Ltd. (“SuperCom”), with which the Company had been litigating since 2013. Such settlements were approved by the Board, which determined them to be in the best interest of the Company. Under the settlement with Merwell the Company paid an amount of NIS 5,700,000 (approximately $1,766,000) while under the settlement with SuperCom, SuperCom paid the Company an amount of NIS 5,128,000 (approximately $1,589,000), resulting in a net expense of a total of approximately $177,000 to the Company.

Through the years, the Company has been receiving loans BLL in various amounts of up to $4,000,000 on the Company’s accounts in BLL, composed of, at the relevant times of a credit line of up to $2,500,000 against invoices for products, a credit line of up to $1,000,000 against customer purchase orders and a credit line of up to $500,000 against invoices for SaaS (i.e., software as a service). As collateral for the various loans provided by BLL, BLL was granted with a first ranking charge over all of the Company’s assets and rights. BLL funding through the years was critical to the operation of the Company and was the primary mechanism for funding the manufacturing of committed orders.

Since the extension of the date of the repayment of the Ivy Loan Amount to December 17, 2021, the Company had been negotiating with Ivy to either convert the Ivy Loan Amount to equity or further extend the repayment date of the Ivy Loan Amount. Given the proximity to December 17, 2021, and based on the projected cash-flows, projected revenues and the Company’s cash balances presented for September 30, 2021, the Company stated that if the Ivy Loan Amount was to be repaid in December, and without further fund raising, it would have only sufficient funds to continue to operate its business until the end of the third quarter of 2022, however, the Company was unable to assure that the it will be able to continue its operations for a period of at least 12 months. This created a substantial doubt regarding the Company’s ability to continue as a going concern, which is why a note of going concern was added to the Company’s financial statements for the third quarter of 2021. The addition of the going concern note caused the Company additional difficulties as suppliers were more reluctant to either provide the Company with credit or allow it to defer certain payments, and insisted on immediate payments.

Following a long process and after approaching many companies, none of the pursued opportunities matured and no additional offer was made. On October 18, 2021, the Investment Bank provided the Company with a notice of termination of its engagement.

During November 2021, the Board attempted to obtain additional funding through various third parties while also reaching out to Ivy. After several discussions with Ivy, Ivy notified the Company that he would consider providing the Company with additional funding of up to $5,000,000. In later discussions and as part of the negotiations on the terms of such potential additional funding that took place during November of 2021, Ivy stated that such potential funding would be subject to the Company’s presentation of a financial plan demonstrating profitability in the near future. If none was provided, the Company was set to pay back the Loan Amount at the Maturity Date. A few meetings were conducted, including a face-to-face meeting conducted on November 7, 2021, with a Company management representative, a person working with Ivy, and Mr. Zvi Atlas, then a director nominee and Company’s counsel. In the meeting, the outline for an additional loan was provided and discussed, and it was agreed that the Company’s counsels will provide an initial draft based on the Ivy Loan Agreement.

On November 7, 2021, a meeting was conducted with BLL in which a management representative, Mr. Atlas and a person working with Ivy were present, for the purpose of increasing the factoring loans. During that meeting, the person working with Ivy provided background about Ivy to the bank and stated that Ivy was committed to the Company and had faith in its abilities. The person working with Ivy further told BLL that Ivy was in discussions with the Company on additional credit to be provided by Ivy.

On November 11, 2021, the Company presented the Board with the key terms of the potential loan to be provided by Ivy, and the Board designated Mr. Atlas, then a director nominee, to act as the Board’s representative to the negotiations.

On December 12, 2021, the management updated the Board with respect to the impacts of the going concern note on the Company’s cash-flow, as well as the reasonable possibility of recognizing materially lower revenues for the fourth quarter of 2021. The management stated that the Company’s needed to further increase its cash in order to support the 2022 operation plan. On December 16, 2021, the Company’s management stated based on the cash flow projections, that the Company would not be able to pay its employee’s salaries by January 9, 2022. During that time, the management was working on the 2022 budget while discussing with the Board the ability of the Company to defer certain payments.

On December 16, the Company and Ivy entered into an additional agreement to extend the Maturity Date of the Ivy Loan Agreement from December 17, 2021, to January 28, 2022.

On December 23, 2021, the Board convened and discussed all potential fund raising options, including an idea of conducting a PIPE transaction (if even available to OTI) that was brought up as a last resort, subject to Ivy’s agreement for waiver of his preemptive rights granted under the SPA, the possible engagement of a new financial advisor to assist in the Company’s attempts of raising certain debt funding (from which the Company was expecting a response about possible representation after his examination of materials provided to him with respect to the Company’s status and different obligations) and the attempts to locate other potential buyers, if any, of the Company, as part of its efforts to avoid insolvency. The Board discussed each of the fund raising options and each of their feasibility, considering the Company’s situation as well as the limitations imposed by the note of going concern and the agreements with Ivy (both the SPA and the Loan Agreement). The Board additionally discussed the possible inability of the Company to pay its employees their December salaries, and was also informed of the possible need to initiate insolvency procedures. By that time, Ivy remained undecided as to its willingness to provide an additional loan and did not provide comments to the draft loan agreement sent to his counsel on November 11, 2021. The possibility of conducting a PIPE transaction was further examined and the limitations to such fund raising efforts, such as Ivy’s preemptive rights and the need for a special approval of the shareholders in certain instances, was presented.

On December 26, 2021, Ms. Hardardottir informed the Board and the management that Ivy informed her that he did not intend to extend or renew the loan he provided under the Ivy Loan Agreement, and further asked to be advised as to the next steps to be taken by the Company. At that point, the Board instructed management to (i) examine Ivy’s willingness to allow the Company to pursue funding opportunities, bearing in mind the rights Ivy had under the SPA and the Ivy Loan Agreement, (ii) to assess, based on the Company’s cash-flow, how long the Company had to raise such additional funding, and (iii) convene the Board and weigh in the alternatives.

On December 27, 2021, Mr. Atlas, the newly appointed external director, provided Ms. Sandra B. Hardardottir, then the chairperson of the Board, his official letter of resignation from the Board, announcing his resignation with immediate effect.

On December 28, 2021, the Board reconvened. First, the Board was informed of Mr. Atlas’ resignation from the Board. Following her update with respect to Mr. Atlas’ resignation, Ms. Hardardottir, chairperson of the Board, also tendered her resignation from the Board, announcing that it would be taking effect immediately, and then she left the meeting. Mr. William C. Anderson was then appointed as chairman of the meeting. The management then provided the remaining members of the Board a review of the current financial status in the Company. The Board discussed, further to previous meetings and further to Ivy’s announcement, the Company’s ability to continue its operations while reviewing the cash-flow projection and understanding the Company’s ability to continue to operate. In addition, the Board discussed further the limitations and implications of initiating insolvency procedures and it was agreed that the management would exhaust any potential solution to avoid bankruptcy in any way.

On December 30, 2021, the Board was updated by the management as to the current financial and business situation and was further presented with the status of the Company’s fund raising efforts, which included:

In addition, the Board was presented with the possible legal routes under the Insolvency Law.

The Board agreed to present Ivy with the financial plan and examine a possible cooperation (whether by assisting the Company with a request for a credit line with BLL or approaching the Court to declare that the Company was unable to pay its debts, while filing for a stay-of-execution order, a certain relief offered to companies affected by the COVID-19 pandemic under the Insolvency Law). In addition, the Board resolved to continue pursuing the funding options presented to it and assessing the question of insolvency.

On December 30, 2021, after the conclusion of the Board meeting, Mr. Michael Shanahan, a director, tendered his resignation from the Board, with immediate effect. After Mr. Shanahan’s resignation, the Board was composed of three members – Mr. William C. Anderson, Mr. Leonid Berkovitch and Mr. Uri Arazy.

On January 4, 2022, the Board convened and the management informed the Board that BLL had rejected various payments to suppliers while further discussing the implications of such rejection. Further, the management informed the Board that the Company provided BLL with an update as to the Company’s financial situation. The management stated that it requested BLL to renew its credit line while stating that the Company is looking for additional funding. At that meeting, the management further recommended that the Board file for a stay of proceedings order under a special COVID route created as part of the Insolvency Law. The Board agreed to present Ivy with the budget that might be acceptable to him for the purpose of attempting to secure an additional loan. Furthermore, the Board determined that the Company is insolvent unless it obtains additional funding.

On January 5, 2022, the management updated the Board that BLL froze all of the Company’s bank accounts, such that no withdrawals could be made, including ones needed for the pre-payment for future productions, which further impaired the Company’s ability to recover from the financial difficulties. In addition, BLL converted the money that the Company then had in its USD account into NIS in order to offset the Company’s debt in its NIS account, which reduced the debt.

On January 6, 2022, the Company provided BLL with an update and presented them with the 2022 budget. BLL asked questions with respect to the possibility of the Company to secure an additional loan from Ivy. Later that day, Ivy announced that he would not be providing additional funding and BLL, in light of the refusal of Ivy to extend further funding to the Company, advised that it, as well, was unwilling to extend further credit.

On January 7, 2022, the Board determined that the Company was insolvent from a cash flow perspective and could not pay its debts when they became due. It determined further that the best course of action would be to commence insolvency proceedings with the court and to request the appointment of a trustee while the management will continue to work with the trustee to be appointed in order to try and implement a rehabilitation plan in accordance with the plan that was presented and approved by the Board.

On January 10, 2022, the Company filed a petition (the “Petition”) with the Israeli county court of Nazareth (the “Court”) in accordance with the Insolvency Law, seeking a court order to commence proceedings with respect to the Company, which will provide the Company with the court’s protection in accordance with the Insolvency Law. In addition, the Petition provided that the Company sought to obtain a court order to operate the Company for a period of thirty days under court protection in order to rehabilitate the Company, based on a 90-day plan provided by the Company showing how and when the Company would be able to reach a balanced cash-flow.

On January 12, 2022, the management conducted several meetings with seven potential buyers/investors, five of which were not interested in purchasing the Company. One showed interest in purchasing the Company; however, on the evening of January 12, 2022, after reviewing the materials provided to it, it informed the Company that it would not provide an offer and was no longer interested in purchasing the Company. Following a short communication between the Company and the Parent made as part of the Company’s efforts to locate a purchaser as a last resort from insolvency, the management informed the Board of a non-binding offer from the Parent for the purchase of the Company and the provision of a loan, and it was suggested to amend the court application such that the order to commence proceedings shall be postponed by approximately two weeks, while appointing a temporary trustee, for the purpose of entering into a transaction with the Parent. For the purpose of approaching the Court, the Parent provided the Company with an email to be presented to the Court stating that it was willing to purchase 100% of the Company’s shares, “as-is”, for a total amount of $10,000,000, to be split between payment of debts and the remainder paid to the shareholders. The Parent further stated in the email that it was willing to move fast and inject the Company with at least $3,000,000 to cover short term debts that were due, while noting that such amount would be deducted from the $10,000,000 offered.

On January 13, 2022, a Court hearing took place in which the Company presented the Parent’s offer to the Court, following which the Court deferred any further action or order in connection with the petitions filed in order for the Company to conclude negotiations with the Parent.

Between January 14, 2022 and January 18, 2022, the Company and Parent negotiated the terms of a binding term sheet for the purchase of the Company.

On January 18, 2022, at 9:30 AM (EST), which was 4:30 PM (Israel time), the Board met and discussed the binding term sheet negotiated with the Parent (the “Term Sheet”). The Board and the management agreed to conduct further negotiations, while the Board appointed Mr. Anderson to take part in the negotiations and represent the Board.

Between two Board meetings conducted on January 18, 2022, Mr. Anderson conducted a call with the Parent negotiating the terms of the Term Sheet. On the call, Mr. Anderson expressed to the Parent what the management’s and Board’s concerns were, and what they thought the gap was between their perception of the Company’s value in comparison to the offered purchase price. The Parent responded that the total $10,000,000 purchase price, which also included the amount to be used to cover the Company’s debts, was the price approved by the Parent’s board of directors, while also noting the risk in making such acquisition considering its inability to conduct full due-diligence. The Parent rejected all of the proposed revisions to the Term Sheet.

On a second meeting conducted that day at 3:45 PM (EST), which was 10:45 PM (Israel time), after Mr. Anderson advised the Board of the negotiations he had with the Parent, the Board closely considered the alternatives that the Company had, which only included the insolvency procedures or the Parent’s offer, and taking into account the interests of the Company, its shareholders and its creditors, the Board resolved that the transaction contemplated by the Term Sheet is in the best interest of the Company and its shareholders, and approved it to be executed. Furthermore, the Board resolved to withdraw the Petition filed with the Court.

On that same day, Ivy’s legal counsel informed the Parent’s legal counsel, Hertzog, Fox & Neeman (“HFN”), that Mr. Ivy agreed to comply with the “Exclusivity & Stand-Still” provisions of the Term Sheet. In addition, Ivy’s legal counsel confirmed that, provided that repayment of the secured loans was made in full in accordance with the Term Sheet, the Jerry L. Ivy, Jr. Descendants’ Trust would agree: (i) not to exercise its pre-emptive rights with respect to all the transactions described in the Term Sheet; and (ii) to vote in favor of the proposed merger (as described in the Term Sheet). HFN confirmed that (i) the exemption from liability set forth in the Term Sheet for officers and directors provided by the Parent shall also apply to Ivy; and (ii) per Ivy’s request, the Parent would agree to conduct good faith negotiations as to the possible purchase by Ivy of OTI PetroSmart (Pty) Ltd. (“PetroSmart”), a subsidiary of OTI.

On January 19, 2022, the Company signed the Term Sheet with the Parent. The Term Sheet provided that the Company and the Parent shall enter into a two-step transaction relating to (i) the Parent extending a senior secured convertible loan to the Company; and (ii) the Merger. Under the Term Sheet, the Company and the Parent agreed to make all reasonably commercial efforts to enter into a definitive merger agreement within 21 days after the entry into the Merger Loan Agreement (as defined below), and to complete the Merger by May 2, 2022. The consideration payable to the Company’s shareholders under the Merger Agreement would equal to an aggregate amount of $4,500,000. If the Merger Agreement would not be put to the vote of the shareholders of the Company by May 5, 2022 or not approved by the shareholders by May 31, 2022, for a reason not directly and exclusively related to the Parent, than (a) the Parent would have the right to either demand the immediate repayment of the Merger Loan Amount, or convert it into Company’s equity at a conversion price equal to the Merger Loan Amount, divided by the lowest market share price during the seven trading days prior to the date of the Merger Loan Agreement, but in no event more than $0.145 per share (the “Conversion Rate”), (b) if the Parent elected not to demand the immediate repayment or conversion, the interest on the Merger Loan Amount would be increased to an annual rate of 16%, and (c) the Company would pay the Parent, upon demand by the Parent, an amount of $1,500,000 (i.e., the break-up fee). Furthermore, pursuant to the Term Sheet, during the period commencing on the extension of the Merger Loan Amount, and until the completion of the Merger, the Company agreed to perform its business in the ordinary course, and not to operate outside the ordinary course of business without the prior written consent of the Parent. In addition, pursuant to the Term Sheet, the Parent agreed to use its commercially reasonable efforts to guarantee the Company a credit line in an amount of up to $2,000,000.

On that same day, the Company presented the Court with the Term Sheet, showing that there was a binding agreement with respect to the purchase of the Company. The Court ordered the dismissal of the proceedings initiated by the Petition.

On January 27, 2022, the Company and the Parent entered into a senior secured convertible loan agreement (the “Merger Loan Agreement”) under which the Parent extended a loan to the Company in the amount of $5,500,000 (the “Merger Loan Amount”), of which approximately $173,000 was used to pay the Company’s employees their December salaries and was paid directly by the Parent before the entry into the Merger Loan Agreement. The Parent and Company agreed that the Merger Loan Amount, which will be used to pay in full the Company’s existing debts to its secured creditors and other current liabilities, is subject to 10% interest per year and it matures on the second anniversary of the closing of the Merger Loan Agreement. The parties further agreed that the Merger Loan Amount shall be secured with a registered floating charge over the Company’s assets. In addition, the Parent may extend additional loans to the Company, which amounts would be added to the Merger Loan Amount. The Merger Loan Agreement further stated that the Parent has the right to convert the Merger Loan Amount after the earlier to occur: (i) an Event of Default (as defined therein), or (ii) the completion of the Merger Agreement, and prior to the repayment in full of the Merger Loan Amount, into ordinary shares of the Company, at a price per ordinary share equal to $0.043 (the “Conversion”). The Company agreed to convene a shareholders meeting as needed, to effect the Conversion. Until the repayment of the Merger Loan Amount or conversion thereof, the Company agreed not to issue to any third party any shares, options, warrants, or any other instrument convertible into ordinary shares, without the prior written consent of the Parent. Upon the occurrence of an Event of Default, at the election of the Parent: (i) the Merger Loan Amount shall become immediately due and payable; and (ii) the interest on the Merger Loan Amount shall be increased to an annual rate of 16%. For further detail of the Merger Agreement and the terms thereof see “The“The Merger Agreement” starting on page 48 to this Proxy Statement.

On January 31, 2022, the Parent advised the Company that it paid directly all amounts due under the Ivy Loan Agreement. Accordingly, the Ivy Loan Agreement and the associated debenture have been satisfied in full and have been terminated.

On February 7, 2022, an initial draft of the Merger Agreement by and among the Parent, the Merger Sub and the Company was provided by HFN, to the Company and the Company’s legal counsels, Gornitzky & Co. (“GNY”) and Sullivan & Worcester LLP.

As provided for under the Term Sheet, on February 9, 2022, the Parent provided a guarantee to one of the Company’s suppliers, allowing the Company to continue to purchase components from such supplier.

On February 14, 2022, Ivy’s legal counsel informed HFN that, in connection with the agreements made on January 18, 2022, Ivy will not initiate negotiations as to, and is not interested to explore, the possible purchase by Ivy of PetroSmart.

As provided for under the Term Sheet, between February 9, 2022, and March 1, 2022, additional guarantees were provided by the Parent to suppliers and subcontractors of the Company, for the purpose of allowing the Company to continue its operations.

During February and March of 2022, the Company negotiated with the Parent the terms of the Merger Agreement, specifically with respect to the representations and warranties made, the terms of directors and officers indemnifications and other covenants relating to the technical performance of the Merger. In addition, during the same period, the Parent negotiated with Ivy the voting and support agreement.

On March 17, 2022, the Merger Agreement was signed by the Parent, the Merger Sub and the Company, and on the same day, a voting and support agreement was signed by the Parent and Ivy.

Reasons for Approval of the Merger; Recommendation of the Board of Directors

Recommendation of the Board

The Board unanimously recommends that you vote FOR the proposal to approve the Merger Proposal including the Merger Agreement, the Merger, the Merger Consideration, and all other transactions and arrangements contemplated under the Merger Agreement, including, without limitation, the purchase of the Company of run-off directors’ and officers’ liability insurance for a period of six (6) years following the effective time of the Merger for the Company’s current directors and officers, as required under the Merger Agreement.

Reasons for the Merger

In its evaluation of the Merger Agreement and the Merger, the Board consulted with the Company’s management and its outside legal counsel, and assessed various matters relevant to its decision, primarily the technical insolvency situation the Company experienced. In reaching its decision to approve the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, and to recommend that the Company’s shareholders approve the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, the Board considered a variety of factors, including those described below.

The Board also considered a variety of uncertainties, risks and other potentially negative factors in its deliberations concerning the Merger and the transactions contemplated by the Merger Agreement, including those described below.

The foregoing discussion of the information and factors considered by the Board is intended to be illustrative and not exhaustive, but includes the material reasons and factors considered by the Board in reaching its conclusions and recommendation in relation to the Merger and the Merger Agreement and the transactions proposed thereby. In view of the wide variety of reasons and factors considered and the complexity of these matters, the Board did not find it practical to, and did not, quantify or otherwise assign relative weights to the specified factors considered in reaching its determinations or the reasons for such determinations. Individual directors may have given differing weights to different factors or may have had different reasons for their ultimate determination. In addition, the Board did not reach any specific conclusion with respect to any of the factors or reasons considered. Instead, the Board conducted an overall analysis of the factors and reasons described above and unanimously determined in its business judgment that, in the aggregate, the potential benefits of the Merger to the shareholders of the Company outweighed the risks or potential negative consequences.

Interests of Certain of OTI’s Executive Officers and Directors in the Merger

When considering the recommendation of our Board, you should be aware that members of our Board and our executive officers have interests in the Merger other than their interests as OTI’s shareholders generally, pursuant to agreements between such directors and executive officers and us including:

These interests may be perceived as different from, or in conflict with, your interests as OTI’s shareholders.

Unvested Equity Awards

As a result of the Merger, [●]2,795,818 unvested restricted shares held by the Company’s employees and directors, as of [●],April 4, 2022, will be accelerated and shall be participated in the Merger, without any increase to the Merger Consideration and have an aggregate value of $[●].$166,033.

Cash Compensation

As a result of the Merger, Mr. Amir Eilam, the Company’s Chief Executive Officer, will be entitled to an amount of NIS 192,500 (the “CEO Retention”), 50% of which shall be payable upon the closing of the Merger, while the remaining 50% shall be paid to him upon the lapse of a 12 month period following the closing of the Merger, unless he has resigned from his position in the Surviving Corporation, or his employment by the Surviving Corporation is terminated (other than due to re-structuring or workforce contingency reasons), in which case he will no longer be eligible to receive the remaining 50% of the CEO Retention.

As a result of the Merger, Mr. Assaf Cohen, the Company’s Chief Financial Officer, shall be entitled to an amount of NIS 157,500 (the “CFO Retention”), 50% of which shall be payable upon the closing of the Merger, while the remaining 50% shall be paid to him upon the lapse of a 12 month period following the closing of the Merger, unless he has resigned from his position in the Surviving Corporation, or his employment by the Surviving Corporation is terminated (other than due to re-structuring or workforce contingency reasons), in which case he will no longer be eligible to receive the remaining 50% of the CFO Retention.

The members of our Board were aware of these interests, and considered them, when they approved the Merger Agreement.

No Appraisal Rights

Under Israeli law, holders of ordinary shares are not entitled to statutory appraisal rights in connection with the Merger.

Effects of the Merger on Our Ordinary Shares

Assuming the completion of the Merger as contemplated by the Merger Agreement, and further assuming no exercise of options held by employees of the Company, at the Effective Time, each outstanding ordinary share (other than ordinary shares owned by the Parent or the Company, or by any direct or indirect wholly owned subsidiary of the Parent or the Company) will be converted into the right to receive the $4,500,000 in cash, in the aggregate, without interest and less any applicable withholding taxes.

Effects of the Merger on Outstanding Equity Awards

As a result of the Merger, the treatment of options and restricted shares that are outstanding immediately prior to the Effective Time will be as follows:

Options

To the extent not exercised prior to the Effective Time, each vested and unvested option will be terminated for no cost, without receiving consent from holders of such options.

Restricted Shares

Each vested and unvested restricted share will be accelerated and shall be participated in the Merger, without any increase to the Merger Consideration.

De-quotation and De-registration of OTI’s Ordinary Shares

If the Merger is completed, our ordinary shares will cease to be quoted in, and will no longer be traded on, the OTC Markets and will be deregistered under the Exchange Act. As such, we would no longer be required to file periodic reports with the SEC.

Procedures for Receiving the Merger Consideration

After the completion of the Merger, a paying agent designated by the Paying AgentCompany (the “Paying Agent”) will provide instructions to each holder of record of ordinary shares of OTI that will explain how to surrender share certificates and book-entry shares. Each shareholder will receive cash for his, her or its shares from the Paying Agent after complying with these instructions. If your ordinary shares are held in “street name” by your bank, broker or other nominee, you will receive instructions from your bank, broker or other nominee as to how to effect the surrender of the “street name” shares and receive cash for those shares. YOU SHOULD NOT FORWARD YOUR SHARE CERTIFICATES TO THE PAYING AGENT WITHOUT A LETTER OF TRANSMITTAL, AND YOU SHOULD NOT RETURN YOUR SHARE CERTIFICATES WITH THE ENCLOSED PROXY.

For further information, see “The“The Merger Agreement-Exchange and Payment Procedures”Procedures” beginning on page 49 of this Proxy Statement.

Material U.S. Federal and Israeli Income Tax Consequences

Tax matters are very complicated, and the tax consequences of the Merger Consideration being made in connection with the Merger to you will depend on your particular situation. You are encouraged to consult your own tax advisor regarding the specific tax consequences of the Merger Consideration and the Merger to you, including tax return reporting requirements, the applicability of federal, state, local and non-U.S. tax laws and the effect of any proposed changes in the tax laws. This discussion is not intended to be a complete analysis or description of all potential tax consequences of the Merger Consideration and the Merger.

Material U.S. Federal Income Tax Consequences

General

The following is a general discussion of the material U.S. federal income tax considerations of the Merger to U.S. Holders (as defined below) of ordinary shares who receive cash in exchange for their ordinary shares in the Merger. The following discussion does not purport to consider all aspects of U.S. federal income taxation that might be relevant to a U.S. Holder.

This discussion is based on current provisions of the Internal Revenue Code of 1986, as amended, final, temporary and proposed U.S. Treasury Regulations, judicial opinions, and published positions of the Internal Revenue Service, all as in effect on the date hereof and all of which are subject to differing interpretations or change, possibly with retroactive effect. This discussion does not purport to be a complete analysis or listing of all potential U.S. federal income tax considerations that may apply to a U.S. Holder as a result of the Merger or as a result of the ownership and disposition of ordinary shares. In addition, this discussion does not address all aspects of U.S. federal income taxation that may be relevant to particular U.S. Holders nor does it take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income tax consequences to such U.S. Holder, and accordingly, is not intended to be, and should not be construed as, tax advice. This discussion does not address the U.S. federal 3.8% Medicare tax imposed on certain net investment income or any aspects of U.S. federal taxation other than those pertaining to the income tax, nor does it address any tax consequences arising under any U.S. state or local tax laws. U.S. Holders should consult their own tax advisors regarding such tax consequences in light of their particular circumstances.

We have not sought, and will not seek, any ruling from the IRS or any opinion of counsel with respect to the tax consequences discussed herein, and there can be no assurance that the IRS will not take a position contrary to the tax consequences discussed herein or that any position taken by the IRS would not be sustained.

The following discussion applies to you only if you are a U.S. Holder and you hold your ordinary shares as capital assets for U.S. federal income tax purposes. This section does not apply to you if you are a member of a class of holders subject to special rules under the U.S. federal income tax laws, including, without limitation:

If a partnership or other pass-through entity is a beneficial owner of ordinary shares, the U.S. federal income tax treatment of a partner in the partnership or pass-through entity generally will depend upon the status of the partner and the activities of the partnership or pass-through entity. Partnerships or other pass-through entities that are beneficial owners of ordinary shares, and partners in such partnerships or pass-through entities, are urged to consult their tax advisors regarding the U.S. federal, state, local and foreign tax consequences of the Merger.

As used herein, the term “U.S. Holder” means a beneficial owner of ordinary shares that does not own directly, constructively or by attribution 10% or more of ordinary shares and is, for U.S. federal income tax purposes:

This section does not consider the specific facts and circumstances that may be relevant to a particular U.S. Holder, nor the income tax treatment to a U.S. Holder under the laws of any state, local or non-U.S. (other than as described below in “Material Israeli Tax Consequences”) jurisdictions.

Please consult your own tax advisor concerning the consequences of the receipt of cash for your ordinary shares in the Merger based upon your particular circumstances, as well as any tax consequences that may arise under the laws of any state, local or certain foreign taxing jurisdictions.

The Merger

Subject to the discussion in the following paragraph, a U.S. Holder generally will recognize gain or loss on the exchange of ordinary shares for cash pursuant to the Merger in an amount equal to the difference between the cash received in the Merger and such U.S. Holder’s adjusted tax basis in such shares. Any gain or loss recognized by a U.S. Holder on a taxable disposition of ordinary shares generally will be capital gain or loss and will be long-term capital gain or loss if the U.S. Holder’s holding period in such shares exceeds one (1) year at the time of the Merger. Preferential tax rates may apply to long-term capital gains of non-corporate U.S. Holders (including individuals). The deductibility of capital losses is subject to limitations.

OTI believes that it is not and never has been a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes, but this conclusion is a factual determination with which the IRS may not agree. With certain exceptions, ordinary shares would be treated as stock in a PFIC with respect to a U.S. Holder if OTI were a PFIC at any time during the U.S. Holder’s holding period in ordinary shares. If a U.S. Holder were to be treated as having disposed of stock in a PFIC, the gain realized by the U.S. Holder in the Merger would in general not be treated as capital gain. Instead, such gain will generally be treated as ordinary income and the U.S. Holder would be treated as if it had realized such gain ratably over the U.S. Holder’s holding period for ordinary shares and would generally be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax deemed attributable to each such year. U.S. Holders should consult their own tax advisors regarding the application of the PFIC rules to their investment in ordinary shares and the Merger.

Information Reporting and Backup Withholding

In general, information reporting requirements will apply to the proceeds received pursuant to the Merger, other than with respect to U.S. Holders that are exempt recipients (such as corporations). Backup withholding (currently at a rate of 24%) may apply to such amounts if the U.S. Holder fails to provide an accurate taxpayer identification number (generally on an IRS Form W-9 provided to the paying agent or the U.S. Holder’s broker) or is otherwise subject to backup withholding.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or credit against a U.S. Holder’s U.S. federal income tax liability, if any, provided the required information is timely furnished to the IRS.

Material Israeli Tax Consequences

Certain Israeli Tax Considerations

The following is a summary discussion of certain Israeli income tax considerations in connection with the Merger. The following summary is included for general information purposes only, is based upon current Israeli tax law and should not be conceived as tax advice to any particular holder of ordinary shares. No assurance can be given that the analysis made and the views contained in this summary as well as the classification of the transaction for Israeli tax purposes as set forth below will be upheld by the tax authorities, nor that new or future legislation, regulations or interpretations will not significantly change the tax considerations described below, and any such change may apply retroactively. This summary does not discuss all material aspects of Israeli tax consequences that may apply to particular holders of ordinary shares in light of their particular circumstances, such as investors subject to special tax rules or other investors referred to below.

HOLDERS OF ORDINARY SHARES SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR ISRAELI TAX CONSEQUENCES OF THE MERGER APPLICABLE TO THEM.

Sale of Ordinary Shares

In general, under the Israeli Income Tax Ordinance (New Version), 5721-1961 and the rules and regulations promulgated thereunder, which we also refer to as the Tax Ordinance, the disposition of shares of an Israeli resident company is deemed to be a sale of capital assets, unless such shares are held for the purpose of trading. The Tax Ordinance generally imposes a capital gains tax on the sale of capital assets by an Israeli resident, and on the sale of such assets by a non-Israel resident if those assets are either (i) located in Israel, (ii) are shares or a right to a share in an Israeli resident corporation, or (iii) represent, directly or indirectly, rights to assets located in Israel, unless a specific exemption is available under Israeli law or unless a double taxation prevention treaty between Israel and the seller’s country of residence provides otherwise (subject to the receipt in advance of a valid certificate from the Israel Tax Authority allowing for an exemption).

The Tax Ordinance distinguishes between ‘Real Capital Gain’ and ‘Inflationary Surplus’. The Inflationary Surplus is the portion of the total capital gain, which is equivalent to the increase of the relevant asset’s purchase price which is attributable to the increase in the Israeli consumer price index or, in certain circumstances, a foreign currency exchange rate, between the date of purchase and the date of sale. The Real Capital Gain is the excess of the total capital gain over the Inflationary Surplus.

Under the Tax Ordinance, the tax rate applicable to the Real Capital Gain derived after January 1, 2012 from the disposition of Ordinary Shares in the Merger is generally 25% for individuals, unless such an individual shareholder claims a deduction for financing expenses in connection with such shares, in which case the gain will generally be taxed at a rate of 30% (Real Capital Gains which derived before January 1, 2003 is subject to marginal tax rate. Real Capital Gains derived from January 1, 2003 until January 1, 2012 is subject to a 20% tax rate (for shareholders which are not Significant Shareholders) or 25% tax rate (for Significant Shareholders)). Additionally, if such shareholder is considered a “Significant Shareholder” at any time during the 12-month period preceding such disposition, i.e., such shareholder holds directly or indirectly, alone or together with such shareholder’s relative or another person who collaborates with such shareholder on a permanent basis, at least 10% of any means of control in our company, the tax rate will be 30%. However, the foregoing tax rates will not apply to: (a) individual shareholder dealing in securities or to individual shareholder to whom such income is otherwise taxable as ordinary business income (such individual shareholders are taxed at their marginal tax rates applicable to business income); or (b) shareholders who acquired their shares prior to January 1, 2003. The Inflationary Surplus is generally exempt from tax.

Individuals who are subject to tax in Israel (whether any such individual is an Israeli resident or non-Israeli resident) are also subject to an additional tax at the rate of 3% on annual taxable income exceeding NIS 663,240 in 2022 which amount is linked to the annual change in the Israeli consumer price index, including, but not limited to, dividends, interest and capital gain.

Companies are subject to the ordinary corporate tax rate (23% for the 2022 tax year) on capital gains derived from the disposition of ordinary shares.

According to the Tax Ordinance, upon a sale of an asset, the seller (Israeli resident or non-Israeli resident) is required to file a capital gain report to the ITA within 30 days.

Notwithstanding the foregoing, according to the Tax Ordinance, a non-Israel resident for tax purposes (whether an individual or a corporation), is generally exempt from Israeli capital gains tax on the sale of securities of an Israeli resident company, provided certain conditions (which may vary depending on the date the shares were purchased) are met (including that the capital gain is not realized through a permanent establishment that the non-Israeli resident shareholder maintains in Israel). However, non-Israeli corporations will not be entitled to the foregoing exemption if Israeli residents (i) have a controlling interest of more than 25% in such non-Israeli corporation or (ii) are the beneficiaries of or are entitled to 25% or more of the revenues or profits of such non-Israeli corporation, whether directly or indirectly. These provisions dealing with capital gain are not applicable to a person whose gains from selling or otherwise disposing of the shares are deemed to be business income.

In addition, the sale of securities of an Israeli resident company by a non-Israeli resident may be exempt from Israeli capital gain tax (or subject to tax at a reduced rate) under the provisions of an applicable tax treaty between Israel and the seller’s country of residence (subject to the receipt of a valid certificate or ruling from the Israel Tax Authority allowing for an exemption or a reduced tax rate). Under the United States-Israel Income Tax Treaty (the “US-Israel Tax Treaty”), the sale, exchange or disposition of our shares by a shareholder who is a United States resident (for purposes of the US-Israel Tax Treaty) holding the shares as a capital asset is generally exempt from Israeli capital gains tax unless either (i) the shareholder holds, directly or indirectly, shares representing 10% or more of our voting capital during any part of the 12-month period preceding such sale, exchange or disposition, subject to specified conditions, (ii) the capital gains arising from such sale may be attributable to a permanent establishment of such shareholder located in Israel, (iii) the seller, being an individual, is present in Israel for a period or periods aggregating to 183 days or more during the taxable year, (iv) the capital gains arising from such sale, exchange or disposition is attributed to real estate located in Israel, or (v) the capital gains arising from such sale, exchange or disposition is attributed to royalties. In either case, the sale, exchange or disposition of the shares would be subject to Israeli tax, to the extent applicable; however, under the US-Israel Tax Treaty, the US resident would be permitted to claim a credit for the tax against the U.S. federal income tax imposed with respect to the sale, exchange or disposition, subject to the limitations in U.S. laws applicable to foreign tax credits. Other countries are party to tax treaties with Israel that, subject to the provisions of those treaties, may exempt a non-Israeli resident shareholder from Israeli tax. You are urged to consult with your own tax advisor regarding the applicability of these tax treaties to you and your receipt of Merger Consideration. Holders should be aware that even in cases where a tax treaty does not provide for an exemption, the Tax Ordinance may provide an exemption as detailed above.

Israeli Tax Withholding

Whether or not a particular shareholder is actually subject to Israeli capital gains tax in connection with the Merger, absent receipt by OTI of a tax ruling from the Israel Tax Authority prior to closing of the Merger, all of our shareholders will be subject to Israeli tax withholding at the rate of 25% (for individuals) and 23% (for corporations) on the gross Merger Consideration (unless the shareholder requests and obtains an individual certificate of exemption or a reduced tax rate from the Israel Tax Authority, as described below), and Parent (or an exchange agent acting on behalf of Parent) will withhold and deduct from the Merger Consideration an amount equal to 25% (for individuals), and 23% (for corporations) or such other reduced tax rate as stipulated in the certificate obtained, as applicable, of the gross Merger Consideration received by such shareholder.

The Merger Agreement generally requires that the Company, prior to closing, request a tax pre-ruling from the ITA with respect to, among other things, the Company, the Parent, and the paying agent and their respective paying agents’ withholding obligations relating to the consideration to be paid to non-Israeli residents (including U.S. Holders) and to Israeli residents for the Company’s ordinary shares (other than shares granted pursuant to Section 102 of the Tax Ordinance). The pre-ruling application requests that, among other things, the ITA rule that either (1) the Company, the Parent and paying agent, and their respective agents, are exempt from any obligation to withhold Israeli taxes from any consideration payable or otherwise deliverable to such holders pursuant to the Merger Agreement or clarifies that no such obligation exists, or (2) clearly instructs the Company, the Parent paying agent, and their respective agents, on how such withholding is to be executed, and in particular, with respect to the classes or categories of holders of the Company Ordinary Shares from which tax is to be withheld (if any), the rate or rates of withholding to be applied and how to identify any non−Israeli residents for the purposes of the withholding obligations under the pre-ruling. There is no assurance that such pre-ruling will be obtained before the closing or at all, and if obtained, what will be its terms and conditions.

Subject to the specific terms of the tax pre-ruling (if obtained), the determination of whether a person is deemed a “resident of Israel” for Israeli tax purposes may be based on a Declaration of Status form (which may require shareholders to provide certain supporting documentation) to be completed by each shareholder. If so required by the tax pre-ruling, a form of such Declaration of Status shall be made available to shareholders.

Regardless of whether we obtain the tax pre-ruling from the ITA, any holder of ordinary shares who believes that it is entitled to such an exemption (or a reduced tax rate) may separately apply to the ITA to obtain a certificate of exemption from withholding or an individual tax ruling providing an exemption from withholding or withholding at a reduced rate, and submit such certificate of exemption or ruling to the exchange agent at least three (3) business days prior to the date that is 180 days following the Closing Date (or such longer period as may be provided by Parent or the Surviving Company). If Parent or the exchange agent receive a valid exemption certificate or tax ruling (in form and substance reasonably satisfactory to Parent and the Exchange Agent) at least three (3) business days prior to the date that is 180 days following the Closing Date, then the withholding (if any) of any Israeli taxes from the consideration payable shall be made only in accordance with the provisions of such Israeli tax certificate or tax ruling.

The Israeli tax pre-ruling described above may not be obtained or may contain such provisions, terms and conditions as the ITA may prescribe, which may be different from those detailed above. Certain categories of shareholders, such as holders of 5% or more of the outstanding ordinary shares of the Company, are expected to be excluded from the scope of any eventual ruling granted by the ITA, and the final determination of the type of holders of ordinary shares who will be included in such categories will be based on the outcome of the discussions with the ITA. If Parent or the exchange agent deducts any amount from the Merger Consideration payable to you in respect of Israeli withholding tax obligations, you should consult your tax advisor concerning the possibility of obtaining a refund from the ITA of any such withheld amounts.

Shares Issued as Compensation for Employment or Service

Shareholders who received or acquired their ordinary shares under one or more of our incentive plans, or otherwise as compensation for employment or services provided to our company or any of its affiliates, may be subject to different tax treatment and/or rates. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, ANY SUCH HOLDERS OF ORDINARY SHARES SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE ISRAELI TAX CONSEQUENCES APPLICABLE TO THEM.

Tax Considerations in Other Jurisdictions

Depending on the country in which a Company shareholder is resident, the Merger may be a taxable event to such shareholder under such country’s tax laws. We encourage all shareholders to consult their tax advisors regarding the applicable tax considerations of the Merger.

Regulatory Matters

Israeli Companies Registrar

Under the Companies Law, we and Merger Sub may not complete the Merger without first making the following filings and notifications to the Israeli Companies Registrar:

No later than the closing date of the Merger (assuming that the shareholders of the Company approved the Merger Agreement and the Merger and that all of the other conditions set forth in the Merger Agreement have been satisfied or waived (if permissible under applicable law)), each of us and Merger Sub will notify the Israeli Companies Registrar that all of the conditions to the closing have been met and request that the Israeli Companies Registrar issue a certificate evidencing the completion of the Merger in accordance with Section 323(5) of the Companies Law. Assuming all statutory procedures and requirements have been complied with, the Merger will then become effective and the Israeli Companies Registrar will be required to register the Merger in the surviving corporation’s register and to issue the surviving corporation a certificate regarding the Merger.

Israeli Innovation Authority

The change in the composition of the Company’s shareholders in connection with the Merger and the transfer of control therein require the submission of notice to the National Authority for Technological Innovation of the Ministry of Economy and Industry of the State of Israel, also known as the Israeli Innovation Authority, formerly known as the Office of the Chief Scientist of the Ministry of Economy and Industry of the State of Israel.

Israeli Tax Rulings

We have agreed to request certain rulings from the Israel Tax Authority. See “Material“Material Israeli Tax Consequences.”

Other Regulatory Approvals

Other than the filings described above, the Company is not aware of any material regulatory filings or approvals issued by the United States government, the State of Israel, or any foreign, state or local government, required to be obtained, or waiting periods required to expire, to complete the Merger. If the Parent or the Company discover that other such material approvals or waiting periods are necessary, the Parent, Merger Sub and/or the Company (as applicable) will seek to obtain or comply with them in accordance with the Merger Agreement.

THE MERGER AGREEMENT

Explanatory Note Regarding the Merger Agreement

The following summary describes the material provisions of the Merger Agreement. The descriptions of the Merger Agreement in this summary and elsewhere in this Proxy Statement are not complete and are qualified in their entirety by reference to the Merger Agreement, a copy of which is attached to this Proxy Statement as Annex A and incorporated into this Proxy Statement by reference. We encourage you to read the Merger Agreement carefully and in its entirety because this summary may not contain all the information about the Merger Agreement that is important to you. The rights and obligations of the parties are governed by the express terms of the Merger Agreement and not by this summary or any other information contained in this Proxy Statement. Capitalized terms used in this section but not defined in this Proxy Statement have the meaning ascribed to them in the Merger Agreement.

The representations, warranties, covenants and agreements described below and included in the Merger Agreement (1) were made only for purposes of the Merger Agreement and as of specific dates; (2) were made solely for the benefit of the parties to the Merger Agreement; and (3) may be subject to important qualifications, limitations and supplemental information agreed to by the Company, the Parent and Merger Sub in connection with negotiating the terms of the Merger Agreement. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to reports and documents filed with the SEC and in some cases were qualified by confidential matters disclosed to the Parent and Merger Sub by the Company in connection with the Merger Agreement. In addition, the representations and warranties may have been included in the Merger Agreement for the purpose of allocating contractual risk between the Parent, the Company and Merger Sub rather than to establish matters as facts, and may be subject to standards of materiality applicable to such parties that differ from those applicable to investors. The shareholders of the Company are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of the Company, the Parent or Merger Sub or any of their respective affiliates or businesses. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement. The Merger Agreement is described below, and included as Annex A, only to provide you with information regarding its terms and conditions, and not to provide any other factual information regarding the Company, the Parent, Merger Sub or their respective businesses. Accordingly, the representations, warranties, covenants and other agreements in the Merger Agreement should not be read alone, and you should read the information provided elsewhere in this document and in our filings with the SEC regarding the Company and our business.

Effects of the Merger; Directors and Officers

The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, and in accordance with the Companies Law, at the Effective Time, (1) Merger Sub will be merged with and into the Company, with the Company, as the Surviving corporation, becoming a wholly owned subsidiary of the Parent; and (2) the separate corporate existence of Merger Sub will cease. From and after the Effective Time, the Surviving Corporation will possess all properties, rights, privileges, powers and franchises of the Company and Merger Sub, and all of the debts, liabilities and duties of the Company and Merger Sub will become the debts, liabilities and duties of the Surviving Corporation.

The parties will take all necessary action to ensure that, effective as of, and immediately following, the Effective Time, the Board of the Surviving Corporation will consist of the directors of Merger Sub at the Effective Time, to hold office in accordance with the articles of association of the Surviving Corporation until their successors are duly elected or appointed and qualified. From and after the Effective Time, the officers of the Company at the Effective Time will be the officers of the Surviving Corporation, until their successors are duly appointed.

Closing and Effective Time

The closing of the Merger will take place at 10:00 a.m. (Israel time) on the date to be specified by the parties, which date shall be no later than the second (2nd) business day following the satisfaction or waiver of all conditions to closing of the Merger (described below under the caption “The Merger Agreement - Conditions to the Closing of the Merger”) (other than those conditions to be satisfied at the closing of the Merger, but subject to the satisfaction or waiver of such conditions at the closing) or such other time agreed to in writing by the parties. The Merger will become effective upon the issuance by the Israeli Companies Registrar of the certificate of merger in accordance with Section 323(5) of the Companies Law.

Merger Consideration

Ordinary Shares

At the Effective Time, each outstanding ordinary share (other than ordinary shares owned by the Company, or by any direct or indirect wholly owned subsidiary of the Company) will be converted into the right to receive its pro rata portion of $4,500,000 (four million and five hundred thousand U.S. dollars) in the aggregate, without interest and less any applicable withholding taxes.

Outstanding Equity Awards

As a result of the Merger, the treatment of options and restricted shares that are outstanding immediately prior to the Effective Time will be as follows:

Options

Since the Merger Consideration is lower than the lowest exercise price of any of the options, all vested and unvested options will be cancelled without consideration upon the Effective Time and no consideration for such options will be paid.

Restricted Shares

Each vested and unvested restricted share will be accelerated, and such shares shall participate in the Merger, without any increase to the Merger Consideration.

Exchange and Payment Procedures

Prior to the closing of the Merger, Company will designate Broadridgea paying agent to act as agent for the holders of Company ordinary shares, which we refer to as the “Paying Agent,” to make payments of the Merger Consideration to the shareholders of the Company and an Israeli information and withholding agent (the “Israeli Withholding Agent”) to assist in obtaining any requisite certificate and/or other declaration for Israeli Tax withholding purposes. The Parent will deposit the aggregate Merger Consideration with the Paying Agent and/or the trustee appointed by the Company with respect to the Company ordinary shares that were granted and intended to be taxed pursuant to Section 102(b)(2) or Section 102(b)(3) of the Israeli Tax Ordinance (the “102 Trustee” and the “Section 102 Shares”, respectively) immediately following the issuance of the Certificate of Merger by the Israeli Companies Registrar.

Immediately following the issuance of the Certificate of Merger by the Israeli Companies Registrar, the Parent shall cause the transfer of the portion of the aggregate Merger Consideration payable with respect to Section 102 Shares (the “Section 102 Share Consideration”) to the 102 Trustee, on behalf of holders of Section 102 Shares. The Section 102 Share Consideration shall be held in trust by the 102 Trustee pursuant to the applicable provisions of Section 102 and shall be released by the 102 Trustee, together with any interest earned thereon by virtue of the investment of such amounts by the 102 Trustee, in accordance with the terms and conditions of Section 102.

Within five days after the Effective Time, the Parent and the Surviving Corporation shall cause the Paying Agent to mail to each holders of record of a certificate (or evidence of shares in book-entry form) (i) a letter of transmittal containing instructions to, and the associated risks of, delivery of such certificates, (ii) instructions advising such shareholders how to surrender share certificates and book-entry shares in exchange for their portion of the aggregate Merger Consideration and (iii) a form of declaration for tax withholding purposes (or such other forms as are required under any applicable law) in which the beneficial owner of an Ordinary Share provides certain information (and, if applicable, supporting documentation) necessary for the Parent, Paying Agent or the Israeli Withholding Agent to determine whether any amounts need to be withheld from the consideration payable to such beneficial owner hereunder pursuant to the terms of the Israeli Tax Ordinance. Upon receipt of (1) surrendered certificates (or affidavits of loss in lieu thereof) or book-entry shares representing the ordinary shares; and (2) a signed letter of transmittal and such other documents as may be required pursuant to such instructions, the holders of such ordinary shares will be entitled to receive their portion of the aggregate Merger Consideration in exchange therefor and the certificate so surrendered shall forthwith be cancelled. The amount of any Merger Consideration paid to the shareholders of the Company may be reduced by any applicable withholding taxes.

The letter of transmittal will include instructions if a shareholder of the Company has lost a share certificate or if such certificate has been stolen or destroyed. In the event any certificates have been lost, stolen or destroyed, then before such shareholder will be entitled to receive the Merger Consideration, such shareholder will have to make an affidavit of the loss, theft or destruction and agree to indemnify and hold the Parent harmless against any claim that may be made against it with respect to such certificate, all as further provided in the letter of transmittal.

If any cash deposited with the Paying Agent is not claimed within twelve (12) months following the Closing Date (as defined under the Merger Agreement), such cash will be returned to the Parent upon demand, and any holders of ordinary shares who have not complied with the exchange procedures in the Merger Agreement will thereafter look only to the Parent as general creditors for payment of the Merger Consideration.

Representations and Warranties

The Merger Agreement contains representations and warranties of the Company, the Parent and Merger Sub.

In the Merger Agreement, the Company has made customary representations and warranties to the Parent and Merger Sub that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:

In the Merger Agreement, the Parent and Merger Sub have made customary representations and warranties to the Company that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement. These representations and warranties relate to, among other things:

Conduct of Business Pending the Merger

The Merger Agreement provides that, except as (i) expressly contemplated by the Merger Agreement or (ii) required by applicable law, during the period of time between the date of the signing of the Merger Agreement and the Effective Time, the Company will use reasonable commercial efforts, and will cause each of its subsidiaries to use reasonable commercial efforts:

In addition, the Company has also agreed that, except as (i) expressly contemplated by the Merger Agreement or (ii) approved in advance by the Parent in writing, during the period of time between the date of the signing of the Merger Agreement and the Effective Time, the Company will not, and will cause each of its subsidiaries not to, among other things:

Alternative Acquisition Proposals

From the date of the Merger Agreement, the Company has agreed not to, and to cause its subsidiaries and its and their respective representatives not to:

Notwithstanding the restrictions described above, in the event where prior to, but not after, the adoption of the Merger Agreement by the shareholders of the Company, the Board of Directors of the Company receives an unsolicited, bona fide written Takeover Proposal made in circumstances not involving a breach of the Merger Agreement, the Merger Loan Agreement, the Term Sheet or any standstill agreement, and the Board reasonably determines in good faith, after consultation with its outside legal counsel, that (i) such Takeover Proposal constitutes or is reasonably likely to lead to a Superior Proposal and (ii) the failure to take such action would be inconsistent with its fiduciary duties to the Company’s shareholders under applicable law, and after providing the Parent not less than 24 hours written notice of its intention to take such actions, then the Company may (A) furnish information (including non-public information) with respect to the Company and its subsidiaries to the Person making such Takeover Proposal, but only after such Person enters into (or has previously entered into) a customary confidentiality agreement with the Company, and (B) participate in discussions and negotiations with such Person regarding such Takeover Proposal.

For purposes of this Proxy Statement and the Merger Agreement:

“Takeover Proposal” means any bona fide proposal or offer from any Person or “group” (as defined in Section 13(d) of the Exchange Act), other than the Parent and its subsidiaries, relating to any (A) direct or indirect acquisition (whether in a single transaction or a series of related transactions) of assets of the Company and its subsidiaries (including securities of subsidiaries) in an amount equal to twenty percent (20%) or more of the aggregate Merger Consideration, (B) direct or indirect acquisition (whether in a single transaction or a series of related transactions) of beneficial ownership (within the meaning of Section 13 under the Exchange Act) of twenty percent (20%) or more of any class of equity securities of the Company, (C) tender offer or exchange offer that if consummated would result in any Person or “group” (as defined in Section 13(d) of the Exchange Act) beneficially owning twenty percent (20%) or more of any class of equity securities of the Company or (D) merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its subsidiaries, in each case, other than the transactions contemplated by the Merger Agreement.

“Superior Proposal” means a bona fide written offer, obtained after the date hereof and not in breach of the Merger Agreement or any standstill agreement, to acquire, directly or indirectly, for consideration consisting of cash and/or securities, all of the equity securities of the Company or all or substantially all of the assets of the Company and its subsidiaries on a consolidated basis, made by a third party, which is not subject to a financing contingency, and which is otherwise on terms and conditions which the Board determines in its good faith and reasonable judgment (after consultation with outside counsel) to be more favorable to the Company’s shareholders from a financial point of view than the Merger and the other transaction contemplated thereby, taking into account at the time of determination any changes to the terms of the Merger Agreement that as of that time had been proposed by the Parent in writing and the ability of the Person making such proposal to consummate the transactions contemplated by such proposal (based upon, among other things, the availability of financing and the expectation of obtaining required approvals)).

The Board Recommendation; Company Adverse Recommendation Change

As described above, and subject to the provisions described below, the Board has made the recommendation that the shareholders of the Company vote “FOR” the Merger Proposal. The Merger Agreement provides that the Board or any committee thereof will not affect a company adverse recommendation change except as described below.

The Board, or any committee thereof, may not (with any action described in the following being referred to as a “Company Adverse Recommendation Change”):