TO: Mr. Yair Nechmad - CEO and Mr. David Ben Avi - CTO and cofounder, Nayax Ltd.
20 April 2022
Dear Yair and David, shalom.
We represent a group of minority shareholders in OTI holding together approximately 20% of OTI issued shares. Most of us are very long term shareholders. Some of us, engineers by profession, have hold shares of OTI for 20 years because we’ve continuously believed in its potential! We have a collective good knowledge of the history of the company, a deep understanding of its technology, patents and products, as well as full awareness of its recent cashflow difficulties - the result of Covid, but also of its execution mistakes.
We appreciate the need for OTI to attract injection of new “smart” capital and to develop new strategic partnerships. From that point of view, we were glad to read that Nayax recognizes the synergies and complementarity in a partnership with OTI, at multiple levels: financial, technological, marketing, geographic presence, etc. We understand and welcome the potential of two technologically innovative companies from Israel, specialized in the same industry segment, and who are complementary on multiple levels, to join forces in realizing synergies and to prosper, in some format of partnership.
For above reasons, we do not oppose Nayax expression of interest and initiative to partner with OTI, either as one entity, or as remaining separate entities. What we do, however, strongly oppose are some financial terms of the Merger Agreement which are extremely unfavorable to us - minority shareholders of OTI, unfavorable beyond any reasonable explanation of such low valuation.
You are both busy high-level executives and you may or may not remember a financial detail of the proposed merger agreement, so allow us to mention it here for clarity: it provides for a cash payment of $.0595 per share of OTI, subject to withholding of Israeli tax. Since this offer is unacceptable to us, for reasons detailed below, we plan to vote in block against this Agreement, as it is currently presented.
We consider that you deserve to know our position well in advance of the actual vote. We already made our position known to Mr. Bill Anderson from the Board of OTI, however we doubt that he brought to your attention this matter. That is because, unfortunately, we have reasons to believe Bill is not performing his fiduciary responsibilities towards us in a trustworthy manner. There seem to be many conflicts of interest. Our doubts in Bill are supported by paragraphs in the Proxy that explicitly mention “certain compensation” for OTI directors. Further, Mr. Anderson’s dismissive demeanor in interactions with our group lowers our confidence that he is an honest intermediary, or an effective negotiator. We do not see him being a director diligently performing his legal fiduciary role.
Because of that, we chose to present to you directly some of the reasons for our rejection of the current terms.
a. You are offering a total of 10 million dollars (including the loan) for an advanced technological company, holder of numerous patents and industry certifications, expected to generate sales well in excess of $20 million in 2022 or 2023 and with an increasing percentage of those revenues being recurrent (SaaS). What standard appraisal method could rationalize such valuation?! The Proxy document does not even attempt to justify or explain the logic of the offer for 10 million total.
b. The proposed merger document explicitly mentions a conflict of interest between executives and/or directors of OTI vs its shareholders. From the Proxy card: “2. Approval, on a non-binding, advisory basis, of certain compensation that may be paid or become payable to OTI 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.”
c. Intentionally ambiguous language in item 1B of the Proxy card uses a double negative. ( “Double negatives are not grammatically correct in English because they are considered to be confusing.”) Should that text not be corrected, we shall request legal injunction to delay the vote.
d. The Proxy describes the process of negotiations between Nayax and the OTI Board to have consisted in just one phone call. That is unacceptable and suspect of illegal non-performance of fiduciary responsibilities by OTI Board.
e. Mr. Ivy, the controlling shareholder of OTI, has shifted his position - as expressed in his recent SEC filings, multiple times in regard to this deal. Our attempts to reach out to him to understand his position remain not answered, despite his having communicated amicably in the past with members of our group. If our interests would be perceived by Mr. Ivy as being aligned with his - as a shareholder, he would not hesitate to communicate with us. This raises our suspicion that Nayax might be offering him special inducements to get his eventual vote in favor of the deal. We believe that risks a legal action.
f. There is no indication of a mechanism to audit the vote process and certify voting results, nor a clear explanation of the manner in which Mr. Ivy could place his vote only after being privy to the vote results of the other shareholders – as per Ivy’s 13D SEC filing: “(a) if a majority of the shares present at the meeting (in person or by proxy), excluding the Trust, are voted in favor of the approval of the Merger, the Trust’s votes shall be cast in favor of the Merger, and (b) if a majority of the shares present at the meeting (in person or by proxy), excluding the Trust, are voted against the Merger, this Agreement shall terminate, and the Trust shall be free to cast its votes as Mr. Ivy deems fit.” This text implies a voting process in two phases, favorizing the decision-making information for one shareholder.
In conclusion, our group has major lack of clarity about this deal; we believe that it was structured in a rush and communicated in unacceptably ambiguous language; and that it has major weaknesses in aligning the interests of various stakeholders, as mandated by law. We believe you and us could do better by working together, in a more transparent collaborative manner. Our group remains open to consult with you or with your representatives, by any suitable means, verbally or written. We are ready to further explain to you our position and to seek together creative and fair arrangements, acceptable to all parties.
Sincerely,
Our names and emails
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