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Two members of the board of Israel-based On Track Innovations have resigned, following pressure from dissident shareholders seeking to capture control of the board of the financially struggling contactless and NFC supplier.

Mark Green and David Stone submitted their resignations today, effective immediately, according to a company filing with the U.S. Securities and Exchange Commission. They quit a day after OTI’s board gave in to demands by dissident shareholders to call a special shareholders meeting before the end of the year to vote on removing three existing board members and to consider electing a slate of eight board candidates. OTI had earlier rejected the demands. UPDATE: That special shareholders meeting is now scheduled for Dec. 30. END UPDATE.

As NFC Times reported Monday, OTI’s second largest investor, Jerry Ivy, who is backed by veterans of successful proxy fights at a number of other, mostly American, companies, is seeking to seize control of the board of OTI, which hasn’t turned a profit in its 22-year history.

In the special meeting, Ivy and his allies will try to expand the size of the board from nine to 11 members and then get their slate of eight board candidates elected. 

The shareholder group was also planning to try to remove three existing board members at the special meeting: Green and Stone, along with Eli Akavia. That task is made easier with the resignations of two of the three.

UPDATE: Akavia gave notice on Nov. 26 that he has also resigned from the board, effectively immediately. END UPDATE.

They were targeting these three members because they would be the easiest to remove. The other three OTI board members can only be removed for cause or by shareholders representing 75% of shares. The latter condition applies to OTI's co-founders, Oded Bashan and Ronnie Gilboa, Ivy’s attorney Mark R. Beatty told NFC Times.

The shareholder group had already voted down three company-endorsed board nominees, on Nov. 9, including sitting board member Ora Setter. So with the two resignations, OTI's board has only four sitting members, at present.

Stone, a retired lawyer in New York, in response to a request for comment from NFC Times, said that, “given the sensitivities of the situation, I believe that it is most appropriate for me to refrain, at least for now,” from commenting.

Ivy and his allies have insisted that their goal is not to remove either Bashan, who is OTI’s chairman and CEO, or his son, Ohad, who is OTI’s president and chief marketing officer. Instead, they say they want a new board that can capitalize on OTI’s engineering talent and its more than 100 patents, something it has had ample opportunity to do over the years, they contend.

But most observers believe the shareholder group would sack the Bashans from their executive positions if they are able to wrest control of the company by electing a new board.

And that is looking increasingly likely given the decision to hold the special shareholders meeting and the resignations of Green and Stone.

The slate of board members that Ivy wants shareholders to elect includes proxy battle veterans Dilip Singh, Rick Coleman, Chuck Gillman and Jeff Eberwein. All four are also trying to take board seats as part of a proxy fight for control of U.S.-based semiconductor reliability test systems provider Aetrium. And the four are also waging a proxy battle at NTS Inc., a U.S.-based Internet and telecommunications network services supplier.

They and other members of the slate of eight are involved in other proxy battles, as well. The shakeups often lead to sale of the companies and a sharp increase in the share price.

Ivy bought into OTI six years ago and now owns nearly 10% of the company. OTI shares hit a high of more than $16 in late 2005, but earlier this week were trading at just $1.24 a share, not far from the all-time low, and Ivy contends OTI’s board is to blame. 

Bashan, in the company’s third quarter earnings report released today, noted that the “actions of the dissident shareholders are causing major disruption in running our day-to-day operations.” He added that the situation, “hurts all of our stakeholders.”

Bashan, in a letter to shareholders last month, had said that the shareholder dispute had caused some customers and suppliers to question whether the current management team would be around to support any contracts they sign. “They are concerned about who would replace it (management) if dissident shareholders took over the business.”

In the letter, Bashan asks shareholders for more time, saying the company believes that a mix of lower costs and revenue growth would put the company “in a strong position to achieve profitability in 2013.” 

OTI reported that its third quarter revenue increased by 9% from a year earlier, to $9.3 million, but sales for the first nine months of the year were down by 16% to $29.7 million from the same period in 2011.

The company posted a net loss of $1.9 million in the third quarter, which is improved from its $3.6 million loss in the third quarter of 2011. But for the first three quarters of the year, losses were up by 28% to $7.6 million.

The company said during the third quarter it received orders for $2 million worth of contactless and NFC payment readers for distribution in the U.S. Oded Bashan noted in his letter to shareholders in October that the company had won the orders thanks to competitor Vivotech having to sell its reader business. Vivotech went out of business last month after selling off its other assets.

OTI also received an order for 17,000 NFC and contactless payment readers for Europe during the quarter. And it introduced its Copni Wave plug-in NFC payment attachment for mobile phones.