SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as Permitted by
[_] Definitive Proxy Statement Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
OPTi, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[X] No fee required.
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was paid previously. Identify the previous filing by registration statement
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Notes:
OPTi Inc.
660 Alder Drive
Milpitas, California 95035
October , 2001
Dear Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of
OPTi Inc. ("OPTi") which will be held on November 12, 2001, at 9:00 am.,
Pacific Time, at our corporate headquarters at 660 Alder Drive, Milpitas,
California 95035.
At the Annual Meeting, you will be asked to vote on the following proposals:
1. Approve and adopt the Plan of Complete Liquidation and Dissolution of
OPTi. On September 7, 2001, OPTi's Board of Directors determined that the
voluntary liquidation and dissolution of OPTi would be in the best interest
of its shareholders and approved a Plan of Complete Liquidation and
Dissolution (the "Liquidation Plan"). You will be asked at the meeting to
approve the voluntary liquidation and dissolution of OPTi, to adopt the
Liquidation Plan and approve the appointment of Stephen Dukker, Kapil Nanda
and William Welling as trustees of a trust that will be established for the
benefit of the shareholders primarily to conduct the orderly liquidation of
OPTi's patents and other intellectual property.
2. Elect Four members to the Board of Directors. These directors will
serve until the earlier of (i) the dissolution of OPTi; (ii) OPTi's next
annual meeting; or (iii) the appointment of their successors.
3. Appointment of Ernst & Young LLP as independent auditors of OPTi for
the fiscal year ending December 31, 2001.
4. Any other business as may properly come before the meeting or any
postponement or adjournment thereof.
The foregoing items of business are more fully described in the enclosed
Proxy Statement. The formal Notice of Meeting, the proxy card and a copy of the
Annual Report to Shareholders describing OPTi's operations for the year ended
December 31, 2000 are also enclosed. Whether or not you plan to attend the
meeting, it is important that you sign and return the enclosed proxy card
promptly. A prepaid return envelope is provided for this purpose. Your shares
will be voted at the meeting in accordance with your proxy.
Very truly yours,
OPTi Inc.
/s/ Michael Mazzoni
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Michael Mazzoni
Secretary
OPTi Inc.
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Notice of Annual Meeting of Shareholders
To Be Held On November 12, 2001
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TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the 2001 Annual Meeting of Shareholders of OPTi
Inc., a California corporation ("OPTi" or the "Company"), will be held on
November 12, 2001 at 9:00 a.m.,Pacific Time, at our corporate headquarters at
660 Alder Drive, Milpitas, California 95035 for the following purposes:
1. To approve and adopt the Plan of Complete Liquidation and Dissolution
attached as Exhibit A to the Proxy Statement, including the establishment of
the OPTi Inc. Liquidating Trust and the appointment of Stephen Dukker, Kapil
Nanda and William Welling as its trustees (Proposal No. 1);
2. To elect four directors who will serve until the earlier of (i) the
dissolution of OPTi; (ii) OPTi's next annual meeting; or (iii) the
appointment of their successors (Proposal No. 2);
3. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending December 31, 2001 (Proposal No.
3); and
4. To transact such other business as may properly come before the
meeting or any postponement or adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on October 8, 2001 are
entitled to notice of and to vote at the meeting and any postponement or
adjournment thereof.
Sincerely,
Michael Mazzoni
Secretary
Milpitas, California
October , 2001
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IMPORTANT: All shareholders are cordially invited to attend the Annual
Meeting in person. However, to ensure your representation at the meeting, you
are urged to mark, sign, date and return the enclosed proxy card as promptly
as possible in the postage-prepaid envelope enclosed for that purpose. Any
shareholder attending the meeting may vote in person even if such shareholder
returned a proxy card.
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QUESTIONS AND ANSWERS ABOUT THE PROPOSALS
The following questions and answers are for your convenience only, and
briefly address some commonly asked questions about the proposals. You should
still carefully read this proxy statement in its entirety, including the
attached exhibits.
Q: WHAT WILL BE VOTED ON AT THE ANNUAL MEETING?
A: At the meeting you will be voting on three proposals:
Proposal 1: Approval of a Plan of Complete Liquidation and Dissolution
attached as Exhibit A (the "Liquidation Plan" or the "Plan").
Proposal 2: To elect the four directors standing for re-election to our
Board of Directors.
Proposal 3: To ratify the appointment of Ernst & Young LLP as OPTi's
independent accountants for the year ending December 31, 2001.
Q: WHAT DOES THE LIQUIDATION PLAN ENTAIL?
A: The Liquidation Plan provides for the voluntary liquidation, winding up and
dissolution of OPTi. If the Liquidation Plan is approved, we will liquidate
our remaining assets, satisfy or make reasonable provisions for our
remaining obligations and make distributions to our shareholders of
available liquidation proceeds. By the terms of the Liquidation Plan,
shareholder approval of the Plan will also constitute shareholder approval
of the establishment of a liquidating trust (the "Liquidating Trust" or the
"Trust") pursuant to a Liquidating Trust Agreement by and among OPTi Inc.,
Stephen Dukker, Kapil Nanda and William Welling as trustees of the
Liquidating Trust (the "Trustees") and approval of the appointment of the
three named Trustees.
Q: WHAT WILL HAPPEN IF THE LIQUIDATION PLAN IS NOT APPROVED?
A: If the Liquidation Plan is not approved, we will continue operating OPTi as
an ongoing concern and there would be no distribution of cash or other
property to shareholders arising from the liquidation of our assets.
Q: WHEN DO YOU EXPECT THE LIQUIDATION TO BE COMPLETED?
A: We currently estimate that the assets of OPTi that can be readily sold or
distributed in kind will be liquidated by March 30, 2002. In addition, we
plan to transfer OPTi's intellectual property relating to our patents to the
Liquidating Trust together with approximately $2.5 million in cash to enable
us to pursue potential legal claims related to our patents. We believe that
pursuing such potential claims prior to the liquidation of our patents will
increase the likelihood that we can ascertain and maximize the value of our
patents for the benefit of our shareholders. We may also transfer other
assets that cannot be readily liquidated, if any, to the Liquidating Trust
for an orderly disposition. Following such transfer, the Liquidating Trust
would proceed to liquidate the intellectual property related to our patents
along with any other assets transferred to the Trust over a period of three
years. The term of the Liquidating Trust may be subject to extension for an
additional two years if a ruling that we have requested from the Internal
Revenue Service relating to the value of our intellectual property allows us
to do so and circumstances warrant.
Q: WHEN WILL THE SHAREHOLDERS RECEIVE ANY PAYMENT FROM THE LIQUIDATION OF OPTi?
A: If the Liquidation Plan is approved, we anticipate that an initial
distribution of available assets will be made to the shareholders in or
around December 2001. Thereafter, as we liquidate our remaining assets and
properties we will distribute available liquidation proceeds to shareholders
as our Board of Directors deems appropriate. We anticipate that the
remaining liquidation proceeds for OPTi assets that can be readily
liquidated will be distributed over a period of three to six months. In
addition, the Liquidating Trust will
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continue to liquidate and distribute proceeds related to our intellectual
property and other assets that may be transferred into the Trust to
shareholders as the Trustees deem appropriate. In such event, we expect that
the majority of the trust assets will be distributed over a period of three
years.
Q: WHAT AMOUNT WILL SHAREHOLDERS RECEIVE FROM THE LIQUIDATION OF OPTi?
A: Due to the uncertainties as to the precise net realizable value of our
assets and the ultimate settlement amount of our liabilities, it is
impossible to predict with certainty the aggregate net values which will
ultimately be distributed to our shareholders should the Liquidation Plan be
approved. However, based upon information presently available to us and
assuming no unanticipated claims or other material adverse events, we
believe our shareholders are likely to receive approximately $2.00 to $2.35
per share from the initial distribution of net available assets to occur in
or around December 2001. In addition, OPTi holds 1,914,155 shares of common
stock of Tripath Technology, Inc., a publicly traded company quoted on the
Nasdaq National Market. The Tripath shares will either be sold by OPTi or
distributed to our shareholders in kind, as our Board deems appropriate. As
of October , 2001, the closing sale price of Tripath common stock was $
per share. If our Board elects to distribute the shares of Tripath in kind
to OPTi shareholders, each OPTi shareholder as of the record date for such
distribution would receive one share of Tripath stock for each share of
OPTi common stock held on that record date.
Q: WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE LIQUIDATION AND
DISSOLUTION TO ME?
A: If the Liquidation Plan is approved, our shareholders will realize, for
federal income tax purposes, gain or loss equal to the difference between
the cash plus the value of any property distributed to our shareholders from
the liquidating distributions and their adjusted tax basis in their shares
of common stock. OPTi has requested a ruling from the Internal Revenue
Service relating to the value of our intellectual property that, if granted,
would affect the determination and time to report your gain or loss on your
OPTi common stock. Tax consequences may differ for each shareholder,
depending on his or her circumstances. We encourage each shareholder to
consult with his or her own tax advisors.
Q: DO I HAVE APPRAISAL RIGHTS?
A: No. Under California law, appraisal rights are not available in connection
with the liquidation and dissolution.
Q: SHOULD I STILL VOTE TO ELECT OUR BOARD OF DIRECTORS AND RATIFY THE SELECTION
OF ACCOUNTANTS IF I APPROVE THE LIQUIDATION PLAN?
A: Yes. Even if a shareholder votes to approve the Liquidation Plan, each
shareholder should vote on the proposal to elect our Board of Directors and
the proposal to ratify the appointment of Ernst & Young LLP as OPTi's
independent accountants for the year ending December 31, 2001. If the
Liquidation Plan is adopted, our Board of Directors will oversee the orderly
liquidation and dissolution of OPTi. In addition, if our shareholders do not
approve the Liquidation Plan, we will continue to operate as an ongoing
concern and the Board members elected at this Annual Meeting will direct
OPTi's continuing operations until their successors are elected or
appointed. With respect to the proposal appointing Ernst & Young as our
independent auditors, OPTi will still require the services of independent
accountants to conduct yearly audits and other such matters for so long as
OPTi is obligated to comply with the applicable reporting requirements of
the Securities Exchange Act of 1934, as amended.
Q: WHAT DO OPTi SHAREHOLDERS NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
Proxy Statement, including the Liquidation Plan attached as Exhibit A, each
OPTi shareholder should complete and sign his or her proxy and return it in
the enclosed return envelope as soon as possible so that his or her shares
may be represented at the meeting. A majority of shares entitled to vote
must be represented at the meeting to enable OPTi to conduct business at the
meeting.
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Q: CAN OPTi SHAREHOLDERS CHANGE THEIR VOTE AFTER THEY HAVE MAILED THEIR SIGNED
PROXIES?
A: Any proxy given for the Annual Meeting may be revoked by the shareholder
giving it at any time before the Annual Meeting by delivering to the
Secretary of the Company, Michael Mazzoni, at our principal executive
offices, 660 Alder Drive, Milpitas, California 95035, a written notice of
revocation or a duly executed proxy bearing a later date or by attending the
Annual Meeting and voting in person. Attending the Annual Meeting in and of
itself will not constitute a revocation of a proxy.
Q: IF OPTi SHARES ARE HELD IN "STREET NAME" BY A SHAREHOLDER'S BROKER, WILL THE
BROKER VOTE THESE SHARES ON BEHALF OF THE SHAREHOLDER WITH RESPECT TO THE
APPROVAL OF THE LIQUIDATION PLAN AND THE ASSET PURCHASE AGREEMENT?
A: A broker will vote OPTi shares with respect to the approval of the
Liquidation Plan only if the holder of these shares provides the broker with
instructions on how to vote. Shareholders should follow the directions
provided by their brokers regarding how to instruct brokers to vote the
shares.
Q: CAN I SELL MY SHARES OF OPTi COMMON STOCK ONCE THE LIQUIDATION PLAN IS
APPROVED?
A: We expect that our common stock will continue to trade on the Nasdaq
National Market as long as we continue to meet Nasdaq's listing maintenance
standards. If our common stock is delisted from Nasdaq, trading, if any,
would thereafter be conducted on the over-the-counter market in the
so-called "pink sheets" or on the "Electronic Bulletin Board" of the
National Association of Securities Dealers, Inc. Consequently, if our common
stock is delisted, shareholders may find it more difficult to dispose of, or
to obtain accurate quotations as to the price of our common stock. In
addition, we intend to close our stock transfer books and restrict transfers
of our common stock after filing the Certificate of Dissolution with the
State of California.
Shareholders who are considering the sale of their stock should be aware
that only persons who hold OPTi shares at the time of each liquidating
distribution will receive the initial, final and other liquidating
distributions, if any, including the distribution of pro rata beneficial
interests in the Liquidating Trust. If the shareholders approve the
Liquidation Plan, the dates of each liquidating distribution will be
announced by OPTi as they are determined by OPTi's Board of Directors.
Q: WHO CAN HELP ANSWER QUESTIONS?
A: If you have any additional questions about any of the proposals or if you
need additional copies of this Proxy Statement or any public filings
referred to in this Proxy Statement, you should contact: Michael Mazzoni,
our Chief Financial Officer, at 660 Alder Drive, Milpitas, California 95035.
Our public filings can also be accessed at the SEC's web site at
www.sec.gov.
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OPTi INC.
PROXY STATEMENT FOR THE 2001 ANNUAL MEETING OF SHAREHOLDERS
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INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of OPTi Inc. ("OPTi" or the
"Company") for use at the Annual Meeting of Shareholders (the "Annual Meeting")
to be held on November 12, 2001 at 9:00 a.m., Pacific Time, or at any
postponement or adjournment thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting of Shareholders. The Annual Meeting
will be held at our corporate headquarters at 660 Alder Drive, Milpitas,
California 95035. The telephone number at that location is (408) 382-2600.
These proxy solicitation materials were mailed on or about October , 2001
to all shareholders entitled to vote at the meeting.
Purposes of the Annual Meeting
The purposes of the Annual Meeting are to (i) approve and adopt the Plan of
Complete Liquidation and Dissolution of OPTi Inc. (the "Liquidation Plan" or
the "Plan"), (ii) elect four directors to serve until the earlier of (x) the
dissolution of OPTi; (y) OPTi's next annual meeting; or (z) the appointing of
their successors, (iii) ratify the appointment of Ernst & Young LLP as the
Company's independent auditors for the fiscal year 2001 and (iv) transact such
other business as may properly come before the Annual Meeting and at any and
all postponements or adjournments thereof.
Annual Meeting Record Date and Share Ownership
Only shareholders of record at the close of business on October 8, 2001 (the
"Annual Meeting Record Date") are entitled to receive notice of and to vote at
the Annual Meeting. On the Annual Meeting Record Date, shares of the Company's
common stock were issued and outstanding. For information regarding security
ownership by management and by 5% shareholders. See "OTHER
INFORMATION--Security Ownership of Certain Beneficial Owners and Management."
The closing price of the Company's common stock on the Nasdaq National Market
on the Annual Meeting Record Date was $ per share.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to Michael Mazzoni,
Secretary of the Company at its principal executive offices, 660 Alder Drive,
Milpitas, California 95035, a written notice of revocation or a duly executed
proxy bearing a later date or by attending the Annual Meeting and voting in
person. Attending the Annual Meeting in and of itself will not constitute a
revocation of a proxy.
Voting and Solicitation
Every shareholder voting in the election of directors may cumulate such
shareholder's votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of shares held by
such shareholder, or distribute the shareholder's votes on the same principle
among as many candidates as the shareholder deems fit, provided that votes
cannot be cast for more than four (4) candidates. However, no shareholder shall
be entitled to cumulate votes unless the candidate's name has been placed in
nomination prior to the voting and the shareholder, or any other shareholder,
has given notice at the Annual Meeting prior to the voting of the intention to
cumulate the shareholder's votes. On all other matters, each share has one (1)
vote.
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Shares of common stock represented by properly executed proxies will, unless
such proxies have been previously revoked, be voted in accordance with the
instructions indicated thereon. In the absence of specific instructions to the
contrary, properly executed proxies will be voted: (i) FOR the approval and
adoption of the Liquidation Plan; (ii) FOR the election of each of the
Company's nominees as a director; and (iii) FOR ratification of the appointment
of Ernst & Young LLP as independent auditors for fiscal 2001. No business other
than that set forth in the accompanying Notice of Annual Meeting of
Shareholders is expected to come before the Annual Meeting. Should any other
matter requiring a vote of shareholders properly arise, the persons named in
the enclosed form of proxy will vote the shares they represent as the Board of
Directors may recommend.
The cost of this solicitation will be borne by the Company. The Company may
reimburse brokerage firms and other persons representing beneficial owners of
shares for their expenses in forwarding solicitation material to such
beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers and regular employees, without additional compensation,
personally or by telephone, telegram or letter.
Quorum; Abstentions; Broker Non-Votes
The required quorum for the transaction of business at the Annual Meeting is
a majority of the shares of common stock issued and outstanding on the Annual
Meeting Record Date. Shares that are voted "FOR" or "AGAINST" a matter are
treated as being present at the meeting for purposes of establishing a quorum
and are also treated as shares "represented and voting" at the Annual Meeting
(the "Votes Cast") with respect to such matter.
While there is no definitive statutory or case law authority in California
as to the proper treatment of abstentions or broker non-votes, the Company
believes that both abstentions and broker non-votes should be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. The Company further believes that neither abstentions nor broker
non-votes should be counted as shares "represented and voting" with respect to
a particular matter for purposes of determining the total number of Votes Cast
with respect to such matter. In the absence of controlling precedent to the
contrary, the Company intends to treat abstentions and broker non-votes in this
manner. Accordingly, with respect to Proposals No. 2 and 3, abstentions and
broker non-votes will not affect the determination as to whether the requisite
majority of Votes Cast has been obtained with respect to a particular matter.
With respect to Proposal No. 1 only, an affirmative vote by a majority of
the shares outstanding on the Annual Meeting Record Date is required in order
to approve the proposal. Accordingly, abstentions and broker non-votes will
have the effect of votes against Proposal No. 1.
Deadline for Receipt of Shareholder Proposals
If the Company is not dissolved in accordance with Proposal No. 1, proposals
of shareholders of the Company which are intended to be presented by such
shareholders at the 2002 Annual Meeting of Shareholders must be received by the
Company no later than June 14, 2002 in order to have them included in the proxy
statement and form of proxy relating to that meeting. In addition, proposals of
the Company's shareholders that such shareholders intend to present at the
Company's 2002 Annual Meeting, but not include in the Company's Proxy Statement
and form of Proxy relating to the 2002 Annual Meeting, must be received by the
Company at the Company's offices no later than June 30, 2002 and no earlier
than June 15, 2002.
Fiscal Year End
The Company's fiscal year ends on December 31. Fiscal 2000 ended on December
31, 2000 and is referred to herein as the "Last Fiscal Year."
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PROPOSAL NUMBER 1
APPROVAL AND ADOPTION OF THE
PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION OF OPTi INC.
General
Our Board of Directors is proposing that the voluntary Plan of Complete
Liquidation and Dissolution (the "Liquidation Plan" or the "Plan") be approved
and adopted by our shareholders at the Annual Meeting. The Plan was authorized
by our Board of Directors, subject to shareholder approval, on September 7,
2001. A copy of the Plan is attached as Exhibit A to this Proxy Statement.
Certain material features of the Plan are summarized below. Shareholders should
read the Plan in its entirety.
Our Board of Directors has authorized, subject to shareholder approval, the
orderly liquidation of OPTi's assets and the dissolution of the Company
pursuant to the Plan. The Plan provides that, if the requisite shareholder
approval is received (such time of approval deemed the "Adoption Date"), our
officers and directors will initiate the complete liquidation and subsequent
dissolution of OPTi and will file a Certificate of Election to Wind Up and
Dissolve (the "Certificate of Election") with the State of California. After
the Adoption Date, we will not engage in any business activities except for the
purpose of preserving the value of our assets, prosecuting and defending
lawsuits by or against us or our subsidiaries, adjusting and winding up our
business affairs, selling and liquidating all of our assets, paying our
creditors and making distributions to shareholders in accordance with the Plan.
Following the Adoption Date, in addition to filing the Certificate of Election,
we expect to establish the OPTi Inc. Liquidating Trust (the "Liquidating Trust"
or "Trust") and transfer to the Trust all of our patents, other intellectual
property, approximately $2.5 million in cash and other assets that cannot be
readily liquidated or distributed in kind prior to the dissolution of the
Company (collectively, the "Trust Assets") pursuant to the Plan and to the
Liquidating Trust Agreement between OPTi and the trustees of the Trust (the
"Trustees"). Our Board of Directors has appointed Stephen Dukker, Kapil Nanda
and William Welling to serve as Trustees of the Liquidating Trust. Your
approval of the Plan will also constitute your approval of the appointment of
such persons as the Trustees.
During the liquidation of our assets, we may pay to our officers, directors,
employees, and agents, or any of them, compensation for services rendered in
connection with the implementation of the Plan and/or retention and severance
benefits. Your approval of the Plan will constitute your approval of the
payment of any such compensation.
The following resolution will be offered at the Annual Meeting:
"RESOLVED, THAT THE VOLUNTARY PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION OF
OPTi INC. RECOMMENDED BY THE BOARD OF DIRECTORS BE APPROVED AND ADOPTED."
BACKGROUND AND REASONS FOR THE LIQUIDATION PLAN
Since our incorporation in California in 1989, OPTi has conducted business
as an independent supplier of semiconductor products that provide core logic
functions or universal serial bus controller functions for a personal computer
or embedded product within a semiconductor device. Through 1995, our principal
business was our core logic products for desktop personal computers and we have
employed as many as 235 employees over the years. However, in time, OPTi faced
increasingly tight competition and we decided to shift our design, development,
marketing and sales efforts away from our core logic products and towards
peripheral products such as our universal serial bus devices. During February
1999, OPTi completely ceased further development of core logic products, even
though we continued to ship such products to our customers.
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Over the past several years, we have been facing tightening conditions and
increased competition in each of our markets despite our patented technology.
In light of these increasingly difficult competitive conditions, our Board has
in the past determined that the return of unallocated capital to our
shareholders can be a more effective means of maximizing shareholder value than
committing such capital to the pursuit of uncertain new technology initiatives.
Consistent with our philosophy, in 1998 we repurchased approximately $23.9
million worth of our common stock and in 1999 we declared a cash dividend of
$4.00 per share of our common stock which resulted in the return of
approximately $44.4 million to our shareholders. In addition, we redirected our
primary business strategies towards the license of our core logic technology
and began to look for opportunities to develop or acquire technology for other
emerging markets in the electronics area.
Over the last eighteen months, OPTi's Board and management have investigated
various strategic opportunities and engaged in discussions regarding merger and
asset sale transactions with potential business partners and investment banks.
We have also taken steps to minimize our overhead expenses as revenues from our
existing products has continued to decline. With the exception of a final
close-out order at the request of our customers, we suspended all ongoing
orders of inventory from our manufacturers approximately four months ago and we
have significantly reduced our work force to seven employees. After reviewing
OPTi's business prospects and potential opportunities, our Board has determined
that the voluntary liquidation and dissolution of the Company is in the best
interest of our shareholders and will serve to maximize shareholder value in
the Company.
Most of our assets are readily transferable. As of June 30, 2001, the end of
our most recent fiscal quarter, our assets included $31 million in cash and
1,914,155 shares of Tripath Technology, Inc., a publicly traded company quoted
on the Nasdaq National Market ("Tripath").
In addition, we are currently investigating potential claims against certain
third parties for infringement of certain of our patents (the "OPTi Patents")
(such claims collectively referred to as the "Infringement Claims").
Consequently, we do not believe that the value of the OPTi Patents can be
reasonably ascertained prior to our final dissolution. We have, however,
received an estimate that OPTi's recovery for the Infringement Claims could
range from $0 to $100 million dollars in damages.
Accordingly, the Board of Directors believes that, in conjunction with
OPTi's liquidation, it is in the best interest of OPTi and our shareholders to
continue to pursue our causes of action which are the basis for the
Infringement Claims. Because of the uncertainty as to the total sums that OPTi
may recover from the Infringement Claims the Board of Directors has decided to
establish a Liquidating Trust to hold the OPTi patents and other intellectual
property, as well as other assets, if any, that also prove difficult to
liquidate in an orderly fashion prior to our dissolution.
Potential Adverse Impact
The Board of Directors also considered a number of factors regarding the
potential adverse impact of the proposed liquidation and dissolution on our
shareholders, including the following:
1. We cannot assure you that we would be successful in disposing of our
assets for values equal to or exceeding those currently estimated or
that these dispositions would occur as early as we expected.
2. It is possible that the liquidation may not yield distributions as great
as the recent market prices of our shares and distributions may not be
effected for an extended amount of time.
3. As opposed to a business combination with a relatively short time frame
during which a third party would acquire us, the liquidation process
would involve a longer pay-off process and would require us to incur
potentially larger administrative costs.
4. The receipt of liquidating distributions will be a taxable event for
shareholders.
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5. It is likely that the liquidity and price of our shares will decrease as
we pay distributions to shareholders.
The foregoing discussion of the information and factors discussed by the
Board of Directors is not meant to be exhaustive, but is believed to include
the significant factors considered by the Board of Directors. The Board of
Directors did not quantify or attach any particular weight to the various
factors that it considered in approving the Liquidation Plan. Rather, the Board
viewed its position and recommendation as being based on the totality of the
information presented to and considered by it. In addition, individual members
of the Board of Directors may have given different weights to different
factors. However, in the view of the Board of Directors, the potentially
negative factors considered by it did not outweigh the benefits and advantages
of the liquidation and dissolution.
Conclusion of our Board of Directors
On September 7, 2001, our Board of Directors unanimously adopted the
Liquidation Plan. In arriving at this conclusion, our Board considered a number
of factors, including alternatives to the proposal and the future prospects of
OPTi. Our Board of Directors concluded that the Liquidation Plan was in the
best interests of OPTi and our shareholders.
FACTORS TO BE CONSIDERED BY SHAREHOLDERS IN DECIDING
WHETHER TO APPROVE THE PLAN
There are many factors that OPTi's shareholders should consider when
deciding whether to vote to approve the Plan. Such factors include the risk
factors related to OPTi's ongoing business prospects, as well as additional
data set forth in OPTi's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000, OPTi's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2001 and June 30, 2001 and those factors set forth below.
Forward looking statements with respect to the likelihood and the value of
liquidating distributions to our shareholders are based upon facts known to us
and the methods we used with respect to the valuation of our assets and our
liabilities. We can offer no assurance that the markets for our assets will not
change or that additional liabilities currently unknown to us will not arise
during the course of our liquidation and dissolution that could materially
reduce the value and change the timing of the liquidating distributions.
This Proxy Statement contains certain forward looking statements, including
statements contained under the heading "LIQUIDATION ANALYSIS AND ESTIMATES"
below and other statements concerning the value of OPTi's net assets, the
liquidation value per share of common stock as compared to our market price
absent the proposed liquidation and the likelihood of shareholder value
resulting from sale of certain of our significant assets. The methods used by
our Board of Directors and management in estimating the value of OPTi's assets
do not result in an exact determination of value nor are they intended to
indicate definitively the amount a shareholder will receive in liquidation.
Specifically, estimates regarding final proceeds from the sale of assets and
the ultimate disposition of the remaining non-cash assets to third party
acquirers are subject to many variables and will not be determined with
certainty until the settlement of remaining liabilities.
In addition, we will need to liquidate our excess property and equipment and
accounts receivable. The cash value realized by OPTi for these assets will be
difficult to estimate, and we can make no assurance that we will receive any
material amounts with respect to such assets. The prices at which we will be
able to sell our various remaining assets will depend largely on factors beyond
OPTi's control, including, without limitation, the condition of financial
markets, the availability of financing to prospective purchasers of the assets,
United States and foreign regulatory approvals, public market perceptions and
limitations on transferability of certain assets. No assurance can be given
that the amount to be received in liquidation will equal or exceed the price or
prices at which the common stock has recently traded or may trade in the
future. Shareholders who disagree with our Board of Directors' determination
that the adoption of the Plan is in the best interests of OPTi and our
shareholders should vote "against" approval of the Plan.
10
Shareholders may be liable to creditors of OPTi for the amount received from
OPTi if OPTi's reserves are inadequate
If the Plan is approved by the shareholders, a Certificate of Election to
Wind Up and Dissolve will be filed with the State of California initiating the
dissolution procedure. Once the final distribution has been made to
shareholders, a Certificate of Dissolution will be filed with the State of
California dissolving OPTi. Pursuant to the California Corporations Code, in
the event OPTi fails to adequately provide for payment of its expenses and
liabilities, each shareholder could be held liable for payment to OPTi's
creditors of such shareholder's pro rata share of amounts owed to creditors in
excess of the funds reserved to pay such creditors (the "Contingency Reserve").
The liability of any shareholder would be limited to the amounts previously
received by such shareholder from OPTi (and from the Liquidating Trust).
Accordingly, in this event, a shareholder could be required to return all
distributions previously made to such shareholder. As a result, a shareholder
could net nothing from OPTi under the Plan. Moreover, in the event a
shareholder has paid taxes on amounts previously received, a repayment of all
or a portion of such amount could result in a shareholder incurring a net tax
cost if the shareholder's repayment of an amount previously distributed does
not cause a commensurate reduction in taxes payable. There can be no assurance
that OPTi has adequate assets to cover any expenses and liabilities. However,
after a review of our assets and liabilities, OPTi believes that the reserves
will be adequate and that a return of amounts previously distributed will not
be required. See "Contingent Liabilities; Contingency Reserve; The OPTi Inc.
Liquidating Trust."
Our stock transfer books will close on the final record date, after which it
will not be possible for shareholders to publicly trade in our stock
We intend to close our stock transfer books and discontinue recording
transfers of common stock at the close of business on the record date fixed by
our Board for filing the Certificate of Dissolution (the "Final Record Date").
Thereafter, certificates representing the common stock shall not be assignable
or transferable on the books of OPTi except by will, intestate succession or
operation of law. The proportionate interests of all of the shareholders of
OPTi shall be fixed on the basis of their respective stock holdings at the
close of business on the Final Record Date, and, after the Final Record Date,
any distributions made by OPTi shall be made solely to the shareholders of
record at the close of business on the Final Record Date, except as may be
necessary to reflect subsequent transfers recorded on the books of OPTi as a
result of any assignments by will, intestate succession or operation of law.
Our board members may have a potential conflict of interest in recommending
ratification and approval of the Plan
The members of our Board of Directors may be deemed to have a potential
conflict of interest in recommending ratification and approval of the Plan. See
"Possible Effects of the Approval of the Plan Upon Directors, Officers and
Certain Employees."
POSSIBLE EFFECTS OF THE APPROVAL OF THE PLAN
UPON DIRECTORS, OFFICERS AND CERTAIN EMPLOYEES
Other than as set forth below, it is not currently anticipated that
liquidation of OPTi will result in any material benefit to any of our officers
or to directors who participated in the vote to adopt the Plan, or to any other
employees.
As summarized in the table below, our Board of Directors has approved
severance arrangements for Bernard T. Marren, our President, Chief Executive
Officer and Chairman of the Board, and Michael Mazzoni, our Chief Financial
Officer. Mr. Marren will be paid his severance package if the Company is sold
or he is terminated. Mr. Mazzoni will be paid his severance package in the
event of a change of control of OPTi or if
11
OPTi announces its intent to liquidate its assets or shut down the Company. In
conjunction with its approval of the Liquidation Plan, the Board affirmed that
both Mr. Marren and Mr. Mazzoni's severance packages will be paid if the
Liquidation Plan is adopted by the Shareholders and OPTi completely dissolves.
Name and Principal Position Severance Other
--------------------------- --------- -----
Bernard T. Marren President, Chief Executive Officer and
Chairman of the Board................................. $150,000 --(1)
Michael Mazzoni, Chief Financial Officer................ $150,000
--------
(1) Mr. Marren will also receive a severance payment related to the value of
the initial liquidating dividend and the number of vested options he holds.
The Company currently estimates the value of this additional payment at a
maximum of $250,000.
The table below sets forth information relating to stock options held by
each officer and director of OPTi, as of September 17, 2001.
Weighted
Average
Exercise
Total In The Price of
Options Vested Money Vested
Name Outstanding Options Options Options
---- ----------- ------- ------- --------
Bernard T. Marren...................... 117,333 117,333 -- $4.98
Michael Mazzoni........................ -- -- -- --
Stephen A. Dukker...................... -- -- -- --
Kapil K. Nanda......................... 17,333 17,333 -- $6.99
William Welling........................ -- -- -- --
Additionally, each OPTi employee who continues his or her employment through
OPTi's final dissolution will receive a severance payment equal to the greater
of his or her weekly salary multiplied by his or her years of service or one
month's pay. We currently estimate these payments will total approximately
$55,000.
Our Board of Directors may confer other benefits or bonuses to employees and
officers of OPTi, including officers who are also directors, in recognition of
their services to OPTi based on the performance of such employees and officers,
including performance during OPTi's liquidation process.
In addition, if the OPTi shareholders approve the Plan, three of the members
of our Board will serve as trustees of the Liquidating Trust. Stephen A.
Dukker, Kapil K. Nanda and William Welling were appointed as Trustees by our
Board. The Board has determined that each Trustee shall receive $3,000 for each
meeting of Trustees which are currently expected to occur at least quarterly
and an additional $2,500 per day of consulting work performed for the Trust.
Subject to ratification by the Trustees following the establishment of the
Trust, it is currently contemplated that the fourth member of our Board,
Bernard T. Marren, also our President and Chief Executive Officer, will be paid
an annual fee of $50,000 to oversee the routine operations of the Trust and
provide consulting services in connection with its pursuit of the Infringement
Claims. Mr. Marren would also receive 5% of any license fees or monetary
settlement that we recover from a certain semiconductor company designated by
our Board that we believe may be infringing on our patents.
Finally, also subject to ratification by the Trustees, Michael Mazzoni, our
Chief Financial Officer, will be paid an annual fee of $10,000 for ongoing work
involving the preparation of financial statements by the Trust, the work of
auditors who may be engaged by the Trust, liaison with the law firms engaged by
the Trust and other ministerial matters as necessary to carry out the purpose
of the Trust.
12
The Plan was adopted by the unanimous vote of our directors, each of whose
interests in the Plan and the Trust have been set forth herein. It is not
currently anticipated that the liquidation of OPTi will result in any material
increase in value of the shares or options held by any directors who
participated in the vote on the Plan.
PRINCIPAL PROVISIONS OF THE LIQUIDATION PLAN AND DISSOLUTION
We will distribute pro rata to our shareholders, in cash or in-kind, or sell
or otherwise dispose of, all our property and assets. OPTi may, at the sole
discretion of our Board of Directors, choose to distribute the shares of
Tripath common stock directly to our shareholders on a pro rata basis or may
choose to sell the Tripath shares and distribute the proceeds to our
shareholders. The liquidation is expected to commence as soon as practicable
after approval of the Plan by the shareholders and to be concluded by a final
liquidating distribution to the shareholders. Any sales of OPTi's assets will
be made in private or public transactions and on such terms as are approved by
our Board of Directors. It is not anticipated that any further votes of OPTi's
shareholders will be solicited with respect to the approval of the specific
terms of any particular sales of assets approved by our Board of Directors. See
"Sales of OPTi's Assets."
Subject to the payment or the provision for payment of OPTi's obligations
and the transfer of approximately $2.5 million to the Liquidating Trust to
ensure that the Trust has adequate resources to pursue the Infringement Claims,
OPTi's cash on hand, together with the cash proceeds of any sales of OPTi's
other assets and the shares of Tripath stock held by OPTi or proceeds from
their sale, will be distributed pro rata to the holders of the common stock.
OPTi may also establish a reasonable cash reserve as the Contingency Reserve in
an amount determined by our Board of Directors to be sufficient to satisfy the
liabilities, expenses and obligations of OPTi not otherwise paid, provided for
or discharged. The net balance, if any, of any such Contingency Reserve
remaining after payment, provision or discharge of all such liabilities,
expenses and obligations will also be distributed to OPTi's shareholders pro
rata. No assurances can be given that available cash and amounts received from
the sale of assets will be adequate to provide for OPTi's obligations,
liabilities, expenses and claims and to make cash distributions to
shareholders. We currently have no plans to repurchase shares of common stock
from our shareholders. However, if we were to repurchase shares of common stock
from our shareholders, such repurchases would be open market purchases and
would decrease amounts distributable to other shareholders if OPTi were to pay
amounts in excess of the per share values distributable in respect of the
shares purchased and would increase amounts distributable to other shareholders
if OPTi were to pay amounts less than the per share values distributable in
respect of such shares. See "Liquidating Distributions; Nature; Amount; Timing"
and "Contingent Liabilities; Contingency Reserve; The OPTi Inc. Liquidating
Trust" below.
OPTi also plans to transfer its intellectual property, including but not
limited to patents and pending applications, to the Liquidating Trust which
would pursue the Infringement Claims. The proceeds of the Trust would be
distributed pro rata to the holders of OPTi common stock on terms approved by
the Trustees. The interests in the Trust will not be transferable; therefore,
although the recipients of the interests would be treated for tax purposes as
having received their pro rata share of property transferred to the Liquidating
Trust and will thereafter take into account for tax purposes their allocable
portion of any income, gain or loss realized by such Trust, the recipients of
the interests will not realize the value thereof unless and until the
Liquidating Trust distributes cash or other assets to them. The tax
consequences of the Liquidation Plan are complex, especially with regard to the
timing and method for determining gain or loss with respect to the patents
transferred to the Trust (which is dependent upon the resolution by the IRS of
certain pending ruling requests made by OPTi). Accordingly, each OPTi
shareholder should carefully review the Section "CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSIDERATIONS" set forth below, and discuss the tax considerations
with his or her own tax advisor. Pursuant to the Liquidation Plan, our Board of
Directors has appointed three individuals to act as trustee or trustees of the
Liquidating Trust and will cause OPTi to enter into the Liquidating Trust
Agreement with the named Trustees on such terms and conditions as may be
approved by our Board of Directors. Approval of the Plan also will constitute
the approval by OPTi's shareholders the appointment of the Trustees and
authorize OPTi to enter into the Liquidating Trust Agreement and/or similar
agreements consistent with the
13
purposes of the Liquidation Plan. For further information relating to the
Liquidating Trust, the appointment of Trustees and the Liquidating Trust
Agreement, reference is made to "The Liquidating Trust."
We plan to close our stock transfer books and discontinue recording
transfers of shares of common stock on the Final Record Date, and, thereafter,
certificates representing shares of common stock will not be assignable or
transferable on the books of OPTi except by will, intestate succession or
operation of law. After the Final Record Date, OPTi will not issue any new
stock certificates, other than replacement certificates. Any person holding
options, warrants or other rights to purchase common stock must exercise such
instruments or rights prior to the Final Record Date. See "Listing and Trading
of the Common Stock and Interests in the Liquidating Trust or Trusts" and
"Final Record Date" below.
Following approval of the Liquidation Plan by the shareholders, a
Certificate of Election to Wind Up and Dissolve will be filed with the State of
California initiating the dissolution of OPTi. See "Liquidation Analysis and
Estimates" below. Once the final distribution to shareholders has been made,
excluding the property assigned to the Liquidating Trust, a Certificate of
Dissolution will be filed with the State of California. The dissolution of OPTi
will become effective, in accordance with the California Corporations Code,
upon proper filing of the Certificate of Dissolution with the Secretary of
State or upon such later date as may be specified in the Certificate of
Dissolution.
Abandonment; Amendment
Under the Liquidation Plan, our Board of Directors may modify, amend or
abandon the Plan, notwithstanding shareholder approval, to the extent permitted
by the California Corporations Code. OPTi will not amend or modify the Plan
under circumstances that would require additional shareholder solicitations
under the California Corporations Code or the federal securities laws without
complying with the California Corporations Code and the federal securities
laws.
Liquidating Distributions; Nature; Amount; Timing
Although our Board of Directors has not established a firm timetable for
distributions to shareholders if the Liquidation Plan is approved by the
shareholders, our Board of Directors intends, subject to contingencies inherent
in winding up OPTi's business, to make such distributions as promptly as
practicable. After the approval of the Plan by the shareholders, based upon
information presently available to us and assuming no unanticipated claims or
other material adverse events, OPTi believes it will distribute approximately
$2.00 to $2.35 per share from its net available assets. OPTi may also
distribute its Tripath shares in kind directly to shareholders on a pro rata
basis or proceeds from the sale of those shares.
In addition, OPTi may also transfer its patents and related intellectual
property to the Liquidating Trust. Depending upon the outcome of a pending
ruling request we have submitted to the IRS, OPTi shareholders on the date of
such transfer could be deemed to have received a liquidating distribution of
assets on that date. OPTi does not believe that the value of our patents will
be reasonably ascertainable by the time of such transfer but we have received
an estimate that OPTi's recovery from the Infringement Claims could range from
$0 to $100 million. See "CERTAIN UNITED STATES FEDERAL INCOME TAXES" below.
The proportionate interests of all of the shareholders of OPTi shall be
fixed on the basis of their respective stock holdings at the close of business
on record dates set prior to each distribution with the Final Record Date set
prior to the final liquidating distribution(s) and, subject to applicable rules
on the trading of our shares, the right to receive each such distribution may
transfer with any sales of OPTi shares that take place between such record
dates and the respective distribution dates. After the Final Record Date, any
distributions made by OPTi shall be made solely to shareholders of record on
the close of business on the Final Record Date, except to reflect permitted
transfers. Our Board of Directors is, however, currently unable to predict the
precise nature, amount or timing of this distribution or any other
distributions pursuant to the Plan. The actual nature, amount and timing of all
distributions will be determined by our Board of Directors, in its sole
discretion, and will depend in part upon our ability to convert our remaining
assets into cash.
We do not plan to satisfy all of our liabilities and obligations prior to
commencing distributions to our shareholders, but instead will reserve assets
deemed by management and our Board of Directors to be adequate to
14
provide for such liabilities and obligations. See "Contingent Liabilities;
Contingency Reserve." Management and our Board of Directors believe that we
have sufficient cash to pay our current and accrued obligations without the
sale of any of our other assets.
Uncertainties as to the precise net value of our non-cash assets and the
ultimate amount of our liabilities make it impracticable to predict the
aggregate net value ultimately distributable to shareholders. Claims,
liabilities and expenses from operations (including operating costs, salaries,
income taxes, payroll and local taxes, legal and accounting fees and
miscellaneous office expenses), although currently declining, will continue to
be incurred following approval of the Plan. These expenses will reduce the
amount of assets available for ultimate distribution to shareholders and, while
OPTi does not believe that a precise estimate of those expenses can currently
be made, management and our Board of Directors believe that available cash and
amounts received on the sale of assets will be adequate to provide for OPTi's
obligations, liabilities, expenses and claims (including known contingent
liabilities) and to make cash distributions to shareholders. However, no
assurances can be given that available cash and amounts received on the sale of
assets will be adequate to provide for OPTi's obligations, liabilities,
expenses and claims and to make cash distributions to shareholders. If such
available cash and amounts received on the sale of assets are not adequate to
provide for OPTi's obligations, liabilities, expenses and claims, distributions
of cash and other assets to OPTi's shareholders will be reduced.
Sales of OPTi's Assets
The Plan gives our Board of Directors the authority to sell all of the
assets of OPTi. Sales of OPTi's remaining assets will be made on such terms as
are approved by our Board of Directors and may be conducted by competitive
bidding, public sales or privately negotiated sales. Any other types of sales
will only be made after our Board of Directors has determined that any such
sale is in the best interests of the shareholders. It is not anticipated that
any further shareholder votes will be solicited with respect to the approval of
the specific terms of any particular sales of assets approved by our Board of
Directors. OPTi does not anticipate amending or supplementing the Proxy
Statement to reflect any such agreement or sale, unless required by applicable
law. The prices at which we will be able to sell our various remaining assets
will depend largely on factors beyond OPTi's control, including, without
limitation, the condition of financial markets, the availability of financing
to prospective purchasers of the assets, United States and foreign regulatory
approvals, public market perceptions and limitations on transferability of
certain assets.
Conduct of OPTi Following Adoption of the Plan
Since the authorization of the Plan by our Board of Directors, our Board of
Directors and management have taken steps to reduce OPTi's operations and, upon
approval of the Plan by the shareholders, wind up our operations. If our Board
deems it advisable, certain members of management and any other continuing
employees may receive compensation for the duties then being performed. Such
compensation, if any, will be determined by evaluation of all relevant factors,
including, without limitation, the efforts of such individuals in successfully
implementing the Plan and a review of compensation payable to individuals
exercising similar authority and bearing similar responsibilities.
Following approval of the Plan by OPTi's shareholders, our activities will
be limited to winding up our affairs, taking such action as may be necessary to
preserve the value of our assets and distributing our assets in accordance with
the Plan. We will seek to distribute or liquidate all of our assets in such
manner and upon such terms as our Board of Directors determines to be in the
best interests of OPTi's shareholders.
Following the approval of the Plan by OPTi's shareholders, we shall continue
to indemnify our officers, directors, employees and agents in accordance with
our Articles of Incorporation, as amended, and Bylaws. Such indemnification
will include actions taken in connection with the Plan and the winding up of
the affairs of OPTi. OPTi's obligation to indemnify such persons may be
satisfied out of the assets of the Liquidating Trust. Our Board of Directors
and the Trustees of the Liquidating Trust may also obtain and or maintain such
insurance as may be necessary to cover OPTi's indemnification obligations under
the Plan.
15
Reporting Requirements
Whether or not the Plan is approved, we have an obligation to continue to
comply with the applicable reporting requirements of the Securities Exchange
Act of 1934, as amended, (the "Exchange Act") even though compliance with such
reporting requirements is economically burdensome. If the Plan is approved, in
order to curtail expenses we will, after filing a Certificate of Election to
Wind Up and Dissolve and a Certificate of Dissolution, either seek to complete
the dissolution of OPTi prior to March 30, 2002, the due date for the filing of
our next annual report on Form 10-K, or seek relief from the Securities &
Exchange Commission ("SEC") from the reporting requirements under the Exchange
Act.
Contingent Liabilities; Contingency Reserve
Under the California Corporations Code, we are required, in connection with
our dissolution, to pay or provide for payment of all of our liabilities and
obligations. Following approval of the Plan by OPTi's shareholders, OPTi will
pay all expenses and fixed and other known liabilities, or set aside cash and
other assets which it believes to be adequate for payment thereof as a
Contingency Reserve. OPTi is currently unable to estimate with precision the
amount of any Contingency Reserve which may be required, but any such amount
(in addition to the cash contributed to the Liquidating Trust) will be deducted
before the determination of amounts available for distribution to shareholders.
The actual amount of the Contingency Reserve will be based upon estimates
and opinions of management and our Board of Directors and derived from
consultations with outside experts and review of OPTi's estimated operating
expenses and future estimated liabilities, including, without limitation,
anticipated compensation payments, estimated legal and accounting fees,
operating lease expenses, payroll and other taxes payable, miscellaneous office
expenses, expenses accrued in OPTi's financial statements and reserves for
litigation expenses. There can be no assurance that the Contingency Reserve
will be sufficient. Subsequent to the establishment of the Contingency Reserve,
we will distribute to our shareholders any portions of the Contingency Reserve
which it deems no longer to be required. After the liabilities, expenses and
obligations for which the Contingency Reserve was established have been
satisfied in full, we will distribute to our shareholders any remaining portion
of the Contingency Reserve.
Under the California Corporations Code, in the event OPTi fails to create an
adequate contingency reserve for payment of its expenses and liabilities, or
should the Contingency Reserve be exceeded by the amount ultimately found
payable in respect of expenses and liabilities, each shareholder could be held
liable for the payment to creditors of such shareholder's pro rata share of
such excess, limited to the amounts theretofore received by such shareholder
from OPTi.
If we were held by a court to have failed to make adequate provision for our
expenses and liabilities or if the amount ultimately required to be paid in
respect of such liabilities exceeded the amount available from the Contingency
Reserve, a creditor of OPTi could seek an injunction against the making of
distributions under the Plan on the ground that the amounts to be distributed
were needed to provide for the payment of OPTi's expenses and liabilities. Any
such action could delay or substantially diminish the cash distributions to be
made to shareholders and/or interest holders under the Plan.
The OPTi Inc. Liquidating Trust
Following the Adoption Date, we plan to transfer OPTi's patents, other
intellectual property and approximately $2.5 million in cash to fund pursuit of
the claims related to the infringement of certain of our patents and to provide
for the management and operations of the Trust to the Liquidating Trust. We are
currently investigating potential claims against certain third parties for
infringement of our patents (such claims collectively referred to as the
"Infringement Claims"), such that the value of the OPTi Patents on the Adoption
Date and on the distribution date will not be ascertainable. We have received
an estimate that OPTi's recovery for the Infringement Claims could range from
$0 to $100 million in damages.
The Board of Directors has determined that it is in the best interest of
OPTi and our shareholders to pursue our causes of action which are the basis
for the Infringement Claims. Because of the uncertainty as to the total
16
sums that OPTi may recover from the Infringement Claims and because of the
impracticality of distributing our patents and intellectual property to OPTi's
shareholders, the Board of Directors has decided to establish the Liquidating
Trust to hold the OPTi patents and other intellectual property, as well as
other assets, if any, that may not be convenient to liquidate in an orderly
fashion prior to our dissolution.
Our Board of Directors believes the flexibility provided by the Plan with
respect to the Liquidating Trust to be advisable. The Trust will be evidenced
by a trust agreement between OPTi and the trustees. The overall purpose of the
Trust will be to serve as a temporary repository for the trust property prior
to disposition or distribution to OPTi's shareholders. The transfer to the
Trust and distribution of interests therein to OPTi's shareholders would enable
us to divest ourselves of the trust property and permit OPTi's shareholders to
enjoy the economic benefits of ownership thereof. Pursuant to the trust
agreement, the trust property would be transferred to the Trustees prior to the
distribution of interests in the Trust to OPTi's shareholders, to be held in
trust for the benefit of the shareholder beneficiaries subject to the terms of
the trust agreement. The interests would be evidenced only by the records of
the Trust, there would be no certificates or other tangible evidence of such
interests, and no holder of common stock would be required to pay any cash or
other consideration for the interests to be received in the distribution or to
surrender or exchange shares of common stock in order to receive the interests.
It is further anticipated that pursuant to the trust agreement the Trust would
be irrevocable and would terminate after the earliest of (y) the trust property
having been fully distributed, or (z) three years having elapsed after the
creation of the Trust. We have also submitted a request to the IRS that, if
ruled upon favorably, would enable the Trust to continue for an additional two
years if circumstances warrant.
The Trustees; Trustee Compensation
The Plan authorizes our Board of Directors to appoint one or more
individuals or entities to act as trustee or trustees of the liquidating trust
or trusts and to cause OPTi to enter into a liquidating trust agreement or
agreements with such trustee or trustees on such terms and conditions as may be
approved by our Board of Directors. Our Board of Directors has selected three
such trustees, Stephen Dukker, Kapil Nanda and William Welling, on the basis of
their experience with OPTi and our industry and their ability to serve the best
interests of OPTi's shareholders. Approval of the Plan by the shareholders will
also constitute the approval by OPTi's shareholders of any such appointment and
any liquidating trust agreement or agreements.
Our Board has determined that each Trustee shall receive $3,000 for each
meeting of Trustees, which are currently expected to occur at least quarterly,
and an additional $2,500 per day of consulting work performed for the Trust.
The individuals named to serve as Trustees are also three of the four members
of our Board which unanimously approved this compensation arrangement. Each of
the three Trustees has also been nominated for re-election to our Board at this
Annual Meeting. For further information regarding the appointed trustees, see
"PROPOSAL NUMBER TWO--Election of Directors".
Administration of the Trust
The Trustees are responsible for overseeing the administration of the Trust
and will meet periodically (currently expected to be on a quarterly basis) to
review the status and activities of the Trust. Subject to ratification by the
Trustees following the establishment of the Trust, it is currently contemplated
that the fourth member of our Board, Bernard T. Marren, also our President and
Chief Executive Officer, will oversee the routine operations of the Trust and
provide consulting services in connection with its pursuit of the Infringement
Claims and be paid an annual fee of $50,000. Mr. Marren would also receive 5%
of any license fees or monetary settlement that we recover from a certain
semiconductor company, designated by our Board, that we believe may be
infringing on our patents.
In addition, also subject to ratification by the Trustees, Michael Mazzoni,
our Chief Financial Officer, will be paid an annual fee of $10,000 for ongoing
work involving the preparation of financial statements by the Trust, work with
auditors who may be engaged by the Trust, liaison with the law firms engaged by
the Trust and other ministerial matters as necessary to carry out the purpose
of the Trust. In addition, the Trustees will also engage other professionals,
including but not limited to attorneys, accountants, investment advisors and
agents to
17
perform the routine operations of the Trust and they will pay such
professionals out of the assets of the Trust, reasonable compensation and
disbursement of expenses.
Final Record Date
We intend to close our stock transfer books and discontinue recording
transfers of shares of common stock on the Final Record Date, and thereafter
certificates representing shares of common stock will not be assignable or
transferable on the books of OPTi except by will, intestate succession or
operation of law. After the Final Record Date, OPTi will not issue any new
stock certificates, other than replacement certificates. It is anticipated that
no further trading of OPTi's shares will occur on or after the Final Record
Date. See "Listing and Trading of the Common Stock and Interests in the
Liquidating Trust or Trusts" below. All liquidating distributions from OPTi or
the Liquidating Trust on or after the Final Record Date will be made to
shareholders according to their holdings of Common Stock as of the Final Record
Date. Subsequent to the Final Record Date, we may at our election require
shareholders to surrender certificates representing their shares of Common
Stock in order to receive subsequent distributions. Shareholders should not
forward their stock certificates before receiving instructions to do so. If
surrender of stock certificates should be required, all distributions otherwise
payable by OPTi or the Liquidating Trust, if any, to shareholders who have not
surrendered their stock certificates may be held in trust for such
shareholders, without interest, until the surrender of their certificates
(subject to applicable laws relating to abandoned property). If a shareholder's
certificate evidencing the common stock has been lost, stolen or destroyed, the
shareholder may be required to furnish OPTi with satisfactory evidence of the
loss, theft or destruction thereof, together with a surety bond or other
indemnity, as a condition to the receipt of any distribution.
Listing and Trading of the Common Stock and Interests in the Liquidating Trust
or Trusts
We currently intend to close our stock transfer books on the Final Record
Date and to cease recording stock transfers and issuing stock certificates
(other than replacement certificates) at such time. Accordingly, it is expected
that trading in the shares will cease on and after such date.
Our Common Stock is currently listed for trading on the Nasdaq National
Market. We expect that our Common Stock will continue to trade on Nasdaq as
long as we continue to meet their listing requirements. If our shares are
delisted, trading, if any, in the Common Stock would thereafter be conducted in
the over-the-counter market in the so-called "pink sheets" or the NASD's
"Electronic Bulletin Board." As a consequence of such delisting, an investor
would likely find it more difficult to dispose of, or to obtain quotations as
to, the price of the common stock. Delisting of the common stock may result in
lower prices for the common stock than would otherwise prevail. In any event,
we will close our stock transfer books upon the filing of the Certificate of
Dissolution. Thereafter, the shareholders will not be able to transfer their
shares. The interests in the Liquidating Trust will not be transferable.
As shareholders will be deemed to have received a liquidating distribution
equal to their pro rata share of the value of the net assets distributed to the
Liquidating Trust for tax purposes, that deemed distribution could result in
tax liability for the shareholders whether or not the shareholders have
received any actual distributions from the Trust that would provide funds with
which to pay such tax. See "CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS".
Absence of Appraisal Rights
Under the California Corporations Code, the shareholders of OPTi are not
entitled to appraisal rights for their shares of common stock in connection
with the transactions contemplated by the Plan.
Regulatory Approvals
No United States federal or state regulatory requirements must be complied
with or approvals obtained in connection with the dissolution.
18
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of the material United States federal income tax
consequences affecting OPTi and OPTi's shareholders that are anticipated to
result from the liquidation and dissolution of OPTi is based upon the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury Regulations, Internal
Revenue Service ("IRS") rulings, and judicial decisions now in effect, all of
which are subject to change at any time (any such changes may be applied
retroactively). This discussion does not purport to be a complete analysis of
all the potential tax effects of the liquidation and dissolution of OPTi.
Moreover, this discussion does not address the tax consequences that may be
relevant to particular categories of investors subject to special treatment
under certain federal income tax laws (such as dealers in securities, banks,
insurance companies, tax-exempt organizations, mutual funds, foreign
individuals and entities, persons who acquired OPTi shares as compensation, and
persons who hold OPTi shares subject to hedging, straddle, conversion or
constructive sale transactions) and does not address any tax consequences
arising under the laws of any state, local or foreign jurisdiction.
Distributions pursuant to the Plan may occur at various times and in more than
one tax year. No assurance can be given that the tax treatment described herein
will remain unchanged at the time of such distributions.
For federal income tax purposes, assets held by the Liquidating Trust should
be treated as if they had first been distributed by OPTi to our shareholders
pro rata to their shareholdings and then contributed by our shareholders to the
Liquidating Trust. Accordingly, the summary below occasionally refers to a
distribution to our shareholders of the patents held by the Liquidating Trust
and a contribution by our shareholders to the Liquidating Trust.
OPTi has requested that the IRS issue a ruling as to certain of the tax
consequences discussed below. If the IRS rules favorably as to some or all of
those matters, OPTi and OPTi's shareholders will be entitled to rely on those
rulings and can be assured of having the tax treatment described below as to
those matters (assuming that OPTi liquidates in accordance with the Plan in all
material respects). If the IRS does not rule favorably as to any matter
presented in OPTi's ruling request, or if the liquidation is not effected in
accordance with the Plan in all material respects, then the following
discussion has no binding effect on the courts or the IRS. If any of the
anticipated tax consequences described herein proves to be incorrect, the
result could be increased taxation at the corporate and/or shareholder level,
thus reducing the benefit to the shareholders and OPTi from the liquidation and
dissolution.
THE TAX CONSEQUENCES OF THE LIQUIDATION ARE COMPLEX. ACCORDINGLY, EACH
HOLDER OF OPTi SHARES SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR WITH
RESPECT TO THE FEDERAL INCOME TAX CONSEQUENCES, AS WELL AS ANY GIFT, STATE,
LOCAL OR FOREIGN TAX CONSEQUENCES, OF THE LIQUIDATION.
IRS Ruling Request
OPTi has requested the IRS issue a ruling regarding the following U.S.
federal income tax consequences of OPTi's proposed liquidation and dissolution:
(1) OPTi's distributions to its shareholders will be treated as a series of
distributions in complete liquidation of OPTi and will be treated as received
by OPTi shareholders in full payment in exchange for their OPTi shares, (2)
except with respect to the patents transferred to the Liquidating Trust, OPTi
shareholders will recognize gain or loss upon the receipt of the liquidating
distributions, (3) except with respect to the patents transferred to the
Liquidating Trust, OPTi will recognize gain or loss on the distribution of its
property in complete liquidation as if OPTi had sold that property at its fair
market value, (4) OPTi's shareholders will not recognize any gain or loss upon
their deemed contribution of property to the Liquidating Trust, (5) the
Liquidating Trust will be treated as a liquidating trust, and (6) proceeds
derived from the patents transferred to the Liquidating Trust or from any
infringement claims asserted by the Liquidating Trust will be treated as
additional liquidating distributions received by OPTi shareholders in exchange
for their OPTi shares. Request (3) asks that the IRS allow OPTi to treat our
distribution of the patents held by the Liquidating Trust as an "open
transaction" so that OPTi may keep open the recognition and determination of
OPTi's gain
19
from its distribution of those patents until the Liquidating Trust and our
shareholders have received all proceeds derived from those patents. Similarly,
Requests (3) and (6) ask that an OPTi shareholder be allowed to treat the
distribution to him or her of an interest in the patents held by the
Liquidating Trust as an open transaction so that the shareholder may keep open
the recognition and determination of his or her gain from receipt of the
interest in those patents until the Liquidating Trust and the shareholder have
received all proceeds derived from the patents. OPTi has not received any
substantive response from the IRS regarding the requested rulings, and does not
anticipate receiving any substantive response from the IRS until, at the
earliest, October 2001.
Federal Income Taxation of OPTi
After the approval of the Plan and until the dissolution is completed, we
will continue to be subject to federal income tax on our taxable income, if
any. We will recognize gain or loss on sales of our assets pursuant to the
Plan. Upon the distribution of any property, other than cash, to shareholders
pursuant to the Plan, we will recognize gain or loss as if such property were
sold to the shareholders at its fair market value, unless certain exceptions to
the recognition of loss apply and, only in the case of the patents held by the
Liquidating Trust, unless the IRS rules favorably on OPTi's request for open
transaction treatment.
If the IRS rules favorably on OPTi's request for open transaction treatment,
then we will recognize and pay tax on the gain from our deemed sale of the
patents held by the Liquidating Trust only as the Liquidating Trust and after
its termination, our shareholders receive payments from third parties with
respect to the patents (such as licensing royalties or damages for
infringement). If the IRS does not rule favorably on that request, then we will
be required to recognize gain on the patents when they are distributed to our
shareholders. In that case, OPTi will attempt to place a fair market value on
those patents. No assurance can be given, however, that the IRS or a court
would agree with our determination of the fair market value of those patents.
Federal Income Taxation of OPTi's Shareholders
As a result of the liquidation and dissolution of OPTi, for federal income
tax purposes an OPTi shareholder will recognize gain or loss equal to the
difference between (i) the sum of the amount of cash distributed to him or her
and the fair market value (at the time of distribution) of any property
(except, perhaps, the patents held by the Liquidating Trust) distributed to him
or her, and (ii) the tax basis for his or her shares of the Common Stock. A
shareholder's tax basis in OPTi shares will depend upon various factors,
including the shareholder's cost and the amount and nature of any distributions
received with respect thereto. As discussed below, the tax treatment to our
shareholders of the patents held by the Liquidating Trust depends in part on
whether the IRS rules favorably on our request for open transaction treatment
described above.
A shareholder's gain or loss will be computed on a "per share" basis. OPTi
expects to make more than one liquidating distribution. Each liquidating
distribution must be allocated proportionately to each share of stock owned by
a shareholder. The value of each liquidating distribution will be applied
against and reduce a shareholder's tax basis in his or her shares of stock.
Gain will be recognized as a result of a liquidating distribution to the extent
that the aggregate value of the distribution and prior liquidating
distributions received by a shareholder with respect to a share exceeds the
shareholder's tax basis for that share. Any loss will generally be recognized
only when the final distribution from OPTi has been received and then only if
the aggregate value of all liquidating distributions with respect to a share is
less than the shareholder's tax basis for that share. Gain or loss recognized
by a shareholder will be capital gain or loss provided the shares are held as
capital assets; whether such capital gain or loss is short- or long-term
capital gain or loss will depend upon a shareholder's holding period for the
shares. Gain resulting from distributions of cash or assets from a corporation
pursuant to a plan of dissolution is, therefore, usually capital gain rather
than ordinary income. If it were determined that distributions made pursuant to
the Plan were not liquidating distributions, the result could be treatment of
distributions as dividends taxable at ordinary income rates (which may be
higher than capital gain rates).
OPTi's request for open transaction treatment in effect asks the IRS to rule
that our shareholders be allowed to determine their gain or loss, with respect
to the patents transferred to the Liquidating Trust, only if and when
20
the Liquidating Trust and, after termination of the Liquidating Trust, our
shareholders receive payments with respect to those patents. If the IRS rules
favorably on that request, then a shareholder will not be able to recognize a
loss on the shareholder's OPTi shares until the shareholder has received the
final distribution from OPTi and the Liquidating Trust and, after termination
of the Liquidating Trust, the shareholder has received all payments with
respect to the patents. In addition, gain with respect to OPTi shares will be
recognized only when and to the extent that the aggregate amount of all
distributions received by the OPTi shareholder with respect to the OPTi share,
including the shareholder's pro rata portion of payments the Liquidating Trust
and the shareholder receive with respect to the patents, exceeds the
shareholder's tax basis in that share.
Upon any distribution of property, the shareholder's tax basis in such
property immediately after the distribution will be the fair market value of
such property at the time of distribution. However, if the IRS rules favorably
on our request for open transaction treatment, then a shareholder's tax basis
in a patent held by the Liquidating Trust will not be determined until the
Liquidating Trust and, after termination of the Liquidating Trust, the
shareholder has received all payments with respect to the patent, and will be
equal to the aggregate amount of all such payments. The gain or loss realized
upon the shareholder's future sale of that property will be measured by the
difference between the shareholder's tax basis in the property at the time of
such sale and the proceeds of such sale.
After the close of our taxable year, we will provide shareholders and the
IRS with a statement of the amount of cash distributed to the shareholders and
our best estimate as to the value of any property distributed to them during
that year (other than patents transferred to the Liquidating Trust, if the IRS
rules favorably on our request for open transaction treatment). There is no
assurance that the IRS will not challenge such valuation. As a result of such a
challenge, the amount of gain or loss recognized by shareholders might be
changed. Distributions of property other than cash to shareholders could result
in tax liability to any given shareholder exceeding the amount of cash
received, requiring the shareholder to meet the tax obligations from other
sources or by selling all or a portion of the assets received.
It is possible that we will have liabilities not fully covered by our
Contingency Reserve for which the shareholders will be liable up to the extent
of any liquidating distributions they have received. See "Contingent
Liabilities; Contingency Reserve". Such a liability could require a shareholder
to satisfy a portion of such liability out of prior liquidating distributions
received from OPTi and the Liquidating Trust. Payments by shareholders in
satisfaction of such liabilities would commonly produce a capital loss, which,
in the hands of individual shareholders, could not be carried back to prior
years to offset capital gains realized from liquidating distributions in those
years.
Certain Federal Income Tax Consequences Arising from Liquidating Trusts
The Liquidating Trust is structured so that shareholders will be treated for
federal income tax purposes as having actually received their pro rata share of
the property transferred to it, reduced by the amount of known liabilities
assumed by the Liquidating Trust, and then transferring those assets (subject
to those liabilities) to the Liquidating Trust. Assuming such treatment is
achieved, assets transferred to the Liquidating Trust will cause the
shareholder to be treated in the same manner for federal income tax purposes as
if the shareholder had received a distribution directly from OPTi. The
Liquidating Trust should not be subject to federal income tax, assuming that it
is treated as a liquidating trust for federal income tax purposes. Unless the
IRS favorably rules on the status of the Liquidating Trust, however, there can
be no assurance that the Liquidating Trust will be treated as a liquidating
trust for federal income tax purposes.
After formation of the Liquidating Trust, shareholders must take into
account for federal income tax purposes their allocable portion of any income,
gain, loss and deduction recognized by the Liquidating Trust. If the IRS rules
favorably on our request for open transaction treatment, then amounts received
by the Liquidating Trust attributable to the patents transferred to it will be
treated as additional liquidation proceeds, usually taxable as capital gains.
If the IRS does not rule favorably on that request, then such amounts may be
either ordinary
21
income or capital gain, depending upon whether the patent is a capital asset
when held by the shareholder and also upon the nature of the transaction giving
rise to the proceeds. Regardless of whether amounts received by the Liquidating
Trust are treated as additional liquidation proceeds, shareholders should be
aware that they may be subject to tax, whether or not they have received any
actual distributions from the Liquidating Trust with which to pay such tax.
Taxation of Non-United States Shareholders
Foreign corporations or persons who are not citizens or residents of the
United States should consult their tax advisors with respect to the U.S. and
non-U.S. tax consequences of the Plan.
State and Local Tax
We may be subject to liability for state or local taxes with respect to the
sale of our assets. Shareholders may also be subject to state or local taxes,
including with respect to liquidating distributions received by them or paid to
a liquidating trust on their behalf, and with respect to any income derived by
a liquidating trust. Shareholders should consult their tax advisors with
respect to the state and local tax consequences of the Plan.
THE FOREGOING SUMMARY OF UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS IS
INCLUDED FOR GENERAL INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE TO
ANY SHAREHOLDER. THE TAX CONSEQUENCES OF THE PLAN MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF THE SHAREHOLDER. OPTi RECOMMENDS THAT EACH
SHAREHOLDER CONSULT HIS OR HER OWN TAX ADVISOR REGARDING THE FEDERAL INCOME TAX
CONSEQUENCES OF THE PLAN AS WELL AS THE STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES.
22
LIQUIDATION ANALYSIS AND ESTIMATES
If our shareholders approve the Liquidation Plan, our Board of Directors
will determine, in their sole discretion and in accordance with applicable
laws, the timing of, the amount, the kind of and the dates for all
distributions made to shareholders. Although our Board of Directors has not
established a firm timetable for distributions to shareholders, after approval
of the Liquidation Plan, our Board will, subject to exigencies inherent in
winding up our business, make such distributions as promptly as practicable. We
currently anticipate that our Board will set a date for the first distribution
of liquidation proceeds in December 2001 with most of the remaining liquidation
proceeds distributed over a period of three to six months. In the absence of
known claims or liabilities or possible claims or liabilities which we view as
likely, we anticipate distributing our available cash at the time of
distribution, less a reasonable reserve for claims, liabilities and similar
contingencies and less the cash reserved for the Liquidating Trust. See "Final
Record Date" above for additional detail about liquidating distributions.
Because of the uncertainties as to the precise net realizable value of our
assets and the ultimate amount of our liabilities, it is impossible to predict
with certainty the aggregate net values which will ultimately be distributed to
shareholders or the exact timing of distributions. Based upon information
presently available to us and assuming no unanticipated claims or other
material adverse events we believe our shareholders are likely to receive from
$2.00 to $2.35 per share from the initial distribution of net available assets.
Additional distributions could occur during the next three to six months. We
are unable to estimate the amounts of those distributions at this time. Our
estimate of our initial liquidating distribution is based on adjusting the
available cash and marketable securities as of June 30, 2001, as follows:
. Projected increases in available cash and marketable securities due to the
receipt of monies from (i) estimated proceeds from the sale of assets;
(ii) estimated cash based revenues and interest income from June 30, 2001
to the date of the distribution; (iii) the exercise of outstanding vested
"in the money" options by employees and officers; (iv) and the estimated
net realizable value of our non-cash assets.
. Projected decreases in available cash due to payment or reservation of
monies for (i) estimated expenses relating to operations from June 30,
2001 to the date of the distribution; (ii) accounts payable and accrued
liabilities as of June 30, 2001; (iii) estimated amounts due employees or
officers under retention and severance arrangements; (iv) costs and
expenses associated with completion of the sale of our assets, including
necessary legal and professional service costs; (v) estimates of costs
related to discontinuing long-term lease arrangements; and (vi) estimates
of costs for securing continuing director and officer liability insurance.
. The establishment of an appropriate contingency reserve to ensure all
future liabilities of OPTi may be met.
. The establishment of a Liquidating Trust with adequate funds to operate
the Trust.
In addition to the estimated amount of the initial liquidating distribution,
we also expect to distribute the Tripath stock or the proceeds from their sale
in conjunction with the initial distribution. We will distribute the 1,914,155
shares of Tripath to our shareholders on a pro rata basis. As of October ,
2001, the closing sale price for Tripath stock was $ per share.
In addition, OPTi may also transfer its patents and related intellectual
property to the Liquidating Trust. Depending upon the outcome of a pending
ruling request we have submitted to the IRS, OPTi shareholders on the date of
such transfer could be deemed to have received a liquidating distribution of
assets on that date. OPTi does not believe that the value of our patents will
be reasonably ascertained by the time of such transfer but we have received an
estimate that OPTi's recovery from the Infringement Claims could range from $0
to $100 million. See "CERTAIN UNITED STATES FEDERAL INCOME TAXES" below.
We will update this information as promptly as practicable as additional
information becomes available to us.
23
THE METHODS USED BY OUR BOARD OF DIRECTORS AND MANAGEMENT IN ESTIMATING THE
VALUES OF OPTi's ASSETS ARE INEXACT AND MAY NOT APPROXIMATE VALUES ACTUALLY
REALIZED. OUR BOARD OF DIRECTORS' ASSESSMENT ASSUMES THAT THE ESTIMATES OF
OPTi's LIABILITIES AND OPERATING COSTS ARE ACCURATE, BUT THOSE ESTIMATES ARE
SUBJECT TO NUMEROUS UNCERTAINTIES BEYOND OPTi's CONTROL AND ALSO DO NOT REFLECT
ANY CONTINGENT LIABILITIES THAT MAY MATERIALIZE. FOR ALL THESE REASONS, THERE
CAN BE NO ASSURANCE THAT THE ACTUAL NET PROCEEDS DISTRIBUTED TO SHAREHOLDERS IN
DISSOLUTION MAY NOT BE SIGNIFICANTLY LESS THAN THE ESTIMATED AMOUNT SHOWN.
MOREOVER, NO ASSURANCE CAN BE GIVEN THAT ANY AMOUNTS TO BE RECEIVED BY OPTi's
SHAREHOLDERS IN DISSOLUTION WILL EQUAL OR EXCEED THE PRICE OR PRICES AT WHICH
THE COMMON STOCK HAS RECENTLY TRADED OR MAY TRADE IN THE FUTURE.
VOTE REQUIRED AND BOARD RECOMMENDATION
The approval of the Liquidation Plan requires the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock as of the
Annual Meeting Record Date. Members of our Board of Directors and the executive
officers of OPTi who hold (or are deemed to hold) an aggregate of shares of
common stock (approximately % of the outstanding shares of common stock as of
October , 2001) have indicated that they will vote in favor of the proposal.
OUR BOARD BELIEVES THAT THE LIQUIDATION PLAN IS IN THE BEST INTERESTS OF
OPTi's SHAREHOLDERS AND RECOMMENDS A VOTE FOR THIS PROPOSAL. IT IS INTENDED
THAT SHARES REPRESENTED BY THE ENCLOSED FORM OF PROXY WILL BE VOTED IN FAVOR OF
THIS PROPOSAL UNLESS OTHERWISE SPECIFIED IN SUCH PROXY.
24
PROPOSAL NUMBER 2
ELECTION OF DIRECTORS
Directors and Nominees for Directors
A board of four directors is to be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's four nominees named below, all of whom are presently
directors of the Company. In the event that any nominee of the Company is
unable or declines to serve as a director at the time of the Annual Meeting,
the proxies will be voted for any nominee who shall be designated by the
present Board of Directors to fill the vacancy. In the event that additional
persons are nominated for election as directors, the proxy holders intend to
vote all proxies received by them in such a manner in accordance with
cumulative voting as will assure the election of as many of the nominees listed
below as possible, and, in such event, the specific nominees to be voted for
will be determined by the proxy holders. The Company is not aware of any
nominee who will be unable or will decline to serve as a director. The term of
office of each person elected as a director will continue until the earlier of
(i) our next Annual Meeting of Shareholders; (ii) a successor has been duly
elected and qualified; or (iii) we complete the dissolution of OPTi as
described in Proposal No. 1 above.
OUR BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" THE ELECTION OF ALL NOMINEES.
BOARD OF DIRECTORS AND NOMINEE BIOGRAPHICAL INFORMATION
The names of the nominees, each of whom is currently a director of the
Company, and certain information about them is set forth below, including
information furnished by them as to their principal occupations for the last
five (5) years and their ages as of the Annual Meeting Record Date.
Name of Nominee Age Position with the Company Since
--------------- --- ------------------------- -----
Bernard T. Marren.... 64 President, Chief Executive Officer and Chairman of the Board 1996
Stephen A. Dukker(1). 47 Director 1993
Kapil K. Nanda(1)(2). 54 Director 1996
William Welling(1)(2) 67 Director 1998
--------
(1)Member of the Audit Committee.
(2)Member of the Compensation Committee.
Bernard T. Marren has served as President and Chief Executive Officer of the
Company since May 1998. Mr. Marren was elected as a director in May 1996. Mr.
Marren founded Western Microtechnology Inc., a distributor of electronic
systems and semiconductor devices. He served as its President from 1977 to
1994. He also founded and was the first President of SIA (the Semiconductor
Industry Association). Mr. Marren is also a director of three private
companies.
Stephen A. Dukker was elected as a director of the Company in January 1993.
He served as President and Chief Executive Officer of eMachines from 1998 to
April 2001. He was a Senior Vice President of Merchandising at Computer City
from October 1997 to August 1998. He served as President of OPTi Inc. from
January of 1996 to October 1997. From May 1994 to mid 1995, Mr. Dukker served
as President of VideoLogic, Inc., a supplier of video and graphics add-on
boards. From June 1991 through October 1993, he served as a Senior Vice
President of CompUSA, Inc., a chain of discount computer superstores. During
that time he was also a member of the Executive Committee of CompUSA and
President of its Compudyne Computer manufacturing and mail order subsidiaries.
Prior to joining CompUSA, Mr. Dukker was President of PC Brand, Inc., a
manufacturer and mail order distributor of PC products from January 1988 to May
1991.
25
William Welling was elected as a director in August 1998. He is currently
Chairman and CEO of @Comm Corporation, a telecommunications software company.
Since 1983 he has been Managing Partner of Venture Growth Associates, an
investment firm. Mr. Welling also serves as a director on the boards of several
private companies.
Kapil K. Nanda was elected as a director in May 1996. Mr. Nanda is currently
President of InfoGain Corporation, a software and development consulting
company, which he founded in 1990. Prior to 1990, Mr. Nanda held various
positions at Altos Computer Systems, a personal computer manufacturing company,
from 1981 to 1989. He served as Vice President of Engineering from 1984 to
1989. From 1974 to 1981, Mr. Nanda was employed at Intel Corporation, serving
as Manager, Software Engineering from 1976 to 1981. Mr. Nanda holds a B.S. in
Engineering from the University of Punjab, India, an M.S. in Engineering from
the University of Kansas, and an M.B.A. from the University of Southern
California.
Vote Required
The four (4) nominees receiving the highest number of affirmative votes of
the shares entitled to be voted for them shall be elected as directors. Votes
withheld from any director are counted for purposes of determining the presence
or absence of a quorum for the transaction of business, but have no other legal
effect in the election of directors under California law.
MEETINGS AND COMMITTEES OF OUR BOARD OF DIRECTORS
Board Meetings and Committees
During the Last Fiscal Year, the Board of Directors held a total of eight
(8) meetings. No incumbent director attended less than 75% of the aggregate of
all meetings of the Board of Directors and any committees of the Board on which
he served, if any, during his tenure as a director.
The Audit Committee was established to review, in consultation with the
independent auditors, the Company's financial statements, accounting and other
policies, accounting systems and system of internal controls. The Audit
Committee also recommends the engagement of the Company's independent auditors
and reviews other matters relating to the relationship of the Company with its
auditors. The Audit Committee met four (4) time during the Last Fiscal Year.
The Compensation Committee was established to review and act on matters
relating to compensation levels and benefit plans for key executives of the
Company, among other things. The Compensation Committee met two (2) time during
the Last Fiscal Year.
The Board of Directors currently has no nominating committee or other
committee performing a similar function.
DIRECTOR COMPENSATION
Non-employee members of the Board of Directors are currently compensated at
the rate of $1,000 per Board meeting attended, plus out-of-pocket expenses for
attending such meetings. In addition, non-employee directors are eligible to
participate in the Company's 1993 Director Stock Option Plan.
26
PROPOSAL NUMBER 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Ernst & Young LLP, independent auditors,
to audit the financial statements of the Company for the fiscal year ending
December 31, 2001. In the event of a negative vote on such ratification, the
Board of Directors will reconsider its selection.
If the OPTi shareholders approve the Liquidation Plan set forth in Proposal
No. 1 of this Proxy Statement, the Board of Directors may determine that
audited financial statements are not required for fiscal year 2001. However,
OPTi will still require the services of independent accountants to conduct
yearly audits and other such matters for so long as OPTi is obligated to comply
with the applicable reporting requirements of the Securities Exchange Act of
1934, as amended.
Ernst & Young LLP has audited the Company's financial statements for each
fiscal year since the Company's inception. Representatives of Ernst & Young LLP
are expected to be present at the meeting with the opportunity to make a
statement if they desire to do so, and are expected to be available to respond
to appropriate questions.
Vote Required
The affirmative vote of a majority of the Votes Cast will be required to
ratify the appointment of Ernst & Young LLP as the Company's independent
auditors for the fiscal year ending December 31, 2001.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT ACCOUNTANTS OF OPTi FOR THE
YEAR ENDING DECEMBER 31, 2001.
27
OTHER INFORMATION
Executive Officers
The following persons are executive officers of the Company as of the Annual
Meeting Record Date:
Name Age Position
---- --- --------
Bernard T. Marren... 64 President, Chief Executive Officer and Chairman of the Board
Michael Mazzoni..... 38 Chief Financial Officer
Bernard T. Marren's biography is set forth above. See "PROPOSAL NUMBER
TWO--Election of Directors".
Michael Mazzoni has served as Chief Financial Officer since December 2000.
Mr. Mazzoni also served with the Company from October 1993 to January 2000. The
last two years prior to his departure Mr. Mazzoni served as our Chief Financial
Officer. Prior to re-joining the Company, Mr. Mazzoni was Chief Financial
Officer of Xpeed, Inc., a startup in the Digital Subscriber Line CPE business,
from January 2000 to November 2000.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file certain reports regarding ownership
of, and transactions in, the Company's securities with the Securities and
Exchange Commission (the "SEC") and with Nasdaq. Such officers, directors and
10% shareholders are also required by SEC rules to furnish the Company with
copies of all Section 16(a) forms that they file.
Based solely on its review of copies of Forms 3 and 4 and amendments thereto
furnished to the Company pursuant to Rule 16a-3(e) and Forms 5 and amendments
thereto furnished to the Company with respect to the Last Fiscal Year, and any
written representations referred to in Item 405(b)(2)(i) of Regulation S-K
stating that no Forms 5 were required, the Company believes that, during the
last Fiscal Year, all Section 16(a) filing requirements applicable to the
Company's officers, directors and 10% shareholders were complied with, except
for two Form 4's relating to sales of stock not reported by Michael Mazzoni.
28
Security Ownership of Certain Beneficial Owners and Management
The following nominee table sets forth the beneficial ownership of Common
Stock of the Company as of September , 2001 by: (i) each present director of
the Company; (ii) each of the officers named in the table under the heading
"EXECUTIVE COMPENSATION--Summary Compensation Table;" (iii) all current
directors and executive officers as a group; and (iv) each person known to the
Company who beneficially owns 5% or more of the outstanding shares of its
Common Stock. The number and percentage of shares beneficially owned is
determined under the rules of the SEC, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such rules,
beneficial ownership includes shares as to which the individual has sole or
shared voting power or investment power and also any shares which the
individual has the right to acquire within sixty (60) days of September ,
2001 through the exercise of any stock option or other right. Unless otherwise
indicated, each person has sole voting and investment power with respect to the
shares, shown as beneficially owned. Unless otherwise indicated, officers and
directors can be reached at the Company's principal executive offices. A total
of shares of the Company's Common Stock were issued and outstanding as of
September , 2001.
Shares Beneficially
Owned
- -------------------
Name Number Percent
---- ------ -------
Bernard Marren(1)....................................................
Michael Mazzoni(2)...................................................
Donald Farina(3).....................................................
Stephen Dukker(4)....................................................
Kapil Nanda(5).......................................................
William Welling(6)...................................................
Caxton International.................................................
315 Enterprise Drive
Plainsboro, NJ 08536
Dimension Fund Advisors..............................................
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
MG Capital Management LLC............................................
1725 Kearny Street, No. 1
San Francisco, CA 94133
All Directors and Executive Officers as a group (6 persons)(7).......
--------
* Represents less than one percent.
(1) Includes shares subject to stock option exercisable as of September ,
2001 or within sixty (60) days thereafter.
(2) Includes shares subject to stock option exercisable as of September ,
2001 or within sixty (60) days thereafter.
(3) Includes shares subject to stock option exercisable as of September ,
2001 or within sixty (60) days thereafter.
(4) Includes shares subject to stock option exercisable as of September ,
2001 or within sixty (60) days thereafter.
(5) Includes shares subject to stock option exercisable as of September ,
2001 or within sixty (60) days thereafter.
(6) Includes shares subject to stock option exercisable as of September ,
2001 or within sixty (60) days thereafter.
(7) Includes shares pursuant to notes (1), (2), (3), (4), (5) and (6).
29
Summary Compensation Table
The following table sets forth certain information with respect to the
compensation paid by the Company for services rendered during fiscal years
2000, 1999 and 1998 to Bernard Marren, Michael Mazzoni and Donald Farina (the
"Named Officers"). The table lists the principal position held by each Named
Officer in the Last Fiscal Year.
Long-Term
Annual Compensation Compensation
-------------------- Awards All Other
Name Year Salary ($) Bonus ($) Options (#) Compensation
---- ---- ---------- --------- ------------ ------------
Bernard T. Marren........................ 2000 $255,000 $100,000 -- $5,250(1)
President and Chief Executive Officer 1999 251,250 420,000 -- --
1998 150,923 -- -- --
Michael Mazzoni(2)(3).................... 2000 43,650 75,000 -- --
Chief Financial Officer 1999 145,763 69,525 -- --
1998 136,475 50,000 45,000 --
Donald Farina(4)......................... 2000 88,654 -- 25,000 3,500(1)
Vice President, Intellectual Property 1999 -- -- -- --
1998 -- -- -- --
--------
(1) These amounts are related to the 50% company match on 401K contributions.
(2) Mr. Mazzoni resigned from the Company in January 2000.
(3) Mr. Mazzoni was rehired in December 2000.
(4) Mr. Farina's employment with the Company terminated on July 20, 2001.
Option Grants in Last Fiscal Year
The following table provides information with respect to options granted in
the Last Fiscal Year to the Named Officers.
Individual Grants Potential Realizable
----------------------------------------------------- Value at Assumed
Shares of Percent of Annual Rates of Stock
Common Stock Total Options Price Appreciation for
Underlying Granted to Option Term(3)
Options Employees in Exercise Expiration ----------------------
Name Granted (#)(1) Fiscal Year(2) Price ($/Sh) Date 5% 10%
---- -------------- -------------- ------------ ---------- ------- --------
Bernard Marren............... -- -- -- -- -- --
Michael Mazzoni.............. -- -- -- -- -- --
Donald Farina(4)............. 25,000 13.9% $3.75 4/16/10 $58,959 $149,413
--------
(1) All options to Named Officers are granted under the Company's 1993 Stock
Option Plan at an exercise price equal to the fair market value on the date
of the grant. These stock options vest and become exercisable monthly as to
1/8 of the shares beginning six (6) months following the vesting
commencement date and as to 1/48 of the shares on the first day of each
month thereafter. Under the terms of the Option Plan, the plan
administrator retains the discretion, subject to certain limitations within
the plan, to modify, extend, renew or accelerate the vesting of options and
to reprice outstanding options. In particular, subject to Board approval,
the plan administrator may reduce the exercise price of an option to the
current fair market price of the underlying stock if the price of such
stock has declined since the date on which the option was granted.
(2) Based on 180,000 options granted to employees during the Last Fiscal Year
under the 1993 and 1995 Stock Option Plan(s).
(3) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price.
(4) Mr. Farina's employment with the Company terminated on July 20, 2001.
30
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
The following table provides information with respect to option exercises in
the Last Fiscal Year by the Named Officers and the value of such officer's
unexercised options at December 31, 2000.
Total Number of Total Value of Unexercised
Unexercised Options at In-the-Money Options at
Shares Fiscal Year End (#) Fiscal Year End ($)(1)
Acq. Value ------------------------- --------------------------
Name Exer. Realized Exercisable Unexercisable Exercisable Unexercisable
---- ------ -------- ----------- ------------- ----------- -------------
Bernard Marren............... -- -- 100,000 -- $24,500 --
Michael Mazzoni.............. 20,000 $32,375 -- -- -- --
Donald Farina(2)............. -- -- 16,667 8,333 $18,750 $9,375
--------
(1) Market value of the underlying securities based on the closing price of the
Company's Common Stock on December 31, 2000 on the Nasdaq National Market,
minus the exercise price.
(2) Mr. Farina's employment with the Company terminated on July 20, 2001.
Compensation Committee Interlocks and Insider Participation
None.
Certain Transactions
The Company's policy is that it will not make loans to, or enter into other
transactions with, directors, officers or affiliates unless such loans or
transactions are (i) approved by a majority of the Company's independent
disinterested directors, (ii) may reasonably be expected to benefit the
Company, and (iii) will be on terms no less favorable to the Company than could
be obtained in arm's length transactions with unaffiliated third parties.
The Company has entered into indemnification agreements with each of its
directors and executive officers. Such agreements require the Company to
indemnify such individuals to the fullest extent permitted by California law.
31
REPORT OF COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors establishes the general
compensation policies of the Company as well as the compensation plans and
specific compensation levels for executive officers. It also administers the
Company's employee stock benefit plans and the 1993 Bonus Plan (the "Bonus
Plan"). The Compensation Committee is currently composed of independent,
non-employee directors who have no interlocking relationships as defined by the
Securities and Exchange Commission.
The Compensation Committee believes that the compensation of the executive
officers, including that of the Chief Executive Officer (collectively, the
"Executive Officers") should be influenced to a very significant extent by the
Company's financial performance. The Committee establishes the salaries of all
of the Executive Officers by considering various factors, including the
following: (i) the Company's financial performance for the past year, (ii) the
opportunity of the Executive to participate in the Company's success through
equity ownership and stock options, (iii) the salaries of executive officers in
similar positions of comparably-sized companies, and (iv) the critical
importance of cost control in the Company's business in light of ongoing
competition. In addition to salary, the cash portion of the Company's executive
compensation packages includes discretionary bonuses which are paid quarterly
based on the Company's operating results. The Committee believes that the
Company's executive Officer salaries and cash compensation are currently less
than or comparable to the compensation paid to executives at similarly-sized
businesses in the industry.
The Company's Bonus Plan provides that the maximum aggregate bonuses to be
paid to any individual Executive Officer in the year will in no event exceed
two (2) times the base salary of such Executive Officer. In addition, the
aggregate quarterly bonuses which may be paid to all Executive Officers will
not exceed 5% of the Company's pre-tax, pre-bonus income for the quarter.
Acting with the advice of the Committee, the Board of Directors periodically
grants options to Executive Officers. The Committee views stock option grants
as an important component of its long-term, performance-based compensation
philosophy. Since the value of an option bears a direct relationship to the
Company's stock price, the Committee believes that options motivate Executive
Officers to manage the Company in a manner which will also benefit
shareholders. Options are granted at the current market price on the date of
grant.
The compensation package for the Company's Chief Executive Officer, Bernard
T. Marren, includes three elements: (i) base salary, (ii) performance bonus and
(iii) stock options. The base salary was determined through a comparison of
base salaries paid with respect to chief executive officers of other
publicly-traded semiconductor companies located in Northern California. The
performance bonus element has been established to provide variable bonus
compensation to the CEO based on the Company's actual operating results during
fiscal 1996 and thereafter, including both sales and net income measurements.
The stock option award is intended to provide long-term compensation to the CEO
based on the stock performance of the Company. The options vest over a four (4)
year period. In general, the Committee believes that the compensation package
of the CEO is closely tied to the financial performance of the Company and has
a high degree of variability based on such performance.
COMPENSATION COMMITTEE OF THE BOARD
OF DIRECTORS
Kapil Nanda
William Welling
32
AUDIT COMMITTEE REPORT
Under the guidance of a written charter adopted by the Board of Directors,
the purpose of the Audit Committee is to monitor the integrity of the financial
statements of the company, oversee the independence of the company's
independent auditor, and recommend to the Board the selection of the
independent auditor responsible for making recommendations to the Board
regarding the selection of independent accountants. Each of the members of the
Audit Committee meets the independence requirements of Nasdaq.
Management has the primary responsibility for the system of internal
controls and the financial reporting process. The independent accountants have
the responsibility to express an opinion on the financial statements based on
an audit conducted in accordance with generally accepted auditing standards.
The Audit Committee has the responsibility to monitor and oversee these
processes.
In this context and in connection with the audited financial statements
contained in the Company's Annual Report on Form 10-K, the Audit Committee:
. reviewed and discussed the audited financial statements with the Company's
management;
. discussed with Ernst & Young LLP, the Company's independent auditors, the
matters required to be discussed by Statement of Auditing Standards No.
61, Communication with Audit Committees, as amended by Statement of
Auditing Standards No. 90, Audit Committee Communications;
. reviewed the written disclosures and the letter from Ernst & Young LLP,
required by the Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees, discussed with the auditors their
independence, and concluded that the nonaudit service performed by Ernst &
Young LLP are compatible with maintaining their independence;
. based on the foregoing reviews and discussions, recommended to the Board
of Directors that the audited financial statements be included in the
Company's 2000 Annual Report on Form 10-K for the fiscal year ended
December 31, 2000 filed with the Securities and Exchange Commission; and
. instructed the independent auditor that the Committee expects to be
advised if there are any subjects that require special attention.
AUDIT COMMITTEE
Stephen Dukker
Kapil Nanda
William Welling
33
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Ernst & Young LLP has been the independent accounting firm that audits the
financial statements of the Company since its inception. In accordance with
standing policy, Ernst & Young LLP periodically changes the personnel who work
on the audit.
Audit Fees. For professional services rendered by Ernst & Young LLP for the
audit of the Company's annual financial statements for the fiscal year ended
December 31, 2000, and the reviews of the financial statements included in the
Company's quarterly reports on Form 10-Q for the fiscal year ended December 31,
2000, Ernst & Young LLP billed the Company fees in the aggregate amount of
$140,000.
Financial Information Systems Design and Implementation Fees. The Company
did not engage Ernst & Young LLP to provide advice to the Company regarding
financial systems design and implementation during the fiscal year ended
December 31, 2000 and thus the Company did not pay any fees to Ernst & Young
for such services.
All Other Fees. For professional services other than those described above
rendered by Ernst & Young LLP to the Company for the fiscal year ended December
31, 2000, Ernst & Young LLP billed the Company fees in the aggregate amount of
$25,831. All other fees include tax planning and the preparation of tax returns
of the Company.
The Audit Committee reviews summaries of the services provided by Ernst &
Young LLP and the related fees and has considered whether the provision of
non-audit services is compatible with maintaining the independence of Ernst &
Young LLP.
34
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total shareholder
return, calculated on a dividend reinvested basis, from the effective date of
the initial public offering of the Company's common stock (December 31, 1993)
through the Last Fiscal Year end (December 31, 2000) for OPTi Inc., the CRSP
Index for Nasdaq Stock Market (U.S. Companies) (the "Nasdaq Index") and the
CRSP Index for Nasdaq Electronic Components Stocks (the "Nasdaq Electronic
Components Index"). The graph assumes that $100 was invested in the Company's
common stock on December 31, 1993 at the initial public offering price and in
the Nasdaq Index and the Nasdaq Electronic Components Index on December 31,
1993. Note that historic stock price performance is not necessarily indicative
of future stock price performance.
Comparison of Five Year-Cumulative Total Returns
Performance Graph for
OPTi Inc.
Prepared by the Center for Research in Security Prices
Produced on / /01 including data to 12/31/00
[Performance Graph for OPTi Inc.]
CRSP Total Returns
Index for 12/1994 12/1995 12/1996 12/1997 12/1998 12/1999
------------------ ------- ------- ------- ------- ------- -------
Opti Inc. $100.0 51.6 32.5 43.3 29.4 73.0
Nasdaq Stock Market
(US Companies) $100.0 141.3 173.9 213.1 300.4 557.4
Nasdaq Electronic
Components Stocks $100.0 166.5 288.3 302.3 466.9 868.3
SIC 3670-3679 US & Foreign
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the reporting requirements of the Securities Exchange Act
of 1934 and file reports, proxy statements and other information with the
Securities and Exchange Commission. You may read and copy any material we file
with the Securities and Exchange Commission at its public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the public reference rooms. Our public filings are also available to the public
from commercial document retrieval services and at the web site maintained by
the SEC at
http://www.sec.gov. You may also inspect all reports, proxy statements and
other information we filed with the Nasdaq Stock Market at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
The SEC allows us to "incorporate by reference" into this document. This
means that we can disclose important information to you by referring you to
another document filed separately with the SEC. The information incorporated by
reference is deemed to be part of this document, except for any information
superseded by information in this document. This document incorporates by
reference the documents set forth below that we have previously filed with the
SEC. These documents contain important information about us and our finances.
1.OPTi Inc.'s Annual Report on Form 10-K for the fiscal year ended December
31, 2000; and
2.OPTi Inc.'s Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 2001 and June 30, 2001.
We are also incorporating by reference additional documents that we may file
with the SEC between the date of this document and the date of the meeting of
shareholders.
In conjunction with this proxy statement, we are also sending you our 2000
Annual Report to Shareholders, which includes the Report on Form 10-K
referenced above. You can obtain additional copies of our Annual Report as well
as any of the other incorporated documents by contacting us. We will send you
the documents incorporated by reference without charge.
Shareholders may obtain documents incorporated by reference in this document
by requesting them in writing or by telephone from the following: Michael
Mazzoni, Chief Financial Officer, OPTi Inc., 660 Alder Drive, Milpitas,
California 95035, (408) 382-2600.
If you would like to request documents from us, including any documents we
may subsequently file with the SEC before the meeting, please do so by November
, 2001 so that you will receive them before the meeting.
35
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy to vote the shares they represent as the
Board of Directors may recommend.
It is important that your shares of stock be represented at the meeting,
regardless of the number of shares which you hold. You are, therefore, urged to
execute and return, at your earliest convenience, the accompanying proxy in the
envelope which has been enclosed.
FOR THE BOARD OF DIRECTORS
Michael Mazzoni
Secretary
Dated October , 2001
36
Exhibit A
PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION OF OPTi, INC.
This Plan of Liquidation and Dissolution (the "Plan") will effect the
complete liquidation and dissolution of OPTi, Inc., a California corporation
(the "Company"), in accordance with the California Corporations Code (the
"Code") as follows:
1. Approval of the Plan. The Board of Directors of the Company (the "Board")
has adopted this Plan and called a meeting (the "Meeting") of the Company's
shareholders (the "Shareholders") to vote on the Plan in accordance with
Section 1900(a) of the Code. If Shareholders holding a majority of the
Company's outstanding common stock vote for the adoption of this Plan at the
Meeting, the Plan shall constitute the adopted Plan of the Company as of the
date of the Meeting (the "Adoption Date").
2. Cessation of Business Activities. After the Adoption Date, the Company
shall not engage in any business activities, except to the extent necessary to
preserve the value or dispose of its assets, provide for satisfaction of its
obligations, adjust and wind up its business and affairs and distribute the
proceeds from the disposition of its assets in accordance with this Plan. The
Board then in office shall continue in office solely for that purpose. The
Board shall dissolve the Company as soon as it deems feasible. The Board shall
cause to be executed and filed with the Internal Revenue Service Treasury
Department Form 966 ("Form 966") with a certified copy of the Plan and any
other required attachments no later than thirty (30) days following the
Adoption Date. The Board shall also cause to be executed and timely filed with
the appropriate federal or state agencies all other tax returns, certificates,
documents, and information returns, including without limitation supplemental
Forms 966, Treasury Department Forms 1099 Div. ("Forms 1099") and 1096,
required to be filed by reason of the liquidation and dissolution of the
Company. The Board shall cause to be timely disseminated to, as appropriate,
all or any Shareholders all returns, certificates, documents, and information
returns, including without limitation Forms 1099 Div., required by federal or
state agencies to be so disseminated by reason of the liquidation and
dissolution of the Company.
3. Continuing Employees and Consultants. For the purpose of effecting the
dissolution of the Company, the Company shall hire or retain, at the sole
discretion of the Board, such employees and consultants as the Board deems
necessary or desirable to supervise the dissolution.
4. Liquidation Process. From and after the Adoption Date, the Company shall
complete the following corporate actions:
(a) Liquidation of Assets. The Company shall determine whether and when
to (i) transfer any of the Company's patents, other intellectual property and
certain assets to a liquidating trust (established pursuant to Section 7
hereof), and (ii) collect, sell, exchange, distribute or otherwise dispose of
all its property and assets in one or more transactions upon such terms and
conditions as the Board, in its absolute discretion, deems expedient and in the
best interests of the Company and the Shareholders, without any further vote or
action by the Shareholders. The Company's assets and properties may be sold in
bulk to one buyer or to a small number of buyers or on a piecemeal basis to
numerous buyers. The Company will not be required to, but may, in its
discretion, obtain appraisals or other third party opinions as to the value of
its properties and assets in connection with the liquidation. In connection
with such collection, sale, exchange, distribution and other disposition, the
Company shall collect or make provision for the collection (such as through
operation of the liquidating trust established pursuant to Section 7 hereto) of
all accounts receivable, debts and claims owing to the Company.
(b) Payment of Obligations. The Company shall satisfy or, as determined
by the Board, make reasonable provision for the satisfaction of, all legally
enforceable claims and obligations of the Company, including the payment of any
severance, retention and other compensation claims, all contingent, conditional
or unmatured claims known to the Company and all claims which are known to the
Company but for which the identity of the claimant is unknown.
(c) Distributions to Shareholders. The Company shall directly distribute
pro rata to the Shareholders all available cash, including the cash proceeds of
any sale, exchange or disposition, except such cash, property or
A-1
assets that are (i) transferred by the Company for the Shareholders' benefit to
the Trust, or (ii) retained by the Company as a contingency reserve (as defined
below) for paying or making reasonable provision for the claims and obligations
of the Company. Distributions to or for the benefit of the Shareholders may
occur all at once or in a series of distributions and shall be in cash or
assets, in such amounts, and at such time or times, as the Board in its
absolute discretion may determine. If and to the extent deemed necessary,
appropriate or desirable by the Board or the Trustees, in their absolute
discretion, the Company may establish and set aside a reasonable amount of cash
and/or property (the "Contingency Reserve") to satisfy claims against the
Company, including, without limitation, tax obligations, all expenses related
to the sale of the Company's property and assets, all expenses related to the
collection and defense of the Company's property and assets and the liquidation
and dissolution provided for in this Plan.
5. Cancellation of Stock. The distributions to the Shareholders pursuant to
Sections 4, 7 and 8 hereof shall be in complete redemption and cancellation of
all of the outstanding Common Stock of the Company. As a condition to receipt
of any distribution, including but not limited to the final distribution, to
the Shareholders, the Board or the Trustees, in their absolute discretion, may
require the Shareholders to (i) surrender their certificates evidencing the
Common Stock to the Company or its agents for recording of such distributions
thereon or (ii) furnish the Company with evidence satisfactory to the Board or
the Trustees of the loss, theft or destruction of their certificates evidencing
the Common Stock, together with such surety bond or other security or indemnity
as may be required by and satisfactory to the Board or Trustees. The Company
will finally close its stock transfer books and discontinue recording transfers
of Common Stock on the date on which the Company files its Certificate of
Dissolution in the Office of the Secretary of State of the State of California
as set forth in Sections 1901 and 1905 of the Code, and thereafter certificates
representing Common Stock will not be assignable or transferable on the books
of the Company except by will, intestate succession, or operation of law.
6. Abandoned Property. If any distribution to a Shareholder cannot be made,
whether because the Shareholder cannot be located, has not surrendered its
certificates evidencing the Common Stock as required hereunder or for any other
reason, the distribution to which such Shareholder is entitled shall be
separately reserved for distribution to such Shareholder. Such separate reserve
shall be maintained until the earlier of such time as (i) the factor(s)
preventing the distribution have been resolved to the satisfaction of the
Company and the distribution is made; or (ii) the distribution may be disposed
of as "abandoned property" pursuant to the California Code of Civil Procedure
section 1500 et seq. (the "Civil Code"). If any such distributions cannot be so
disposed of prior to the filing of the Certificate of Dissolution pursuant to
Section 9 hereto, the Board shall provide for the maintenance of such separate
reserve until such time as it may be disposed of pursuant to the Civil Code. In
no event shall the proceeds of any such distribution revert to or become the
property of the Company.
7. Liquidating Trust. In furtherance of the liquidation and distribution of
the Company's assets to the Shareholders, the Company shall transfer to one or
more liquidating trustees, for the benefit of the Shareholders (the
"Trustees"), under a Liquidating Trust (the "Trust"), all of the Company's
patents, other intellectual property and other assets as set forth in a
liquidating trust agreement between the Trustees and the Company. The Board is
hereby authorized to appoint one or more individuals, corporations,
partnerships or other persons, or any combination thereof, including, without
limitation, any one or more officers, directors, employees, agents or
representatives of the Company, to act as the initial Trustees for the benefit
of the Shareholders and to receive any assets of the Company. Any Trustees
appointed as provided in the preceding sentence shall succeed to all right,
title and interest of the Company of any kind and character with respect to
such transferred assets and, to the extent of the assets so transferred and
solely in their capacity as Trustees, shall assume all of the liabilities and
obligations of the Company, including, without limitation, any unsatisfied
claims and unascertained or contingent liabilities. Further, any conveyance of
assets to the Trustees shall be deemed to be a distribution of property and
assets by the Company to the Shareholders for the purposes of Section 4 of this
Plan. Any such conveyance to the Trustees shall be in trust for the
Shareholders of the Company. The Company, subject to this Section, may enter
into a liquidating trust agreement with the Trustees, on such terms and
conditions as the Board, in its absolute discretion, may deem necessary,
appropriate or desirable. Adoption of this Plan by a majority of the
outstanding Common Stock shall constitute the approval of the Shareholders of
any such
A-2
appointment, any such liquidating trust agreement, and any transfer of assets
by the Company to the Trust as their act and as a part hereto as if herein
written.
8. Liquidation Period. The actions provided for in this Plan shall be
commenced as soon as practicable after the Adoption Date, and the transfer of
assets to the Trust shall be completed as soon as practicable in a manner
consistent with the orderly liquidation and distribution of the Company's
assets.
9. Certificate of Dissolution. After the Adoption Date, the officers of the
Company shall, at such time as the Board, in its absolute discretion, deems
necessary, appropriate or desirable, obtain any certificates required from the
California tax authorities and, upon obtaining such certificates, the Company
shall file Certificates of Election to Wind Up and Dissolve and Certificate of
Dissolution pursuant to Sections 1900 et seq. of the Corporations Code of the
State of California with the Secretary of the State of the State of California
and make such other filings and undertake such additional steps as are deemed
necessary or convenient to achieve the dissolution of the Company.
10. Shareholder Consent to Sale of Assets. Adoption of this Plan by holders
of a majority of the outstanding Common Stock shall constitute the approval of
the Shareholders of the sale, exchange, distribution or other disposition in
liquidation of all of the property and assets of the Company, whether such
sale, exchange, distribution or other disposition occurs in one transaction or
a series of transactions, and shall constitute ratification of all contracts
for sale, exchange or other disposition which are conditioned on adoption of
this Plan.
11. Expenses of Dissolution. In connection with and for the purposes of
implementing and assuring completion of this Plan, the Company may, in the
absolute discretion of the Board, pay any brokerage, agency, professional and
other fees and expenses of persons rendering services to the Company in
connection with the collection, sale, exchange or other disposition of the
Company's property and assets and the implementation of this Plan.
12. Compensation. In connection with and for the purpose of implementing and
assuring completion of this Plan, the Company may, in the absolute discretion
of the Board, pay the Company's officers, directors, employees, agents and
representatives, or any of them, compensation or additional compensation above
their regular compensation, including pursuant to severance and retention
agreements, in money or other property, in recognition of the extraordinary
efforts they, or any of them, will be required to undertake, or actually
undertake, in connection with the implementation of this Plan. Adoption of this
Plan by a majority of the outstanding Common Stock shall constitute the
approval of the Shareholders of the payment of any such compensation.
13. Indemnification. The Company shall continue to indemnify its officers,
directors, employees, agents and representatives in accordance with its
Articles of Incorporation, as amended, and Bylaws and any contractual
arrangements, for the actions taken in connection with this Plan and the
winding up of the affairs of the Company. The Company's obligation to indemnify
such persons may also be satisfied out of the assets of the Trust. The Board
and the Trustees, in their absolute discretion, are authorized to obtain and
maintain insurance as may be necessary or appropriate to cover the Company's
obligation hereunder.
14. Amendment or Termination of the Plan. Notwithstanding authorization or
consent to this Plan and the transactions contemplated hereby by the
Shareholders, the Board may modify, amend or terminate this Plan and the
transactions contemplated hereby without further action by the Shareholders to
the extent permitted by the Code.
15. Authorization. The Board of the Company is hereby authorized, without
further action by the Shareholders, to do and perform or cause the officers of
the Company, subject to approval of the Board, to do and perform, any and all
acts, and to make, execute, deliver or adopt any and all agreements,
resolutions, conveyances, certificates and other documents of every kind which
are deemed necessary, appropriate or desirable, in the absolute discretion of
the Board, to implement this Plan and the transactions contemplated hereby,
including without limitation, all filings or acts required by any state or
federal law or regulation to wind up its affairs.
Adopted by the Board of Directors on September 7, 2001.
A-3
================================================================================
PROXY
OPTi Inc.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of OPTi Inc. (the "Company"), hereby
appoints Bernard T. Marren and Michael Mazzoni and each of them, with power
of substitution to each true and lawful attorneys, agents, and proxyholders
of the undersigned and hereby authorizes them to represent and vote, as
specified herein, all shares of common stock of the Company to be held of
record by the undersigned on October 8, 2001 at the 2001 Annual Meeting of
Shareholders of the Company to be held on November 12, 2001 at 9:00 a.m.,
local time, at 660 Alder Drive, Milpitas, CA 95305 and any adjournments or
postponement thereof.
-------------- --------------
SEE REVERSE CONTINUED AND TO BE SIGNED SEE REVERSE
SIDE ON REVERSE SIDE SIDE
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[x] Please mark votes as in this example
The shares represented by this proxy will be voted in the manner directed.
In the absence of any direction, the shares will be voted FOR Proposal 1, 2
and 3. The undersigned acknowledges receipt of the Notice of Annual Meeting
of Shareholders and Proxy Statement dated October __, 2001.
PROPOSAL 1--Approval and adoption of the Liquidation Plan and Dissolution of
OPTi, including the establishment of the OPTi Inc. Liquidating Trust and the
appointment of Stephen Dukker, Kapil Nanda and William Welling as its trustees.
[ ] FOR PROPOSAL 1 [ ] AGAINST PROPOSAL 1 [ ] ABSTAIN ON PROPOSAL 1
Our Board of Directors unanimously recommends a vote for the approval of
Proposal 1.
PROPOSAL 2--Election of Directors
[ ] FOR all nominees listed below
[ ] WITHHOLD authority to vote for all nominees listed below
To withhold authority to vote for any individual nominee, strike a line
through the nominee's name in the list below:
Bernard T. Marren
Stephen A. Dukker
Kapil K. Nanda
William H. Welling
Our Board of Directors unanimously recommends a vote for each of the nominees
---
named above.
PROPOSAL 3--Ratification of the appointment of Ernst & Young LLP as OPTi's
independent auditors for the year ending December 31, 2001.
[ ] FOR PROPOSAL 3 [ ] AGAINST PROPOSAL 3 [ ] ABSTAIN ON PROPOSAL 3
Our Board of Directors unanimously recommends a vote for the approval of
---
Proposal 3.
and, in their discretion, upon such other matter or matters that may properly
come before the meeting and any postponement(s) or adjournment(s) thereof.
PLEASE SIGN ON REVERSE SIDE AND RETURN IMMEDIATELY
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\ THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED AS FOLLOWS: (1) FOR THE APPROVAL AND ADOPTION OF
THE LIQUIDATION PLAN AND DISSOLUTION OF OPTi; (2) FOR THE RE-ELECTION OF 4
DIRECTORS; (3) FOR RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS
THE INDEPENDENT ACCOUNTANTS OF OPTi FOR THE FISCAL YEAR ENDING DECEMBER 31,
2001; AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME
BEFORE THE MEETING.
===========================================================================
Date:
Signature
===========================================================================
Date:
Signature
(This Proxy should be marked, dated, signed by the shareholder(s) exactly
as his or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should
sign.)
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