Doesn't look like Bernie likes Sal
By Email and Federal Express
May 16, 2011
Mr. Salvatore Muoio
Managing Member
S. Muoio & Co. LLC
509 Madison Avenue, Suite 406
New York, NY 10022
Dear Mr. Muoio,
This letter responds to your letter to me dated May 13, 2011, which I have shared with the Board of the Directors (“Board”) of OPTi, Inc., a California corporation (the “Company”).
As you well know, your request for representation on the Board dates back to earlier this year when you called me to demand that you and one of your designees be added to the Board. At the time, I noted that there is a nomination process set forth in the Company’s proxy statement. After considering your demand and conducting a preliminary inquiry into the appropriateness of your request, the Nominating Committee and the Board decided to decline your demand to serve on the Board. Your letter does not change the Board’s conclusion in any respect.
The Board believes that the Company’s proxy statement contains no inaccuracies. Neither the Company’s articles or bylaws nor the General Corporation Law of California specify any process for shareholders to nominate directors. In the absence of such specification the Nominating Committee and the Board have established a reasonable process for consideration of nominees by shareholders. That process (which has been repeatedly set forth in the Company’s annual proxy statements) requires the nominating shareholder to submit to the Nominating Committee (i) all information relating to the nominee required to be disclosed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, (ii) the name, address and share ownership of the shareholder submitting the nomination, (iii) other appropriate biographical information and (iv) a statement as to the qualifications of the nominee. In order for the Nominating Committee and the Board to have sufficient time to consider nominees, the information must be submitted no later than the deadlines set forth in the proxy statement. Your request for Board representation did not comply with any of these steps.
SF:309787.1
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The Board owes a fiduciary duty to all shareholders of the Company to insure that the directors of the Company are duly qualified to serve and that they will act in the best interests of all shareholders. Consistent with this duty applicable regulations require the Company to describe the specific experience, qualifications, attributes or skills that led to a conclusion that a person should serve as a director.
When the Board conducted even a cursory inquiry into your background it discovered the In re Emerging Communications Shareholders Litigation (2004 WL 1305745 (Del.Ch.)) in which the Delaware Court of Chancery stated:
The credible evidence persuades the Court that Muoio's conduct is explainable in terms of only one of two possible mindsets. The first is that Muoio made a deliberate judgment that to further his personal business interests, it was of paramount importance for him to exhibit his primary loyalty to Prosser. The second was that Muoio, for whatever reason, “consciously and intentionally disregarded” his responsibility to safeguard the minority stockholders from the risk, of which he had unique knowledge, that the transaction was unfair. If motivated by either of those mindsets, Muoio's conduct would have amounted to a violation of his duty of loyalty and/or good faith. Because Muoio has not established to the satisfaction of the Court, after careful scrutiny of the record, that his motivation was of a benign character, he is not exculpated from liability…. (at page 37)
By following the process set forth in the Company’s proxy statement the Committee and the Board believe that they will have the time to review candidates and make informed judgments on their qualifications to serve. In particular they will be able to ascertain the type of information that has been revealed so far in the consideration of your requested candidacy. Accordingly, the Board invites you to comply with the Company’s process in anticipation of next year’s election.
The Company will proceed as set forth in the proxy statement. In accordance with the provisions of applicable California law, Mike Mazzoni has been designated inspector of elections. He will hear and determine all challenges and questions in any way arising in connection with the right to vote.
We confirm receipt of your request to use written ballots at the meeting. Such ballots will be available at the meeting.
Very truly yours,
/s/ Bernard T. Marren
President/CEO
cc: Board of Directors
Michael Mazzoni
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Exhibit C
509 Madison Avenue, Suite 406 S. Muoio & Co. LLC
New York, New York 10022
Tel. (212) 297-2555
Fax (212) 297-2550
Via FedEx
May 13, 2011
Bernard T. Marren
Chairman of the Board
OPTi Inc.
3430 Bayshore Road, Suite 103
Palo Alto, CA 94303
Re: OPTi Inc. 2011 Annual Meeting of Shareholders
Dear Mr. Marren:
S. Muoio & Co. LLC ("SMC"), a Delaware limited liability company, has the shared power to vote or direct the vote of approximately 28 % of the outstanding shares of the common stock of OPTi Inc., a California corporation (" OPTi" ).
We refer to OPTi's proxy statement filed with the Securities and Exchange Commission (" SEC" ) on April 26, 2011 (the " 2011 Proxy Statement" ) with respect to OPTi's annual meeting of shareholders to be held on May 23, 2011 (the " Annual Meeting" ).
SMC believes that the 2011 Proxy Statement includes inaccuracies regarding shareholders' rights to nominate, and cumulate votes for, candidates for election to OPTi's board of directors at the Annual Meeting. It appears to us that the 2011 Proxy Statement also is inconsistent with the OPTi's previous proxy disclosures, California law, and OPTi's articles of incorporation and bylaws.
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Bernard T. Marren
May 13, 2011
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S. Muoio & Co. LLC
Inaccuracies
SMC believes that the 2011 Proxy Statement does not accurately state the right of shareholders to make nominations for election of directors. The 2011 Proxy Statement under the caption "Voting and Solicitation" provides in relevant part:
"However, no shareholder shall be entitled to cumulate votes for any candidate unless the candidate's name has been properly placed in nomination pursuant to the procedures set forth in the Company's 2010 Proxy Statement. . . ."
This statement, which does not appear in OPTi's 2010 Proxy Statement, is inaccurate in at least three respects.
First, OPTi's 2010 Proxy Statement does not describe any procedures for a shareholder to nominate a candidate directly. 1 Thus, the statement inaccurately states that nomination procedures exist when, in fact, there are none.
Second, the statement is inconsistent with OPTi's bylaws (Article II, Section 2.8) which provide that a shareholder is entitled to cumulate votes "if the candidates' names have been placed in nomination prior to commencement of the voting . . .". The bylaws do not impose any other requirements with respect to nominations in order for a shareholder to vote cumulatively.
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1 The 2010 Proxy Statement describes the process by which a shareholder may propose a candidate for consideration by the Nominating Committee of OPTi's board of directors under the caption "Director Nominations – Shareholder Nominee ". However, nothing in OPTi's articles of incorporation or bylaws or in California law requires a shareholder to submit nominations to the board in advance of the Annual Meeting, limits shareholders to voting only on nominees approved by the board, or prohibits a shareholder from nominating candidates directly at the Annual Meeting before voting begins.
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Bernard T. Marren
May 13, 2011
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S. Muoio & Co. LLC
Third, the statement does not accurately reflect California law. Section 708(b) of the Code provides in relevant part: "No shareholder shall be entitled to cumulate votes . . . unless the candidate or candidate's names have been placed in nomination prior to voting . . .". Thus, California law does not include, or even contemplate, any limitation on a shareholder's right to nominate candidate(s) beyond the simple requirement that the nomination be made prior to voting.
OPTi's 2011 Proxy Statement will cause shareholders to believe that they have no right to cumulate votes in the election of directors because of the procedural condition referenced in OPTi's 2010 Proxy Statement. In our view, no such procedural conditions exist or could exist under California law. 2
We believe that the 2011 Proxy Statement also includes, under the caption "Voting and Solicitation," the following inaccurate statements:
"Only the four nominees set forth in this proxy statement have been properly nominated for election at the Annual Meeting. No other nominees will be considered at the Annual Meeting ." (Emphasis added).
Neither of these inaccurate statements appears in OPTi's 2010 Proxy Statement.
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2 The 2010 Proxy Statement contemplated the possibility of additional nominees by including the following statement under the caption "PROPOSAL NUMBER 1 – Election of Directors – Directors and Nominees for Directors ": "In the event that additional persons are nominated for election as directors, the proxy holders . . .". OPTi omitted this statement from the 2011 Proxy Statement.
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Bernard T. Marren
May 13, 2011
Page 4
S. Muoio & Co. LLC
The Code does not require that a shareholder formally nominate a candidate in advance of the annual meeting, or require that candidates for nomination to the board be submitted for advance review by members of the incumbent board who are themselves standing for election. While Section 601(a) of the Code requires that notice of any meeting at which directors are to be elected include "the names of nominees intended at the time of the notice to be presented by the board for election " (emphasis added), the statute imposes no similar requirement with respect to nominees to be presented by the shareholders at the meeting.
In addition, OPTi's charter documents 3 do not include any requirement that a shareholder provide advance notice of its intention either to cast votes for a candidate or to nominate a candidate at an annual meeting of shareholders. We thus believe that OPTi's shareholders may either cast votes for one or more candidates presented by the board or nominate one or more of their own candidates for consideration at the Annual Meeting. OPTi's suggestion that a candidate nominated by a shareholder would not be "properly nominated" is inaccurate. We believe that OPTi needs to correct these inaccurate statements.
The 2011 Proxy Statement includes under the caption "Voting and Solicitation" a statement that "votes cannot be cast for more than four (4) candidates." Section 708(a) of the Code establishes the right of a shareholder of a California corporation to cumulate votes in the election of directors. Under the statute, a shareholder may "give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which the shareholder's shares are normally entitled, or distribute the shareholder's votes on the same principle among as many candidates as the shareholder sees fi t" (emphasis added). Article II, Section 2.8 of OPTi's bylaws similarly provides that a shareholder may distribute votes "among any or all of the candidates, as the shareholder thinks fit." Thus, in our view, the 2011 Proxy Statement inaccurately states that shareholders may not cast votes for more than four candidates.
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3 OPTi's quarterly report on Form 10-Q filed with the SEC on February 14, 2011 incorporates these charter documents by reference from OPTi's registration statement on Form S-1 (File No. 33-59978) as declared effective by the SEC on May 11, 1993. Since February 14, 2011, OPTi has not filed a any current report on Form 8-K with the SEC disclosing any amendment of either its articles of incorporation or bylaws.
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Bernard T. Marren
May 13, 2011
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S. Muoio & Co. LLC
We believe that OPTi and its board of directors must take immediate steps to correct these misstatements.
Nomination at the Annual Meeting
The California Supreme Court has observed:
"At shareholders' meetings each shareholder is entitled to offer proposals to be voted on and to vote on proposals presented by management, and to nominate directors and to vote on the slate of directors nominated by management."
Stephenson v. Drever , 16 Cal. 4th 1167, 1176 (1997). OPTi's shareholders are entitled to a fair opportunity to present alternatives to the incumbent slate, as provided by the Code and OPTi's bylaws. OPTi is obligated to provide the shareholders with a fair opportunity to nominate and cast votes for the candidates of their own choosing. In this connection, as discussed above, the 2011 Proxy Statement, unlike the 2010 Proxy Statement, does not disclose how the proxy holders intend to exercise their vote in the event cumulative voting is in effect at the Annual Meeting. We believe that OPTi must provide this disclosure, so that the proxy authority being conferred by the shareholders is fully disclosed to its shareholders.
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Bernard T. Marren
May 13, 2011
Page 6
S. Muoio & Co. LLC
Written Ballots
Section 708(e) of the Code provides that elections for directors need not be by ballot unless a shareholder demands election by ballot at the meeting and before the voting has begun. This right to vote by ballot is also set forth in Article II, Section 2.8 of OPTi's bylaws. SMC intends to be present at the meeting and intends to demand voting by ballot before voting begins.
Shareholders have the right to cast votes for and/or nominate candidates of their own choosing. SMC contemplates nominating one or more additional candidates for election to the board and demanding cumulative voting in accordance with Section 708(b) of the Code and OPTi's bylaws. Therefore, ballots should permit the inclusion of additional nominees and allow shareholders to vote their shares cumulatively in the election of directors. In order to minimize any disputes at the meeting, SMC requests that OPTi provide it with the form(s) of any ballots that it intends to use at the meeting.
Section 707 of the Code provides that the board of directors may appoint inspectors of election and that the number of inspectors must be either one or three. If the board does not appoint inspectors in advance of the meeting, the chairman of the meeting must, on the request of any shareholder, appoint inspectors of election at the meeting. Article II, Section 2.13 of the OPTi's bylaws makes similar provision for the appointment of inspectors.
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Bernard T. Marren
May 13, 2011
Page 7
S. Muoio & Co. LLC
If the board has or intends to appoint inspectors of election, SMC expects that the inspectors will be both independent and disinterested. SMC requests that OPTi inform SMC promptly of the appointment, including the identities and number of inspectors so that any objections to the appointment can be timely addressed. SMC hereby provides OPTi with notice of its request that independent inspectors of the election be appointed if the board does not appoint independent inspectors in advance of the meeting.
Conclusion
SMC requests that the following steps be taken:
· That OPTi immediately amend the 2011 Proxy Statement to correct inaccuracies in the 2011 Proxy Statement with respect to the shareholders' right to nominate directors;
· That OPTi permit its shareholders to nominate candidates for election of directors in accordance with California law, notwithstanding any contrary statements in the 2011 Proxy Statement;
· That OPTi cause the election of directors at the Annual Meeting to be conducted by written ballot that allows shareholders to vote cumulatively and cast votes for the candidate(s) of their choice; and
· That the board of directors of OPTi appoint three independent and disinterested inspectors of election pursuant to Section 707(a) of the California Corporations Code (the " Code" ) to act at the Annual Meeting (and any adjournment thereof) and to exercise the powers
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Bernard T. Marren
May 13, 2011
Page 8
S. Muoio & Co. LLC
conferred upon inspectors of election by Section 707(b) of the Code and to conduct themselves as required under Section 707(c) of the Code.
Very truly yours,
S. Muoio & Co. LLC
/s/ Salvatore Muoio
By: Salvatore Muoio
Title: Managing Member
KPB: sdb
cc: Board of Directors
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