<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
S3 INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
S3 INCORPORATED
2801 MISSION COLLEGE BOULEVARD
SANTA CLARA, CA 95054
(408) 588-8000
April 27, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of S3 Incorporated, which will be held at 9:00 a.m. on Monday, May 18, 1998, at
Techmart, 5201 Great America Parkway, Santa Clara, California.
The formal notice of the Annual Meeting and the Proxy Statement have
been made a part of this invitation.
After reading the Proxy Statement, please mark, date, sign and return,
at an early date, the enclosed proxy in the prepaid envelope addressed to Boston
EquiServe, our agent, to ensure that your shares will be represented.
YOUR SHARES CANNOT BE VOTED UNLESS YOU SIGN, DATE AND RETURN THE ENCLOSED PROXY
OR ATTEND THE ANNUAL MEETING IN PERSON.
A copy of the Company's 1997 Annual Report to Stockholders is also
enclosed.
The Board of Directors and management look forward to seeing you at the
meeting.
Sincerely,
/s/ TERRY N. HOLDT
Terry N. Holdt
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 3
S3 INCORPORATED
------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 18, 1998
------------
To the Stockholders of S3 Incorporated:
The Annual Meeting of Stockholders of S3 Incorporated, a Delaware
corporation (the "Company"), will be held at 9:00 a.m. Pacific Daylight Time on
Monday, May 18, 1998, at Techmart, 5201 Great America Parkway, Santa Clara,
California, for the following purposes:
1. To elect five directors;
2. To approve an amendment to the Employee Stock Purchase Plan;
3. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors; and
4. To transact such other business as may properly come before the
Annual Meeting and any adjournment of the Annual Meeting.
Stockholders of record as of the close of business on March 31, 1998 are
entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof. A complete list of stockholders entitled to vote will be available at
the Secretary's office, 2801 Mission College Boulevard, Santa Clara, California,
for 10 days before the meeting.
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THIS MEETING. EVEN
IF YOU PLAN TO ATTEND THE MEETING, WE HOPE THAT YOU WILL PROMPTLY MARK, SIGN,
DATE AND RETURN THE ENCLOSED PROXY. THIS WILL NOT LIMIT YOUR RIGHTS TO
ATTEND OR VOTE AT THE MEETING.
By Order of the Board of Directors
/s/ RONALD T. YARA
Ronald T. Yara
Secretary
Santa Clara, California
April 27, 1998
<PAGE> 4
S3 INCORPORATED
------------
PROXY STATEMENT
------------
INFORMATION CONCERNING SOLICITATION AND VOTING
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of S3 Incorporated, a Delaware corporation (the
"Company"), of proxies in the accompanying form to be used at the Annual Meeting
of Stockholders to be held at Techmart, 5201 Great America Parkway, Santa Clara,
California, on Monday, May 18, 1998 and any adjournment thereof (the "Annual
Meeting"). The shares represented by the proxies received in response to this
solicitation and not revoked will be voted at the Annual Meeting. A proxy may be
revoked at any time before it is exercised by filing with the Secretary of the
Company a written revocation or a duly executed proxy bearing a later date or by
voting in person at the Annual Meeting. On the matters coming before the Annual
Meeting for which a choice has been specified by a stockholder by means of the
ballot on the proxy, the shares will be voted accordingly. If no choice is
specified, the shares will be voted FOR the election of the nominees for
directors listed in this Proxy Statement and FOR approval of Proposals 2, 3 and
4 described in the Notice of Annual Meeting and in this Proxy Statement.
Stockholders of record at the close of business on March 31, 1998 are
entitled to notice of and to vote at the Annual Meeting. As of the close of
business on such date, the Company had 50,720,758 shares of Common Stock
outstanding and entitled to vote. The presence in person or by proxy of the
holders of a majority of the Company's outstanding shares constitutes a quorum
for the transaction of business at the Annual Meeting. Each holder of Common
Stock is entitled to one vote for each share held as of the record date.
Directors are elected by a plurality vote. The other matters submitted
for stockholder approval at this Annual Meeting will be decided by the
affirmative vote of a majority of shares present in person or represented by
proxy and entitled to vote on each such matter. Abstentions with respect to any
matter are treated as shares present or represented and entitled to vote on that
matter and thus have the same effect as negative votes. If a broker who is the
record holder of certain shares indicates on a proxy that he or she does not
have discretionary authority to vote on a particular matter as to such shares,
or if shares are not voted in other circumstances in which proxy authority is
defective or has been withheld with respect to any matter, these non-voted
shares will be counted for quorum purposes but are not deemed to be present or
represented for purposes of determining whether stockholder approval of a
particular matter has been obtained.
The expense of printing and mailing proxy materials will be borne by the
Company. In addition to the solicitation of proxies by mail, solicitation may be
made by certain directors, officers and other employees of the Company by
personal interview, telephone or facsimile. No additional compensation will be
paid to such persons for such solicitation. The Company will reimburse brokerage
firms and others for their reasonable expenses in forwarding solicitation
materials to beneficial owners of the Company's Common Stock. The Company has
retained Morrow & Co. to assist in the solicitation of proxies at a cost of
approximately $2,000.
This Proxy Statement and the accompanying form of proxy are being mailed
to stockholders on or about April 27, 1998.
IMPORTANT
PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT AT YOUR
EARLIEST CONVENIENCE IN THE ENCLOSED POSTAGE-PREPAID RETURN ENVELOPE SO
THAT, WHETHER YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING OR NOT,
YOUR SHARES CAN BE VOTED. THIS WILL NOT LIMIT YOUR RIGHTS TO ATTEND OR
VOTE AT THE ANNUAL MEETING.
<PAGE> 5
PROPOSAL 1 - ELECTION OF DIRECTORS
DIRECTORS AND NOMINEES
Since last year's annual meeting of stockholders, the Board of Directors
has adopted a resolution decreasing the number of authorized directors from
seven to five effective on the date of the Annual Meeting. Accordingly, five
directors of the Company will be elected at the Annual Meeting for a term of one
year. Directors are elected to serve until the next annual meeting of
stockholders and until their successors are elected and qualified. If any
nominee is unable or declines to serve as director at the time of the Annual
Meeting, an event not now anticipated, proxies will be voted for any nominee
designated by the Board of Directors to fill the vacancy. Nominations for the
Board of Directors may be made by stockholders of the Company following the
procedures set forth in the Bylaws no later than the seventh day following the
day notice of the Annual Meeting was mailed.
Names of the nominees and certain biographical information about them
are set forth below:
MR. JOHN C. COLLIGAN, age 43, has been a director of the Company since
March 1993. From January 1993 until November 1996, Mr. Colligan served as
President and Chief Executive Officer of Macromedia Inc., a multimedia software
tools company, and from April 1992 to January 1993, was President and Chief
Operating Officer of Macromedia. From January 1989 to March 1992, Mr. Colligan
was President and Chief Executive Officer of Authorware, a multimedia software
company that merged with Macromind Paracomp to form Macromedia in March 1992. He
also held various positions with Apple Computer, Inc. from May 1983 to December
1988. Mr. Colligan is presently Chairman of Macromedia and a director of C|NET,
Inc. He holds a B.S. in International Economics from Georgetown University and
an M.B.A. from the Stanford Graduate School of Business.
MR. TERRY N. HOLDT, age 54, has served as Chairman of the Board, Chief
Executive Officer and President of the Company since December 1997, and as a
director since January 1992. Mr. Holdt served as Vice Chairman of the Board from
August 1996 to December 1997, and from January 1992 to August 1996, served as
President and Chief Executive Officer of the Company. Mr. Holdt was Chairman of
the Board of Paradigm Technology, Inc., a semiconductor company, from June 1991
to January 1992 and was its President and Chief Executive Officer from June 1988
to May 1991. From September 1986 to June 1988, Mr. Holdt held various executive
positions at Linear Corporation, a manufacturer of electronic telemetry systems,
where he was most recently President. From 1981 to 1985, he held various
executive positions at Western Digital Corporation, a manufacturer of computer
peripherals, where he was most recently Executive Vice President and Chief
Operating Officer. Mr. Holdt holds a B.S.E.E. and an M.S.E.E. from the
University of Illinois. Mr. Holdt is also a member of the Board of Directors of
SenDEC Corporation and Maxoptix Corporation.
DR. ROBERT P. LEE, age 45, has been a director of the Company since
April 1994. Since July 1997, Mr. Lee has served as President and Chief Executive
Officer of Formulab Neuronetics Corporation, a computer technology company. From
March to May 1997, he served as Vice Chairman of Insignia Solutions plc, which
provides Windows compatibility software for personal computers and workstations.
From April 1995 to March 1997, Dr. Lee served as Chairman of Insignia Solutions,
and from December 1993 to March 1997, he served as President and Chief Executive
Officer of Insignia Solutions. From June 1990 to August 1992, Dr. Lee was
Executive Vice President at Symantec Corporation, and from April 1988 to June
1990, he served as Senior Vice President at Shared Medical Systems, a supplier
of software and computer services to the healthcare industry. Prior to April
1988, he worked at IBM for 11 years in technical and business management
positions. Dr. Lee holds a B.A. in computer science from the University of
California at Berkeley and an M.S. and a Ph.D. in computer science from the
University of California at Los Angeles.
DR. CARMELO J. SANTORO, age 55, has been a director of the Company since
May 1992. He was the Chairman of the Board of Silicon Systems, Inc. from 1984 to
1995, and served as President and Chief Executive Officer of Silicon Systems,
Inc. from 1982 through 1991. Dr. Santoro is currently a director of Platinum
Software
-2-
<PAGE> 6
Corporation, Dallas Semiconductor Corporation, and Techniclone Corporation. He
holds a B.S. in Science, Physics from Manhattan College and a Ph.D. in Solid
State Physics from Rensselaer Polytechnic Institute.
MR. RONALD T. YARA, age 51, co-founded the Company and has served as a
director of the Company since July 1995. Mr. Yara is currently a Senior Vice
President and Secretary of the Company. From September 1996 to April 1997, Mr.
Yara also served as Senior Vice President of Corporate Marketing. From the
inception of the Company in 1989 until December 1993, he served as Vice
President, Marketing. From December 1984 to December 1989, Mr. Yara held various
positions at Chips & Technologies, Inc., a semiconductor company he co-founded,
most recently as Vice President of Business Development. From February 1975 to
1984, Mr. Yara served in various positions at Intel Corporation, most recently
as Product Marketing Manager of Communication Products. He earned a B.S.E.E.
from Purdue University and an M.S.E.E. from the University of Santa Clara.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF MR. JOHN C.
COLLIGAN, MR. TERRY N. HOLDT, DR. ROBERT P. LEE, DR. CARMELO J. SANTORO AND MR.
RONALD T. YARA AS DIRECTORS OF THE COMPANY.
In addition, names of the two current directors of the Company who will
not be standing for reelection to the Board, and certain biographical
information about them, are set forth below.
MR. DIOSDADO P. BANATAO, age 51, co-founded the Company and has been a
director since 1992. From January 1992 to December 1997, Mr. Banatao served as
Chairman of the Board. From the Company's inception to January 1992, Mr. Banatao
served as President and Chief Executive Officer of the Company. From December
1984 to December 1988, Mr. Banatao held various executive level positions at
Chips & Technologies, Inc., a semiconductor company he co-founded, most recently
as Vice President and General Manager of the Advanced Products Operation. From
February 1984 to December 1984, Mr. Banatao served as Chief Technical Officer
and Vice President of Engineering of Mostron, Inc., a single-board computer
design company. From June 1981 to February 1984, he served as Director of Logic
Products at Seeq Technology, Inc. a semiconductor manufacturer. Mr. Banatao
holds a B.S.E.E. from the Mapua Institute of Technology and an M.S. in
electrical engineering and computer science from Stanford University.
MR. GARY J. JOHNSON, age 38, has served as Vice Chairman of the Board
since December 1997, and as a director since August 1996. From August 1996 to
December 1997, Mr. Johnson served as President and Chief Executive Officer of
the Company, and from July 1994 to August 1996, he served as Senior Vice
President of the Graphics Business Unit of the Company. From 1986 to June 1994,
Mr. Johnson held various positions at National Semiconductor Corporation, a
semiconductor manufacturer, including Managing Director/General Manager of the
Wireless Networking Group, Operations and Marketing Director of the Wireless
Communications Group and other Senior marketing positions. From 1975 to 1986, he
held various engineering positions at British Telecommunications, most recently
Systems Development Manager. Mr. Johnson holds a B.Sc., C.Eng. from Leicester
Polytechnic, U.K., and is a member of I.E.E. and I.E.E.E.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held 18 meetings during the year ended December
31, 1997. All directors attended at least 75% of the aggregate number of
meetings of the Board of Directors and of the committees on which such directors
serve.
The Board of Directors has appointed a Compensation Committee and an
Audit Committee. The Compensation Committee and Audit Committee are comprised
entirely of independent directors.
The members of the Compensation Committee during 1997 were John C.
Colligan, Robert P. Lee and Carmelo J. Santoro. The Compensation Committee held
three meetings during 1997. The Compensation Committee's functions are to assist
in the administration of, and the grant of options under, the 1989 Stock Plan
and to assist in the implementation of, and provide recommendations with respect
to, general and specific compensation policies and practices of the Company.
-3-
<PAGE> 7
The members of the Audit Committee during 1997 were John C. Colligan,
Robert P. Lee and Carmelo J. Santoro. The Audit Committee held two meetings
during 1997. The Audit Committee's functions are to review the scope of the
annual audit, monitor the independent auditor's relationship with the Company,
advise and assist the Board of Directors in evaluating the auditor's
examination, supervise the Company's financial and accounting organization and
financial reporting, and nominate for stockholder approval at the annual
meeting, with the approval of the Board of Directors, a firm of certified public
accountants whose duty it is to audit the financial records of the Company for
the fiscal year for which it is appointed.
DIRECTORS' COMPENSATION
Employee directors (including Messrs. Banatao, Holdt, Johnson and Yara)
receive no additional compensation for service on the Board of Directors.
Non-employee directors of the Company receive an annual retainer fee of $24,000,
plus $1,000 for each Board meeting attended. Non-employee directors are
reimbursed for their expenses for each meeting attended.
Under the terms of the Company's 1989 Stock Plan, upon appointment to
the Board, each non-employee director receives an option to purchase 40,000
shares of Common Stock at an exercise price of 100% of the fair market value of
the stock on the date of grant, which option vests ratably over the next four
anniversary dates of the date of grant. In addition, following each annual
meeting of the Company's stockholders, each non-employee director who will
continue to serve as a member of the Board will automatically receive an option
to purchase 20,000 shares of Common Stock at an exercise price of 100% of the
fair market value of the stock on the date of grant, which option vests ratably
over the next four anniversary dates of the date of grant. See "Executive
Compensation -- Employment Agreements" for a description of the compensation
arrangements with Mr. Holdt and Mr. Johnson (officers of the Company, who are
also directors).
-4-
<PAGE> 8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 1, 1998,
as to shares of the Company's Common Stock beneficially owned by: (i) each of
the Named Officers listed in the Summary Compensation Table, (ii) each of the
Company's directors, (iii) all directors and executive officers of the Company
as a group, and (iv) each person who is known by the Company to own beneficially
more than 5% of the Company's Common Stock.
<TABLE>
<CAPTION>
Shares Percentage
Beneficially Beneficially
Owned(1) Owned(1)(2)
------------ ------------
<S> <C> <C>
Terry N. Holdt(3)............................................. 388,165 *
Gary J. Johnson(3)............................................ 356,046 *
Paul G. Franklin(3)........................................... 15,426 *
Daniel A. Karr................................................ 615 *
Neal D. Margulis(3)........................................... 77,303 *
Harry L. Dickinson(3)......................................... 116,209 *
Ronald T. Yara(3)............................................. 439,309 *
John C. Colligan(3)........................................... 40,000 *
Robert P. Lee(3).............................................. 55,000 *
Carmelo J. Santoro(3)......................................... 43,536 *
Diosdado P. Banatao(3)(4)..................................... 837,682 1.7
All directors and executive officers
as a group (12 persons)(3)................................. 2,616,327 4.6
State of Wisconsin Investment Board(5)........................ 3,811,500 7.5
P.O. Box 7842
Madison, WI 53707
</TABLE>
- ----------------
* Amount represents less than 1% of the Company's Common Stock.
(1) To the Company's knowledge, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them, subject to community property laws
where applicable and the information contained in the footnotes to this
table.
(2) For purposes of computing the percentage of outstanding shares held by
each person or group of persons named above on a given date, shares
which such person or group has the right to acquire within 60 days after
such date are deemed to be outstanding, but are not deemed to be
outstanding for the purposes of computing the percentage ownership of
any other person.
(3) Includes shares issuable upon exercise of options within 60 days of
March 9, 1998 as follows: John C. Colligan, 40,000; Robert P. Lee,
55,000; Carmelo J. Santoro, 43,536; Diosdado P. Banatao, 210,008; Terry
N. Holdt, 161,505; Paul G. Franklin, 9,953; Neal D. Margulis, 48,957;
Ronald T. Yara, 192,273; Gary J. Johnson, 347,853; Harry L. Dickinson,
104,173; and all executive officers and directors as a group (12
persons), 1,213,258.
(4) Includes 6,600 shares held by Mr. Banatao's children as to which Mr.
Banatao disclaims beneficial ownership and 101,171 shares held by Gismo
Technologies, a corporation founded by Mr. Banatao, as to which Mr.
Banatao disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest therein.
(5) According at a Schedule 13G dated January 26, 1998, filed by the State
of Wisconsin Investment Board, the State of Wisconsin Investment Board
has sole voting power and sole dispositive power with respect to all
shares listed in the table.
-5-
<PAGE> 9
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation for services rendered in all
capacities to the Company for the three fiscal years ended December 31, 1997 of
(i) the Company's Chief Executive Officer as of December 31, 1997, (ii) the
Company's four other most highly compensated executive officers as of December
31, 1997, (iii) the Company's former Chief Executive Officer, who was no longer
serving as such as of December 31, 1997 and (iv) a former executive officer who
was no longer serving as such as of December 31, 1997 (the "Named Officers").
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
Name and ----------------------- Securities Underlying
Principal Position Year Salary($) Bonus($) Options(#)(3)
- ----------------------------- ---- -------- --------- ---------------------
<S> <C> <C> <C> <C>
Terry N. Holdt (1) 1997 $166,212 $ 0 20,000
Chairman, President and 1996 258,840 97,333 35,000
Chief Executive Officer 1995 283,847 639,275 0
Gary J. Johnson(2) 1997 397,308 0 100,000
Vice Chairman,
former President and 1996 249,100 102,667 550,000
Chief Executive Officer 1995 184,519 365,275 0
Paul G. Franklin 1997 236,479 75,000 219,631
Senior Vice President 1996 169,982 78,197 90,000
of Operations 1995 138,860 243,907 0
Daniel A. Karr 1997 226,340 21,000 181,225
Vice President of 1996 123,077 3,750 25,00
Worldwide Sales 1995 0 0 0
Neal D. Margulis 1997 236,227 0 326,275
Senior Vice President 1996 203,130 183,000 255,000
of Research and Technology 1995 141,140 303,275 0
Ronald T. Yara 1997 215,200 0 50,000
Senior Vice President 1996 113,723 80,000 35,000
and Secretary 1995 152,879 359,875 0
Harry L. Dickinson 1997 261,242 0 80,000
Senior Vice President 1996 217,577 88,000 50,000
of Sales 1995 172,480 334,875 0
</TABLE>
- ------------
(1) Mr. Holdt was appointed Chairman, President and Chief Executive Officer
on December 18, 1997.
(2) Mr. Johnson served as President and Chief Executive Officer until
December 18, 1997, and currently serves as Vice Chairman.
(3) Includes previously granted options that were repriced in 1997. See
Report of the Compensation Committee of the Board of Directors on Option
Repricing and the Ten-Year Option Repricings Table.
-6-
<PAGE> 10
STOCK OPTIONS
The following tables summarize option grants to, and exercises by, the
Named Officers during fiscal 1997, and the value of the options held by each
such person at the end of fiscal 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants Potential
-------------------------------------------------------- Realizable Value at
Number of % of Assumed Annual Rates of
Securities Total Options Stock Price Appreciation
Underlying Granted to Exercise for Option Term(5)
Options Employees in Price Expiration ------------------------
Name Granted(1) Fiscal Year ($/Sh)(3) Date(4) 5%($) 10%($)
- ---- ---------- ------------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Terry N. Holdt 20,000 0.2% $11.2500 05/07/07 $141,501 $ 358,592
Gary J. Johnson 50,000 0.4 16.1250 01/02/07 507,046 1,284,955
50,000 0.4 11.2500 05/07/07 353,753 896,480
Paul G. Franklin 42,500 0.4 16.1250 01/02/07 430,989 1,092,212
42,500 0.4 11.2500 05/07/07 300,690 762,008
4,631* 0.4 5.1250 12/21/04* 9,675 22,553
45,000* 0.4 5.1250 03/08/06* 113,776 274,176
42,500* 0.4 5.1250 01/02/07* 120,764 297,794
42,500* 0.4 5.1250 05/07/07* 126,469 314,901
Daniel A. Karr 5,000 0.0 16.1250 01/02/07 50,705 128,495
25,000 0.2 9.4375 05/01/07 148,380 376,024
50,000 0.4 7.0000 11/10/07 220,113 557,810
21,225* 0.2 5.1250 04/01/06* 54,187 130,817
5,000* 0.0 5.1250 12/02/07* 14,208 35,035
25,000* 0.2 5.1250 05/01/07* 74,231 184,745
50,000* 0.4 5.1250 11/10/07* 159,039 401,834
Neal D. Margulis 50,000 0.4 11.2500 05/07/07 353,753 896,480
41,775* 0.4 5.1250 03/08/06* 105,623 254,527
184,500*(2) 1.6 5.1250 07/15/06* 491,044 1,195,026
50,000* 0.4 5.1250 05/07/07* 148,787 370,472
Ronald T. Yara 25,000 0.2 16.1250 01/02/07 253,523 642,477
25,000 0.2 11.2500 05/07/07 176,877 448,240
Harry L. Dickinson 40,000 0.3 16.1250 01/02/07 405,637 1,027,964
40,000 0.3 11.2500 05/07/07 283,003 717,184
</TABLE>
- ------------
* Denotes options granted as a result of the 1997 Option Repricing (see
Report of the Compensation Committee of the Board of Directors on Option
Repricing and the Ten-Year Option Repricings table on page 10). Under
the terms of the repricing, the option grants retained their (a)
original vesting terms where they vested on a daily basis over a
four-year period commencing on their original grant date and (b)
original expiration date. The original grant date of the repriced
options was 10 years prior to the expiration date as listed in the
table. All repriced options have a one-year block on exercisability.
-7-
<PAGE> 11
(1) Unless otherwise noted, options vest ratably on a daily basis over a
four-year period commencing on the date of grant and become exercisable
as to vested options beginning six months from the date of grant.
(2) These options were previously granted but repriced as of December 18,
1997. Under the terms of the original grant, 84,500 of these options
vest ratably on a daily basis over a four-year period commencing on the
date of grant and become exercisable as to vested options beginning six
months from the date of grant, and 100,000 of these options vest ratably
on a daily basis over a four-year period commencing three years after
the date of grant and become exercisable as to vested options beginning
three years after grant, subject to acceleration of vesting in whole or
in part upon the achievement of specified milestones based upon the
Company's financial and operating performance.
(3) The exercise price on the date of grant was equal to 100% of the fair
market value on the date of grant.
(4) Unless otherwise noted, the options have a term of 10 years, subject to
earlier termination in certain events related to termination of
employment.
(5) 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.
-8-
<PAGE> 12
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Securities Underlying Value of
Unexercised Unexercised
Options at In-the-Money Options at
December 31, 1997(#) December 31, 1997($)(2)
Shares Acquired Value -------------------------- ---------------------------
Name on Exercise(#) Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Terry N. Holdt 187,312 $3,325,725 140,728 64,272 $ 62,291 $ 5,522
Gary J. Johnson 16,000 230,500 275,206 249,072 93,940 40,335
Paul G. Franklin 0 0 8,324 136,260 13,267 1,578
Daniel A. Karr 0 0 0 101,225 0 0
Neal D. Margulis 31,600 293,391 34,724 300,676 30,859 21,534
Harry L. Dickinson 29,102 421,196 104,173 0 38,238 0
Ronald T. Yara 0 0 182,195 66,141 336,673 0
</TABLE>
- ------------
(1) Calculated on the basis of the fair market value of the underlying
securities at the exercise date minus the exercise price.
(2) Calculated on the basis of the fair market value of the underlying
securities at December 31, 1997 ($5.00 per share) minus the exercise
price.
-9-
<PAGE> 13
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON OPTION REPRICING
On December 2, 1997, the Board of Directors approved the repricing of
the stock options of all the employees of the Company who are not directors of
the Company effective as of December 18, 1997. The Board believes the repricing
of its stock options was essential to enable it to retain and attract its
workforce. The Company repriced these stock options because it believes that the
decline in its stock price reflects industry and Company specific conditions
that are likely to be long-term in nature. The existence of "out of the money"
options for such an extended period of time would severely impact the Company's
ability to retain its existing workforce and attract new employees. The Company
believes that the suspension of the ability to exercise options for one year and
possible forfeiture of all options should the employee voluntarily resign or be
terminated with cause during that period in exchange for the new option pricing
is a substantive contribution by the employee for the new price. The Company
does not believe that this repricing causes its stock option plan to be subject
to variable plan accounting.
The foregoing report has been furnished by the Compensation Committee of
the Board of Directors of S3 Incorporated:
Carmelo J. Santoro, Ph.D., Chairman
John C. Colligan
Robert P. Lee, Ph.D.
TEN-YEAR OPTION REPRICINGS
The following table sets forth certain information concerning all
repricing of options held by an executive officer of the Company during the last
10 years:
<TABLE>
<CAPTION>
Length of
Number of Original
Securities Market Price Exercise Option Term
Underlying of Stock at Price at Remaining at
Options/SARS Time of Time of New Date of
Repriced or Repricing or Repricing or Exercise Repricing
Name Date Amended (#) Amendment($) Amendment($) Price($) Amendment
- ---- -------- ------------ ------------ ------------ --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Walter D. Amaral 12/18/97 200,000 $ 5.1250 $15.6875 $ 5.1250 9 Years 251 Days
Chief Financial 12/18/97 100,000 5.1250 6.3438 5.1250 9 Years 330 Days
Officer and Senior
Vice President, Finance
Paul G. Franklin 07/15/96 45,000 10.0625 13.8750 10.0625 9 Years 236 Days
Senior Vice 12/18/97 4,631 5.1250 7.1563 5.1250 7 years 3 Days
President of 12/18/97 45,000 5.1250 10.0625 5.1250 8 Years 80 Days
Operations 12/18/97 42,500 5.1250 16.1250 5.1250 9 Years 15 Days
12/18/97 42,500 5.1250 11.2500 5.1250 9 Years 140 Days
Daniel A. Karr 12/18/97 21,225 5.1250 11.7500 5.1250 8 Years 104 Days
Vice President 12/18/97 5,000 5.1250 16.1250 5.1250 9 Years 15 Days
of Worldwide Sales 12/18/97 25,000 5.1250 9.4375 5.1250 9 Years 134 Days
12/18/97 50,000 5.1250 7.0000 5.1250 9 Years 327 Days
Neal D. Margulis 12/18/97 41,775 5.1250 13.8750 5.1250 8 Years 80 Days
Senior Vice President 12/18/97 184,500 5.1250 10.0625 5.1250 8 Years 209 Days
of Research and 12/18/97 50,000 5.1250 11.2500 5.1250 9 Years 140 Days
Technology
</TABLE>
-10-
<PAGE> 14
PENSION AND LONG-TERM INCENTIVE PLANS
The Company has no pension or long-term incentive plans.
EMPLOYMENT AGREEMENTS
In December 1997, the Company entered into an agreement with Terry N.
Holdt, pursuant to which Mr. Holdt is employed as the President, Chief Executive
Officer and Chairman of the Board at a salary of approximately $42,000 per
month, which may be increased but not decreased. Mr. Holdt will continue in his
capacity as President, Chief Executive Officer and Chairman of the Board until a
replacement is selected by the Board of Directors. In that event, Mr. Holdt
shall become Vice Chairman of the Company and shall receive a salary of $2,000
per month or, in the event the time he spends on company business exceeds 20
hours a month, $3,000 per single day, $5,000 for a consecutive two-day period
and $10,000 per week of continuous service. The agreement also provides that in
January 1998 Mr. Holdt would receive a non-qualified stock option of 500,000
shares with a vesting period of one year and will participate in the Executive
Bonus Plan. In the event Mr. Holdt's employment as President and Chief Executive
Officer is terminated for any reason before one-half of Mr. Holdt's
non-qualified stock option of 500,000 shares has vested, the option shall
continue to vest for as long as Mr. Holdt serves as the Vice Chairman or a
member of the Board of Directors until 250,000 shares have vested. The agreement
may be terminated by either Mr. Holdt or the Company at any time with or without
cause.
In December 1997, the Company entered into an agreement with Gary J.
Johnson, pursuant to which Mr. Johnson is employed full-time by the Company at a
salary of approximately $33,000 per month. Mr. Johnson also serves as Vice
Chairman of the Board of Directors. In the event his full-time employment is
modified to part-time employment, Mr. Johnson shall be paid at a rate of $20,000
per month and will resign from the Board of Directors.
Mr. Johnson will resign as an employee no later than June 18, 1999.
In December 1997, the Company entered into an agreement with Neal D.
Margulis, pursuant to which Mr. Margulis is employed as a part-time consultant.
Mr. Margulis is not eligible to participate in any of the Company's executive
bonus or incentive plans and may not receive any new grants under the Company's
stock option plans. The agreement terminates on December 18, 1998.
-11-
<PAGE> 15
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Company's compensation programs and policies applicable to its
executive officers are administered by the Compensation Committee of the Board
of Directors. The Compensation Committee is made up entirely of non-employee
directors. The programs and policies are designed to provide competitive
compensation and to enhance stockholder value by aligning the financial
interests of the executive officers of the Company with those of its
stockholders.
It is the Company's policy generally to qualify compensation paid to
executive officers for deductibility under section 162(m) of the Internal
Revenue Code. Section 162(m) generally prohibits the Company from deducting the
compensation of executive officers that exceeds $1,000,000 unless that
compensation is based on the satisfaction of objective performance goals. The
Company's 1989 Stock Option Plan and the Executive Bonus Plan are structured to
qualify awards under such plans as performance-based compensation and to
maximize the tax deductibility of such awards. However, the Company reserves the
discretion to pay compensation to its executive officers that may not be
deductible.
There are four primary components of executive compensation: Base
Salary, Bonus, Employee Profit Sharing Plan and Stock Options.
In December 1997, Mr. Gary J. Johnson resigned his positions as
President and Chief Executive Officer and was named Vice Chairman of the Board
of Directors. In December 1997, Mr. Terry N. Holdt was appointed Chairman of the
Board, Chief Executive Officer and President of the Company.
BASE SALARY
Base salaries for fiscal 1997 reported herein were determined by the
Compensation Committee. The Compensation Committee reviews salaries recommended
by the Chief Executive Officer for executive officers other than the Chief
Executive Officer. In conducting its review, the Compensation Committee takes
into consideration the overall performance of the Company, the Chief Executive
Officer's evaluation of individual executive officer performance and independent
compensation surveys such as the Radford Survey for Fabless Semiconductor
Companies in the $500 million revenue range. Final decisions on base salary
adjustments for executives other than the Chief Executive Officer are made in
conjunction with the Chief Executive Officer. The Compensation Committee
independently determines the base salary for the Chief Executive Officer by: (a)
examining the Company's performance against its preset goals, (b) examining the
Company's performance within the semiconductor industry, (c) evaluating the
overall performance of the Chief Executive Officer, and (d) comparing the base
salary of the Chief Executive Officer to that of other chief executive officers
in the semiconductor, computer graphics and personal computer software
industries. In 1997, Mr. Johnson received $397,308 in his capacity as President
and Chief Executive Officer through December 18, 1997. In 1997, Mr. Holdt
received $166,212 in his capacity as Vice Chairman and as a consultant through
December 18, 1997 and then as Chairman, President and Chief Executive Officer.
BONUSES
The Executive Bonus Plan is a cash-based incentive bonus program
providing for the payment to each named executive officer of cash bonuses that
are directly related to the earnings per share (EPS), profitability and gross
revenues of the Company. Under the terms of the Company's Executive Bonus Plan
and the EPS, profitability and revenue performance goals set for 1997, the
Company's executives received no bonuses under the plan.
EMPLOYEE PROFIT SHARING PLAN
The Employee Profit Sharing Plan is a nonqualified current cash profit
sharing plan under which all employees of the Company, including officers, are
eligible to receive, on an annual basis, an equal amount of pre-tax profits,
prorated for service with the Company during 1997, as a cash bonus. For fiscal
1997, there were no payments under the plan.
-12-
<PAGE> 16
STOCK OPTIONS
The Compensation Committee annually grants options under the 1989 Stock
Plan with an exercise price equal to the fair market value on the date of grant.
The grants are intended to be competitive in order to retain and motivate key
executives and to provide a direct link with the interests of the stockholders
of the Company. The Compensation Committee, in making its determination as to
grant levels, takes into consideration: (i) prior award levels, (ii) award
levels necessary to replace particular executives, (iii) the total stock award
to be made and the executive's percentage participation in that award, (iv) the
executive's direct ownership of the Company's shares, (v) the number of options
vested and nonvested, and (vi) the options outstanding as a percentage of total
shares outstanding. The 1989 Stock Plan limits the total number of shares
subject to options that may be granted to a participant during any fiscal year
to 1,500,000 shares. The Compensation Committee awarded Mr. Johnson options to
purchase 100,000 shares in 1997 and Mr. Holdt, 20,000 shares. In 1997, Mr.
Johnson agreed to the cancellation of 214,222 of his unvested options in
connection with his becoming Vice Chairman of the Board of Directors.
STOCK PURCHASE PLAN
The Company maintains a qualified employee stock purchase plan to
encourage employees to own Company stock, which is generally available to all
employees. This plan allows participants to buy Company stock at a discount to
market price with up to 10% of their salaries, not to exceed 2,000 shares, per
six month period. However, the number of shares that may be purchased by each
participant is limited by applicable tax laws.
The foregoing report has been furnished by the Compensation Committee of
the Board of Directors of S3 Incorporated:
Carmelo J. Santoro, Ph.D., Chairman
John C. Colligan
Robert P. Lee, Ph.D.
-13-
<PAGE> 17
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return of
the Company's Common Stock with The Nasdaq Stock Market Index (U.S.) and The
Nasdaq Electronic Components Stock Index. The comparison assumes the investment
of $100 on March 5, 1993 (the date the Company's Common Stock became registered
under Section 12 of the Securities Exchange Act of 1934) based on the initial
public offering price of such stock on that date and that dividends were
reinvested when paid. The comparisons in the graph are required by the
Securities and Exchange Commission and are not intended to forecast or be
indicative of possible future performance of the Company's Common Stock.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG S3 INCORPORATED,
THE NASDAQ STOCK MARKET INDEX (U.S.)
AND THE NASDAQ ELECTRONIC COMPONENTS STOCK INDEX
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
3/5/93 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Nasdaq U.S. $100 $116 $114 $161 $198 $243
Nasdaq Electronic Component Index $100 $114 $125 $208 $359 $377
S3 Incorporated $100 $171 $159 $357 $329 $101
</TABLE>
-14-
<PAGE> 18
PROPOSAL 2 - TO APPROVE AN AMENDMENT TO
THE EMPLOYEE STOCK PURCHASE PLAN OF S3 INCORPORATED
SUMMARY OF THE 1993 EMPLOYEE STOCK PURCHASE PLAN
The 1993 Employee Stock Purchase Plan, which was approved by the
stockholders in April of 1994, gives eligible employees an opportunity to
purchase shares of the Company at a price below their market value and to pay
for the purchases through payroll deductions. There are 550 individuals eligible
to participate in the 1993 Employee Stock Purchase Plan. The fair market value
of the Company's Common Stock subject to purchase on April 13, 1998 was $6.25
per share.
There are currently 388,177 shares of Common Stock reserved for issuance
under the 1993 Employee Stock Purchase Plan.
The Company believes that the availability of an adequate reserve of
shares available for issuance under the Plan will benefit the Company by
providing employees with an opportunity to acquire shares of the Company's stock
and will enable the Company to attract, retain and motivate valued employees. On
a going-forward basis, the Company believes that it is prudent to establish and
maintain a share reserve sufficient for the number of share issuances to
employees required for a two-year period. Under the proposed amendment, an
additional 1,400,000 shares of Common Stock will be added to the shares
currently authorized under the 1993 Employee Stock Purchase Plan.
PROPOSED AMENDMENT
The amendment, which is subject to stockholder approval, amends and
restates Section 3 of the 1993 Employee Stock Purchase Plan to read as follows:
"SECTION 3. SHARES AUTHORIZED.
"The maximum aggregate number of shares which may be
offered under the Plan shall be 2,800,000 shares of stock,
subject to adjustment as provided in Section 13 hereof."
FEDERAL INCOME TAX CONSEQUENCES
The proposed amendment will have no effect upon the tax consequences to
participants or the Company.
REQUIRED APPROVAL
The affirmative vote of the holders of a majority of shares of Common
Stock represented and voting at a duly held meeting at which a quorum is present
is required to approve the amendment of the 1993 Employee Stock Purchase Plan.
Unless marked to the contrary, proxies received will be voted "FOR" approval of
the amendment to the Company's 1993 Employee Stock Purchase Plan.
-15-
<PAGE> 19
PROPOSAL 3 - TO RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors,
on April 13, 1998, engaged the firm of Ernst & Young LLP ("Ernst & Young") as
the Company's independent auditors for the fiscal year ended December 31, 1998,
subject to ratification by the stockholders. Ernst & Young replaced Deloitte &
Touche LLP ("Deloitte"), which firm was dismissed on March 31, 1998 as the
Company's independent auditor.
Neither Deloitte's Report dated January 17, 1997, January 23, 1998 as to
Note 2 (which expresses an unqualified opinion and includes an explanatory
paragraph relating to the restatement described in Note 2) on the Company's
financial statements for the year ended December 31, 1996 nor its Report dated
January 23, 1998 on the Company's financial statements for the year ended
December 31, 1997 contained an adverse opinion or a disclaimer of opinion, and
neither Report was qualified or modified as to uncertainty, audit scope or
accounting principles.
During the Company's fiscal years ended December 31, 1996 and 1997, and
through March 31, 1998, there have been no disagreements with Deloitte on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure which, if not resolved to Deloitte's satisfaction,
would have caused them to make reference to the subject matter of such
disagreement in connection with their Report on the financial statements for
such years, except as follows: In connection with the audit of the Company's
financial statements for the year ended December 31, 1997, there was a
disagreement between Deloitte and the Company regarding the appropriate period
in which to recognize the gain on the sale of stock of an investee. Deloitte
believed that recognition of such gain should be deferred until the period in
which the exchange actually occurred (first quarter of 1998) while the Company
initially believed that recognition of such gain was appropriate in the period
the irrevocable contract was signed (fourth quarter of 1997). Recognition of the
gain was deferred as proposed by Deloitte. On January 21, 1998, Deloitte
discussed this disagreement with the Audit Committee of the Company. The Company
has authorized Deloitte to respond fully to the inquiries of Ernst & Young
concerning the subject matter of such disagreement.
During the Company's fiscal years ended December 31, 1996 and 1997, and
through March 31, 1998, there have been no reportable events.
During the last two fiscal years and the subsequent interim period to
the date Ernst & Young was engaged, the Company did not consult Ernst & Young
regarding: (i) the application of accounting principles to a specified
transaction either completed or proposed; (ii) the type of audit opinion that
might be rendered on financial statements; or (iii) any matter that was the
subject of a disagreement. Representatives of Ernst & Young are expected to be
present at the Annual Meeting. They will have an opportunity to make a
statement, if they desire to do so, and will be available to respond to
appropriate questions. Representatives of Deloitte are not expected to be
present at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF ERNST &
YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Proposals of stockholders of the Company that are intended to be
presented by such stockholders at the Company's 1999 Annual Meeting of
Stockholders must be received by the Secretary of the Company no later than
January 18, 1999 in order that they may be included in the Company's proxy
statement and form of proxy relating to that meeting.
-16-
<PAGE> 20
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers and directors, and persons who own
more than 10 percent of a registered class of the Company's equity securities,
to file reports of ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission (the "SEC"). Officers, directors and greater than 10 percent
stockholders are required by SEC regulation to furnish the Company with copies
of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file Forms 5 for specified fiscal years, the Company
believes that all of its officers, directors and greater than 10 percent
beneficial owners complied with all filing requirements applicable to them with
respect to transactions during fiscal year 1997 except that Walter D. Amaral,
Chief Financial Officer and Senior Vice President, Finance, filed one
transaction on a Form 3 report 34 days late.
OTHER MATTERS
The Company knows of no other business that will be presented at the
Annual Meeting. If any other business is properly brought before the Annual
Meeting, it is intended that proxies in the enclosed form will be voted in
accordance with the judgment of the persons voting the proxies.
Whether or not you intend to be present at the Annual Meeting, we urge
you to return your signed proxy promptly.
By Order of the Board of Directors.
/s/ RONALD T. YARA
Ronald T. Yara
Secretary
Santa Clara, California
April 27, 1998
UPON WRITTEN REQUEST OF ANY STOCKHOLDER ENTITLED TO RECEIVE THIS PROXY
STATEMENT, THE COMPANY WILL PROVIDE, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT
ON FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. ANY SUCH
REQUEST SHOULD BE ADDRESSED TO THE COMPANY AT 2801 MISSION COLLEGE BOULEVARD,
SANTA CLARA, CALIFORNIA 95052, ATTENTION: INVESTOR RELATIONS DEPARTMENT. THE
REQUEST MUST INCLUDE A REPRESENTATION BY THE STOCKHOLDER THAT AS OF MARCH 31,
1998, THE STOCKHOLDER WAS ENTITLED TO VOTE AT THE ANNUAL MEETING.
-17-
<PAGE> 21
DETACH HERE
[X] Please mark
votes as in
this example.
This proxy will be voted as directed but if not otherwise directed, FOR the
election of five directors and FOR proposals 2 and 3. The Board of
Directors unanimously recommends a vote FOR Items 1, 2 and 3.
1. Election of five Directors to serve
until the 1999 Annual Meeting of
Stockholders.
Nominees: John C. Colligan, Terry N. Holdt, Robert P. Lee,
Carmelo J. Santoro, Ronald T. Yara.
FOR WITHHELD
[ ] [ ]
[ ] ______________________________________
For all nominees except as noted above
2. To approve an amendment to the Employee FOR AGAINST ABSTAIN
Stock Purchase Plan as described in [ ] [ ] [ ]
Proposal 2.
3. To ratify the selection of Ernst & Young [ ] [ ] [ ]
LLP as independent auditors.
4. In their discretion, the proxies are
authorized to vote upon such other business
as may properly come before the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
Please sign exactly as your name appears hereon.
When signing as attorney, executor, administrator,
trustees, or guardian, please give full title as
such. If shares are held jointly, each holder must
sign.
Signature:________________ Date:______ Signature:________________ Date:______
<PAGE> 22
DETACH HERE
PROXY
S3 INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby authorizes TERRY N. HOLDT, RONALD T. YARA AND
WALTER D. AMARAL as Proxies with full power in each to act without the other
and with the power of substitution in each, to represent and to vote all the
shares of stock the undersigned is entitled to vote at the Annual Meeting of
Stockholders of S3 Incorporated to be held on May 18, 1998 at 9:00 a.m., or at
any postponement or adjournment thereof.
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
