<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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] 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
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:
----------------------------------------------------------------------
<PAGE> 2
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------------------
2
<PAGE> 3
[S3 INCORPORATED LOGO]
S3 INCORPORATED
2841 MISSION COLLEGE BOULEVARD
SANTA CLARA, CA 95054
(408) 588-8000
April 19, 2000
Dear Stockholder:
I am pleased to invite you to S3 Incorporated's Annual Meeting of
Stockholders. The meeting will be held at 9:00 a.m. on Friday, May 26, 2000, 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 postage-prepaid envelope 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. Your
vote is important, so please return your proxy promptly.
A copy of the Company's 1999 Annual Report to Stockholders is also enclosed.
The Board of Directors and management look forward to seeing you at the
meeting.
Sincerely,
/s/ Kenneth F. Potashner
----------------------------------------
Kenneth F. Potashner
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 4
S3 INCORPORATED
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 26, 2000
---------------
To the Stockholders of S3 Incorporated:
S3 Incorporated will hold its Annual Meeting of Stockholders at 9:00 a.m. on
Friday, May 26, 2000, at Techmart, 5201 Great America Parkway, Santa Clara,
California.
We are holding this meeting:
- to elect five directors;
- to approve an amendment to the Company's Employee Stock Purchase Plan;
- to confirm the appointment of Ernst & Young LLP as the Company's
independent auditors; and
- to transact such other business as may properly come before the Annual
Meeting and any adjournment of the Annual Meeting.
Your Board of Directors has selected March 29, 2000 as the record date for
determining stockholders entitled to vote at the meeting. A complete list of
stockholders entitled to vote will be available at the Secretary's office, 2841
Mission College Boulevard, Santa Clara, California, for ten 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/ Walter Amaral
----------------------------------------
Walter Amaral
Secretary
Santa Clara, California
April 19, 2000
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INFORMATION CONCERNING SOLICITATION AND VOTING.......................... 1
Proposal 1 -- ELECTION OF DIRECTORS..................................... 2
Directors and Nominees................................................ 2
Board Meetings and Committees......................................... 3
Directors' Compensation............................................... 3
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT............................................................ 4
EXECUTIVE COMPENSATION.................................................. 6
Summary Compensation Table............................................ 6
Option Grants in Last Fiscal Year..................................... 7
Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values............................................. 7
Pension and Long-Term Incentive Plans................................. 8
Employment Agreements................................................. 8
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS ON EXECUTIVE COMPENSATION................................... 9
Base Salary........................................................... 9
Bonuses............................................................... 9
Employee Profit Sharing Plan.......................................... 9
Stock Options......................................................... 10
Stock Purchase Plan................................................... 10
Compensation of Chief Executive Officer............................... 10
STOCK PRICE PERFORMANCE GRAPH........................................... 11
Proposal 2 -- TO APPROVE AN AMENDMENT TO THE EMPLOYEE STOCK
PURCHASE PLAN OF S3 INCORPORATED.......................... 12
Summary of the 1993 Employee Stock Purchase Plan...................... 12
Proposed Amendment.................................................... 12
Federal Income Tax Consequences....................................... 12
Required Approval..................................................... 12
Proposal 3 -- TO CONFIRM THE APPOINTMENT OF INDEPENDENT
AUDITORS.................................................. 12
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING....................... 13
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE................. 13
</TABLE>
======================================
FOR DIRECTIONS TO THE MEETING, YOU
WILL FIND A MAP ON THE BACK COVER
OF THIS PROXY STATEMENT
======================================
<PAGE> 6
S3 INCORPORATED
---------------
PROXY STATEMENT
---------------
INFORMATION CONCERNING SOLICITATION AND VOTING
This Proxy Statement is being furnished to you in connection with the
solicitation by the Board of Directors of S3 Incorporated, a Delaware
corporation (the "Company"), of proxies to be used at the Annual Meeting of
Stockholders to be held at Techmart, 5201 Great America Parkway, Santa Clara,
California, at 9:00 a.m. California time on Friday, May 26, 2000 and any
adjournments thereof (the "Annual Meeting").
Only those who owned the Company's Common Stock at the close of business on
March 29, 2000, the record date for the Annual Meeting, can vote. As of the
close of business on such date, the Company had 91,191,382 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.
You may vote your shares at the Annual Meeting either in person or by proxy.
To vote by proxy, you should mark, date, sign and mail the enclosed proxy in the
prepaid envelope. Giving a proxy will not affect your right to vote your shares
if you attend the Annual Meeting and want to vote in person. By voting in
person, you automatically revoke your proxy. You also may revoke your proxy at
any time before the voting by giving the Secretary written notice of your
revocation or by submitting a later-dated proxy. If you return your proxy but do
not mark your voting preference, the individuals named as proxies will vote your
shares FOR the election of the nominees for director, FOR the amendment to the
Employee Stock Purchase Plan and FOR the confirmation of the selection of
independent auditors.
This year, registered stockholders can simplify their voting and save the
Company expense by calling (877) 779-8683 or voting via the Internet at
http://www.eproxyvote.com/siii. Telephone and Internet voting information is
provided on the proxy card if these options are available to you. Votes
submitted via the Internet or by telephone must be received by 12:00 midnight,
Eastern Standard Time, on May 25, 2000. Submitting your proxy via the Internet
or by telephone will not affect your right to vote in person should you decide
to attend the Annual Meeting.
Stockholders holding shares in the name of a bank or broker should follow the
voting instructions on the form of proxy received. The availability of telephone
and Internet voting will depend on their voting processes.
Directors are elected by a plurality vote. Accordingly, the five nominees for
director who receive the most votes cast in their favor will be elected. The
other matters submitted for stockholder approval 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 a vote against such matter. 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 Company will pay the cost of printing and mailing proxy materials. 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
$5,000.
This Proxy Statement and the accompanying form of proxy are being mailed to
stockholders on or about April 21, 2000.
1
<PAGE> 7
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 YOUR SHARES
CAN BE VOTED, WHETHER YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING OR NOT.
THIS WILL NOT LIMIT YOUR RIGHTS TO ATTEND OR VOTE AT THE ANNUAL MEETING.
PROPOSAL 1 -- ELECTION OF DIRECTORS
DIRECTORS AND NOMINEES
The Company's Bylaws provide that the Company shall have not less than three
nor more than nine directors, with the exact number to be determined by the
Board of Directors. Since last year's meeting, the Board of Directors has
adopted a resolution decreasing the number of directors from six to five.
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 Board of Directors' nominees and certain biographical
information about them are set forth below:
MR. KENNETH F. POTASHNER, age 42, has served as Chief Executive Officer,
President and Chairman of the Board since November 1998. Mr. Potashner has been
a director of Maxwell Technologies, Inc. since April 1996 and became Chairman of
the Board of Maxwell Technologies in April 1997. From the time he joined Maxwell
Technologies in April 1996 until October 1998, Mr. Potashner served as its
President, Chief Executive Officer and Chief Operating Officer. From 1994 to
April of 1996, he served as Executive Vice President, Operations for Conner
Peripherals, Inc. From 1991 through 1994, Mr. Potashner was Vice President,
Product Engineering, for Quantum Corporation. Mr. Potashner is also a member of
the Board of Directors of Newport Corporation.
MR. TERRY N. HOLDT, age 56, has served as Vice Chairman of the Board since
November 1998. He previously served as Chairman of the Board from December 1997
to November 1998, and as a director since January 1992. Mr. Holdt served as the
Company's Chief Executive Officer and President from December 1997 to October
1998 and from January 1992 to August 1996. Mr. Holdt served as Vice Chairman of
the Board from August 1996 to December 1997. Mr. Holdt is currently President,
Chief Executive Officer and a director of Entridia Corporation. He 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, Maxoptix Corporation and Tropian Corp.
DR. ROBERT P. LEE, age 47, has been a director of the Company since April
1994. Since February 1999, Dr. Lee has served as President and Chief Executive
Officer of Inxight Software, Inc., a Xerox New Enterprise Company. From July
1997 to April 1998, Dr. Lee 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 58, has been a director of the Company since May
1992. He was the Chairman of the Board of Silicon Systems, Inc. from 1984 to
1991, and served as President and Chief Executive Officer of Silicon Systems,
Inc. from 1982 through 1991. Dr. Santoro is currently a director of Dallas
Semiconductor 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. JAMES T. SCHRAITH, age 42, has been a director of the Company since
September 1999. He served as a director of Diamond Multimedia Systems Inc.
("Diamond") from March 1998 until the Company acquired Diamond in September
2
<PAGE> 8
1999. Mr. Schraith is currently President of Quantum Technology Ventures, the
venture capital subsidiary of Quantum Corporation. Mr. Schraith joined Quantum
Corporation in October 1999 as Executive Vice President of Worldwide Sales &
Corporate Marketing. From February 1998 to September 1999, Mr. Schraith was
President & Chief Executive Officer of ShareWave, Inc., a developer of wireless
networking products. From October 1996 to January 1998, Mr. Schraith was
Vice-President and General Manager of the North America Division of Compaq
Computer. Previously, Mr. Schraith was Chief Executive Officer and a director of
the Cerplex Group, Inc. From 1987 to 1995, Mr. Schraith was employed at AST
Research, Inc., most recently serving as President, Chief Operating Officer and
Director. Mr. Schraith is also a director of Semtech Corporation, ShareWave,
Inc. and Digital Archaeology, Inc.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF MR. KENNETH F.
POTASHNER, MR. TERRY N. HOLDT, DR. ROBERT P. LEE, DR. CARMELO J. SANTORO AND MR.
JAMES T. SCHRAITH AS DIRECTORS OF THE COMPANY.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held six meetings during the year ended December 31,
1999. During that period, each director attended at least 75% of the aggregate
number of meetings of the Board of Directors and of the committees on which such
director serves held during the period for which he has been a director.
The Board of Directors has appointed a Compensation Committee and an Audit
Committee. The Compensation Committee and Audit Committee are comprised entirely
of outside directors. The Board of Directors has no standing nominating
committee.
The members of the Compensation Committee during 1999 were Robert P. Lee, Jim
Schraith (Chairman) and Carmelo J. Santoro. The Compensation Committee held
three meetings during 1999. 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.
The members of the Audit Committee during 1999 were Robert P. Lee, Carmelo J.
Santoro (Chairman) and William J. Schroeder. The Audit Committee held four
meetings during 1999. The Audit Committee's functions are to review the scope of
the annual audit, monitor the external auditor's independence, 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 confirmation
of the Board of Directors, a firm of certified public accountants whose duty it
is to audit the financial statements of the Company for the fiscal year for
which it is appointed.
DIRECTORS' COMPENSATION
Employee directors (presently Mr. Potashner and Mr. Holdt) receive no
additional compensation for service on the Board of Directors. Non-employee
directors of the Company (presently consisting of Messrs. Lee, Santoro and
Schraith) 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. Potashner who is an officer of the Company, as well as a
director.
3
<PAGE> 9
In December 1998, each non-employee director who was serving as such on
December 14, 1998 (consisting of Messrs. Lee and Santoro) was granted an option
to purchase 100,000 shares of Common Stock (the "100,000 Share Option"). Such
option grants were in lieu of the options that such directors would otherwise
have been granted before the 2005 annual meeting of the Company's stockholders
as described in the immediately preceding paragraph. Each 100,000 Share Option
vests according to the following schedule: 20,000 shares vest and become
exercisable at the rate of 25% upon each one year anniversary of the regular
annual meeting of the Company's stockholders occurring in calendar year 1999;
20,000 shares vest and become exercisable at the rate of 25% upon each one year
anniversary of the regular annual meeting of the Company's stockholders
occurring in calendar year 2000; 20,000 shares vest and become exercisable at
the rate of 25% upon each one year anniversary of the regular annual meeting of
the Company's stockholders occurring in calendar year 2001; 20,000 shares vest
and become exercisable at the rate of 25% upon each one year anniversary of the
regular annual meeting of the Company's stockholders occurring in calendar year
2002; and 20,000 shares vest and become exercisable at the rate of 25% upon each
one year anniversary of the regular annual meeting of the Company's stockholders
occurring in calendar year 2003. No shares vest for any non-employee director
after that director has stopped serving on the Board. In addition, in 2000, each
director other than Mr. Potashner was granted an additional option to purchase
20,000 shares of the Company's Common Stock. All options granted to a
non-employee director as described in this paragraph or the immediately
preceding paragraph become exercisable in full in the event of the termination
of such director's service because of death or total and permanent disability or
upon a change in control of the Company.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 1, 2000, as to
shares of the Company's Common Stock beneficially owned by: (i) each of the
Company's current directors, (ii) each of the Company's executive officers
listed on the Summary Compensation Table on page 6, (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)(3)
------------ --------------
<S> <C> <C>
Kenneth F. Potashner ..................... 1,461,081 1.6%
Terry N. Holdt ........................... 695,000 *
Robert P. Lee ............................ 80,000 *
Carmelo J. Santoro........................ 68,526 *
James T. Schraith......................... 8,125 *
Walter D. Amaral.......................... 59,618 *
Paul G. Franklin.......................... 188,700 *
Rick Bergman.............................. 99,764 *
Andy Wolfe................................ 71,646 *
All directors and executive officers
as a group (Nine persons)............... 2,660,814 2.9%
State of Wisconsin Investment Board(4).... 4,894,840 5.4%
P.O. Box 7842
Madison, WI 53707
Via Technologies, Inc.(5) ................ 13,198,000 14.7%
BF, No. 553 Chung-Chen Road
Hsing-Tian, Taipei
Taiwan
</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.
4
<PAGE> 10
(3) Includes shares issuable upon exercise of options within 60 days of March 1,
2000 as follows: Kenneth F. Potashner, 1,459,081; Terry N. Holdt, 695,000;
Robert P. Lee, 80,000; Carmelo J. Santoro, 68,536; James T. Schraith, 8,125;
Walter D. Amaral, 59,618; Paul G. Franklin, 175,302; Rick Bergman, 95,764;
and Andy Wolfe, 71,646.
(4) The number of shares beneficially owned is based on information contained in
a report on Schedule 13G (Amendment No. 2), dated February 10, 2000, filed
by the State of Wisconsin Investment Board. The report states that the State
of Wisconsin Investment Board has sole voting power and sole dispositive
power with respect to all shares listed in the table.
(5) The number of shares beneficially owned is based on information contained in
a report on Schedule 13D, dated February 24, 2000, filed by Via Technology,
Inc. and its affiliates, Viabase, Inc., Timtech Co. and Tim Chen. Via
Technology, Inc. shares with such affiliates voting power and sole
dispositive power with respect to all shares listed in the table.
5
<PAGE> 11
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, 1999 of
(i) the Company's Chief Executive Officer as of December 31, 1999 and (ii) the
Company's four other most highly compensated executive officers as of December
31, 1999 (the "Named Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------------
AWARDS
ANNUAL COMPENSATION ---------------------
--------------------- SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)
- --------------------------- ---- --------- -------- ---------------------
<S> <C> <C> <C> <C>
Kenneth F. Potashner(1)................. 1999 509,615 261,869 0
Chairman, President and 1998 69,231 0 4,500,000
Chief Executive Officer
Walter D. Amaral(2)..................... 1999 254,808 75,000 0
Senior Vice President and 1998 250,001 0 30,000
Chief Financial Officer 1997 80,770 41,666 640,000
Paul G. Franklin........................ 1999 278,010 77,763 155,000
President, Multimedia Division 1998 259,210 0 130,000
1997 236,479 75,000 219,631
Andrew Wolfe(3)......................... 1999 193,654 157,000 30,000
Chief Technical Officer
Richard Bergman(4)...................... 1999 193,653 57,000 0
Vice President and General Manager, 1998 189,230 38,729 120,000
Mobile And Integrated Products 1997 81,856 15,000 70,000
</TABLE>
- ----------
(1) Mr. Potashner joined the Company as President and Chief Executive Officer in
October 1998 and was elected Chairman of the Board in November 1998. See
"Executive Compensation--Employment Agreements."
(2) Mr. Amaral joined the Company in August 1997 as Senior Vice President and
Chief Financial Officer.
(3) Mr. Wolfe became Chief Technical Officer in May 1999.
(4) Mr. Bergman joined the Company in June 1997.
6
<PAGE> 12
STOCK OPTIONS
The following tables summarize option grants to, and exercises by, the Named
Officers and directors during fiscal 1999, and the value of the options held by
each such person at the end of fiscal 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
------------------------------------------------ REALIZABLE VALUE AT
NUMBER OF % OF ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(4)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ------------------------
NAME GRANTED(1) FISCAL YEAR ($/SH)(2) DATE(3) 5%($) 10%($)
---------- ------------- --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Andrew Wolfe ...... 30,000 0.6% 6.88 1/13/09 129,804 328,948
Paul G. Franklin .. 30,000 0.6% 6.88 1/13/09 129,804 328,948
130,000 2.4% 8.94 9/23/09 730,901 1,852,274
</TABLE>
- ----------
(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) The exercise price on the date of grant was equal to 100% of the fair market
value on the date of grant.
(3) Unless otherwise noted, the options have a term of 10 years, subject to
earlier termination in certain events related to termination of employment.
(4) 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.
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, 1999(#) DECEMBER 31, 1999($)(2)
SHARES ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth F. Potashner.. 696,900 4,763,986 1,678,100 2,125,000 14,107,367 17,864,343
Walter D. Amaral...... 60,000 292,500 130,626 159,374 847,243 1,042,276
Paul G. Franklin...... 0 0 183,936 251,648 1,171,849 1,084,891
Andrew Wolfe.......... 0 0 72,797 94,503 443,411 562,781
Richard Bergman....... 0 0 90,036 99,964 580,895 655,450
</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, 1999 ($11.563 per share) minus the exercise
price.
7
<PAGE> 13
PENSION AND LONG-TERM INCENTIVE PLANS
The Company has no pension or long-term incentive plans.
EMPLOYMENT AGREEMENTS
In October 1998, the Company entered into an agreement with Kenneth F.
Potashner (the "Potashner Employment Agreement"), pursuant to which Mr.
Potashner is employed as the President, Chief Executive Officer and Chairman of
the Board at a base salary of $500,000 per year. The agreement has a three year
term. Mr. Potashner is eligible to receive an annual cash bonus of up to 200% of
his base salary, with the cash bonus payable after the first year of the
Potashner Employment Agreement guaranteed to be at least $250,000. Mr. Potashner
also received two options to purchase an aggregate of 4,500,000 shares of Common
Stock of the Company. One option for 1,500,000 shares (the "1,500,000 Share
Option") vests upon the earliest of (i) six months from the date Mr. Potashner
was hired by the Company, (ii) a change in control of the Company, (iii) the
termination of Mr. Potashner's employment without cause or (iv) the termination
of Mr. Potashner's employment following the occurrence of, among other things, a
diminution in Mr. Potashner's duties or a reduction in Mr. Potashner's
compensation, each of which is deemed a "constructive termination" and treated
similarly to a termination without cause. The 1,500,000 Share Option vested in
April 1999, six months after the Company hired Mr. Potashner. The second option
for 3,000,000 shares (the "3,000,000 Share Option") vests over a four-period in
accordance with the following schedule: 750,000 shares vested on the first
anniversary of Mr. Potashner's employment with the Company; thereafter, the
remaining options vest in equal monthly installments of 62,500 shares. In
addition, Mr. Potashner is eligible for a one-time "special cash bonus" on the
third anniversary of the date of his employment if the Company's Common Stock
has not achieved a $4.67 per share increase in value as determined from the date
of Mr. Potashner's employment. The one-time special cash bonus, if payable, will
be equal to $7,000,000 less an amount which adjusts for any increase in the
share price of the Company's Common Stock above the exercise price per share of
the 1,500,000 Share Option. This one-time special cash bonus may also be payable
in the event Mr. Potashner's employment is terminated without cause. The
Potashner Employment Agreement also provides that, in the event that Mr.
Potashner's employment is terminated without cause, the special cash bonus
described above shall be calculated and paid as of the date of Mr. Potashner's
termination, and the Company will continue to pay Mr. Potashner his salary and
maximum bonus for twelve months following his termination. During such
twelve-month period, Mr. Potashner's employee benefits and the vesting on the
3,000,000 Share Option will continue. If termination without cause occurs
following a change in control of the Company, the twelve-month period for
compensation and benefit continuation will be extended to eighteen months, and
Mr. Potashner will receive an additional cash payment to the extent that the sum
of his continued compensation, special cash payment and the net exercise value
of the 3,000,000 Share Option does not exceed $10,000,000. In addition, if the
post-change in control termination occurs after October 31, 2000, the 3,000,000
Share Option will be vested as to any shares that cannot vest during the
eighteen-month period.
When Mr. Potashner became President, Chairman and Chief Executive Officer in
1998, Mr. Holdt, who formerly held those positions, became Vice Chairman of the
Company. Mr. Holdt currently receives 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 pursuant to a consulting agreement. Pursuant to the
agreement, in January 1998 Mr. Holdt received a non-qualified stock option of
500,000 shares with a vesting period of one year and participation in the
Executive Bonus Plan. In addition, in his capacity as Vice Chairman, Mr. Holdt
is entitled under the agreement to receive a non-qualified stock option of
20,000 shares at each regular annual meeting of the Company's stockholders at
which he is re-elected as a director, which option shall vest and become
exercisable at the rate of 25% on each one year anniversary of the date of
grant. The agreement may be terminated by either Mr. Holdt or the Company at any
time with or without cause.
In September 1998, the Company entered into an Involuntary Termination
Agreement with each of Messrs. Amaral, Franklin and Wolfe which provides for a
severance payment by the Company to each of them if they are involuntarily
terminated other than for cause. Each severance payment would be paid in a lump
sum amount equal to six months of the individual's base salary plus one month of
base salary for every full year of that individual's service to the Company. In
addition, each Involuntary Termination Agreement provides that the term for
exercise of any outstanding options will be extended until six months after the
date of termination, although vesting shall cease as of that date.
In December 1998 the Company adopted an Executive Retention Incentive Program
pursuant to which Messrs. Amaral, Franklin and Wolfe will each be entitled to
receive $250,000 on the latest of, (i) November 11, 2000, (ii) the date that the
Company's United Semiconductor Corporation ("USC") shares are free tradable and
are traded on either the Taiwan nation stock exchange or another national stock
exchange or (iii) the sale of substantially all of USC, provided that he
continues to be employed by the Corporation on such date. As a result of the
merger between USC and UMC, in January 2000, the Company's USC shares were
exchanged for UMC shares that are traded on the Taiwan national stock exchange.
Therefore, under the terms of the Executive Retention Incentive
8
<PAGE> 14
Program, Messrs. Amaral, Franklin and Wolfe will each be entitled to received
$250,000 on November 11, 2000, provided they continue to be employed by the
Company on that date, and accordingly an accrual of $750,000 was made in the
first quarter of 2000.
In December 1999, the Company sold to Messrs. Potashner, Amaral and Wolfe
654,717, 191,179 and 191,179 shares of RioPort.com, Inc. common stock, for the
aggregate purchases prices of $261,232, $76,280 and $76,280, respectively. The
Company loaned to each of these officers substantially all of the purchase price
of the common stock purchased. Each loan is evidenced by the officer's full
recourse promissory note and is secured by the officer's RioPort.com, Inc.
common stock purchased. The loans accrue interest at the rate of 5.75% per year
and are due on December 8, 2002.
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. It is the philosophy of the Company that executive compensation be
directly linked to the interests of the Company's stockholders and therefore to
financial objectives that the Company believes are primary determinants of
long-term stockholder value. The compensation policies of the Company are
designed to set its executive compensation, including salary and short-term and
long-term incentive programs, at a level consistent with amounts paid to
executive officers of companies of similar size and marketplace orientation.
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
permit awards under such plans to qualify 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 and, in the case of Mr. Potashner's options, has determined that such
options shall not qualify as performance-based compensation.
In October 1998, Mr. Kenneth F. Potashner joined the Company as President and
Chief Executive Officer. In November 1998, he was elected Chairman of the Board.
There are four primary components of executive compensation: Base Salary,
Bonus, Employee Profit Sharing Plan and Stock Options.
BASE SALARY
Base salaries for fiscal 1999 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 with
the Chief Executive Officer's involvement. 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 1999, Mr. Potashner was paid a total salary of $509,615 in his
capacity as 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. Based on the Company's performance as of June 30, 1999,
Messrs. Potashner, Amaral, Franklin, Wolfe and Bergman were paid bonuses of
$261,869, $75,000, $77,763, $57,000 and $57,000, respectively. Mr. Wolfe was
paid an additional discretionary bonus of $100,000.
EMPLOYEE PROFIT SHARING PLAN
9
<PAGE> 15
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 1999, as a cash bonus. For fiscal
1999, there were no payments made to executive officers under the plan.
STOCK OPTIONS
The Compensation Committee 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. That fiscal year limit was raised to 4,500,000 shares for
1998 only.
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. The number of shares that may be purchased by each participant is
limited by applicable tax laws.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
In October 1998, the Company entered into the Potashner Employment Agreement
with Kenneth F. Potashner, the Company's Chairman, President and Chief Executive
Officer. The terms of the Potashner Employment Agreement were negotiated with
and approved by the Compensation Committee and the Board of Directors. See
"Executive Compensation -- Employment Agreements."
The foregoing report has been furnished by the Compensation Committee of the
Board of Directors of S3 Incorporated:
Carmelo J. Santoro
Robert P. Lee
James T. Schraith, Chairman
10
<PAGE> 16
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 December 31, 1994 (the last trading day before the beginning of the Company's
fifth preceding fiscal year) based on the closing price of the Company's Common
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
[GRAPH]
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
S3 Incorporated 100 223 206 63 93 146
- ----------------------------------------------------------------------------------------------
Nasdaq Stock Market (U.S.) 100 141 173 213 300 542
- ----------------------------------------------------------------------------------------------
Nasdaq Electronic Components Index 100 165 286 300 464 910
- ----------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 17
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's Common Stock at a price below their market value and to pay for
the purchases through payroll deductions. In April of 1998, the stockholders
approved an amendment to the 1993 Employee Stock Purchase Plan (the "Stock
Purchase Plan") increasing the number of shares of Common Stock available for
sale to employees from 1,400,000 to 2,800,000.
There are approximately 1,000 individuals eligible to participate in the
Stock Purchase Plan. There are currently 285,340 shares of Common Stock reserved
for issuance under the Stock Purchase Plan. The fair market value of the
Company's Common Stock subject to purchase on March 1, 2000 was $17.63 per
share.
The Company believes that the availability of an adequate reserve of shares
available for issuance under the Stock Purchase Plan will benefit the Company by
providing employees with an opportunity to acquire shares of the Company's stock
and will help the Company attract, retain and motivate valued employees. The
Company believes that it is prudent to establish and maintain a share reserve
sufficient for the number of shares issuances to employees required for a
two-year period. Under the proposed amendment, an additional 2,000,000 shares of
Common Stock will be added to the shares currently authorized under the Stock
Purchase Plan.
PROPOSED AMENDMENT
The amendment, which is subject to stockholder approval, amends and restates
Section 3 of the 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 4,800,000 shares of stock, subject to adjustment as provided in
Section 13 hereof."
FEDERAL INCOME TAX CONSEQUENCES
The proposed amendment with have no effect upon the tax consequences to
participants or the Company.
REQUIRED APPROVAL
The affirmative vote of the holders of a majority of the 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 Stock Purchase Plan. Unless marked
to the contrary, proxies received will be voted "FOR" approval of the amendment
to the Company's Stock Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT TO
THE STOCK PURCHASE PLAN.
PROPOSAL 3 -- TO CONFIRM THE APPOINTMENT OF INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors has
appointed the firm of Ernst & Young LLP ("Ernst & Young") as the Company's
independent auditors for the fiscal year ended December 31, 2000, subject to
confirmation by the stockholders. Ernst & Young has audited the Company's
financial statements since April 13, 1998. Representatives of Ernst & Young are
expected to be present at the Company's 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.
On March 31, 1998, the Company informed Deloitte & Touche LLP ("Deloitte"),
its former independent accountants, that effective immediately they had been
dismissed as the Company's principal independent accountants. Representatives of
Deloitte are not expected to be present at the Company's Annual Meeting.
12
<PAGE> 18
Deloitte's Report dated January 23, 1998 on the Company's financial
statements for the year ended December 31, 1997 did not contain an adverse
opinion or a disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope or accounting principles.
The decision to dismiss was recommended by the Audit Committee, and approved
by the Board of Directors, of the Company.
During the Company's fiscal year ended December 31, 1997, and through March
31, 1998, there were 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 periods, 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 the successor accountant concerning the subject matter
of such disagreement.
During the Company's fiscal years ended December 31, 1997 and 1998 there were
no reportable events.
During the fiscal year ended December 31, 1997 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR CONFIRMATION OF ERNST & YOUNG
LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
Proposals of stockholders of the Company that are intended to be included in
the Company's proxy statement for the 2001 Annual Meeting of Stockholders must
be received by the Secretary of the Company no later than December 11, 2000.
A stockholder proposal not included in the Company's proxy statement for the
2001 Annual Meeting will be ineligible for presentation at that meeting unless
the stockholder gives timely notice of the proposal in writing to the Secretary
of the Company at the principal executive offices of the Company and otherwise
complies with the applicable provisions of the Company's Bylaws. To be timely,
the Company's Bylaws provide that the Company must have received the
stockholder's notice not less than 50 days nor more than 75 days prior to such
meeting. However, if notice or prior public disclosure of the date of the annual
meeting is given or made to stockholders fewer than 65 days prior to the meeting
date, the Company must receive the stockholder's notice by the earlier of (i)
the close of business on the 15th day after the earlier of the day the Company
mailed notice of the annual meeting date or provided such public disclosure of
the meeting date and (ii) two days prior to the scheduled date of the annual
meeting. The Secretary should be contacted in writing at the address on the
first page of this Proxy Statement to obtain additional information as to the
proper form and content of notices of stockholder proposals.
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. Officers, directors and greater than 10 percent stockholders are
required 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 Form 5 for specified fiscal years, the Company
believes that all of its officers, directors and greater than 10 percent
beneficial owners complied with all Section 16(a) filing requirements applicable
to them with respect to transactions during fiscal year 1999 except that Mr.
Schroeder, who was a director of the Company, amended his Form 3 after recently
discovering that he inadvertently did not report his ownership of the Company's
5-3/4% Convertible Subordinated Notes Due 2003.
13
<PAGE> 19
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, unless otherwise instructed.
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/ Walter Amaral
Walter Amaral
Secretary
Santa Clara, California
April 19, 2000
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 2841 MISSION COLLEGE BOULEVARD,
SANTA CLARA, CALIFORNIA 95054, ATTENTION: INVESTOR RELATIONS DEPARTMENT. THE
REQUEST MUST INCLUDE A REPRESENTATION BY THE STOCKHOLDER THAT AS OF MARCH 29,
2000, THE STOCKHOLDER WAS ENTITLED TO VOTE AT THE ANNUAL MEETING.
14
<PAGE> 20
S3 INCORPORATED'S ANNUAL MEETING OF STOCKHOLDERS
TECHMART
5201 GREAT AMERICA PARKWAY
SANTA CLARA, CALIFORNIA
(408) 562-6111
(408) 562-5703 (FAX)
[MAP]
DIRECTIONS:
FROM SAN JOSE
Highway 101 North to Great America Parkway
exit. Turn right onto Great America Parkway,
go 1 1/2 miles. Techmart will be on your
right at the intersection of Bunker Hill
Lane.
FROM SAN FRANCISCO
Highway 101 South to Great America Parkway
exit. Turn left onto Great America Parkway,
go 1 1/2 miles. Techmart will be on your
right at the intersection of Bunker Hill
Lane.
FROM OAKLAND
Highway 880 South -- exit Route 237 West. At
fifth light (3 miles), make a left onto
Great America Parkway. Techmart is the first
building on your left at the intersection of
Bunker Hill Lane.
FROM SANTA CRUZ
Highway 17/880 North -- exit 101 North. Turn
right onto Great America Parkway, go 1 1/2
miles. Techmart will be on your right at the
intersection of Bunker Hill Lane.
TECHMART IS CONVENIENTLY LOCATED IN SANTA
CLARA ON GREAT AMERICA PARKWAY, BETWEEN
HIGHWAY 101 AND 237. THE WESTIN HOTEL AND
SANTA CLARA CONVENTION CENTER ARE RIGHT NEXT
DOOR, AND SAN JOSE INTERNATIONAL AIRPORT IS
ONLY 10 MINUTES AWAY. AMPLE PARKING IS
AVAILABLE.
15
<PAGE> 21
============================================
For directions to the meeting, you
will find a map on the back cover of
this Proxy Statement
============================================
PROXY
S3 INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY The undersigned hereby authorizes KENNETH F. POTASHNER, TERRY N. HOLDT
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 (the "Company")
to be held on May 26, 2000, or at any postponements or adjournments
thereof on the matters set forth on the reverse side.
------------
(Continued and to be signed on reverse side)
SEE REVERSE SIDE
------------
<PAGE> 22
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2 AND 3.
1. Proposal to elect Mr. Kenneth F. Potashner, Mr. Terry N. Holdt, Dr. Robert
P. Lee, Dr. Carmelo J. Santoro and Mr. James T. Schraith as directors of the
Company to serve until the next Annual Meeting of Stockholders or until
their successors are duly elected and qualified.
FOR ALL NOMINEES [ ] WITHHOLD FROM ALL NOMINEES [ ]
[ ] _____________________________________________________
For all nominees except as noted above
2. Proposal to approve an amendment to the Company's Employee Stock Purchase
Plan increasing the number of shares of the Company's common stock available
to be offered under such plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Proposal to confirm the appointment of Ernst & Young LLP as the Company's
Independent Auditors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any postponements or
adjournments thereof.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE
Please sign where indicated below. When shares are held by joint tenants, both
should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in full
corporate name by an authorized officer. If a partnership, please sign in full
partnership name by an authorized person.
Signature: _______________ Date: _____ Signature: _______________ Date: _____
