DIAMOND MULTIMEDIA SYSTEMS INC, S-8, 1998-04-01

DIAMOND MULTIMEDIA SYSTEMS INC
S-8, 1998-04-01
COMPUTER PERIPHERAL EQUIPMENT, NEC

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<PAGE> 1
As filed with the Securities and Exchange Commission on April ___, 1998
Registration No. 333-__________

================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-8

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------

DIAMOND MULTIMEDIA SYSTEMS, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 77-0390654
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

2880 JUNCTION AVENUE
SAN JOSE, CALIFORNIA 95134-1922
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

1992 STOCK OPTION PLAN

(Full title of the plans)
----------------------

WILLIAM J. SCHROEDER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
DIAMOND MULTIMEDIA SYSTEMS, INC.
2880 JUNCTION AVENUE
SAN JOSE, CALIFORNIA 95134-1922
(408) 325-7000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------
Copy to:

HOWARD S. ZEPRUN, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
============================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO BE PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE (1) PRICE FEE (2)
---------------- ---------- ------------- ----- -------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value
- - to be issued under 1992 Stock Option Plan 563,707 $14.813 $8,350,191.79 $2,463.31
Total 563,707 $14.813 $8,350,191.79 $2,463.31
============================================================================================================
</TABLE>

(1) Estimated in accordance with Rule 457(h) of Regulation C solely for the
purpose of calculating the registration fee. The proposed maximum
aggregate offering price per share with respect to the 563,707 shares
authorized and reserved for issuance under the 1992 Stock Option Plan
has been estimated to be the closing price reported in the Nasdaq
National Market on March 27, 1998.

(2) Amount of Registration Fee was calculated pursuant to Section 6(b) of
the Securities Act of 1933, which states that the fee shall be $295 per
$1,000,000 offered or sold.

<PAGE> 2
DIAMOND MULTIMEDIA SYSTEMS, INC.

REGISTRATION STATEMENT ON FORM S-8

PART II

ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.

There are hereby incorporated by reference into this Registration Statement
the following documents and information heretofore filed with the Securities and
Exchange Commission (the "Commission") by the Registrant:

1. The contents of the Registration Statement on Form S-8 file number 333-40101
filed by the Company with the Securities and Exchange Commission on November
13, 1997.

2. The Company's Annual Report on Form 10-K filed with the SEC for the fiscal
year ended December 31, 1996.

3. The Company's Quarterly Report on Form 10-Q for the quarters ended June 30,
1997 and September 30, 1997, filed pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").

4. The description of Registrant's Common Stock contained in the Registrant's
Registration Statement on Form 8-A dated February 10, 1995, filed with the
Securities and Exchange Commission pursuant to Section 12 of the Exchange
Act, including any amendment or report filed for the purpose of updating
such description.

All documents filed by Registrant pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act after the date hereof, and prior to the filing of a
post-effective amendment which indicates that all securities offered hereunder
have been sold or which deregisters all securities then remaining unsold under
this registration statement, shall be deemed to be incorporated by reference
herein and to be part hereof from the date of filing of such documents.

ITEM 4. DESCRIPTION OF SECURITIES.

Not applicable.

ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.

The validity of the issuance of shares of Common Stock offered hereby will
be passed upon for the Registrant by Wilson Sonsini Goodrich & Rosati,
Professional Corporation ("WSGR"), Palo Alto, California. Jeffrey D. Saper, a
member of WSGR, is a director and Secretary of the Registrant. As of the date of
this Form S-8 Registration Statement, Mr. Saper beneficially owned 19,642 shares
of Registrant's Common Stock.

ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the Delaware General Corporations Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Act. The Registrant's
Bylaws provides for the mandatory indemnification of its directors and officers
and permissible indemnification of employees and other agents to the maximum
extent permitted by Delaware General Corporation Law. Registrant has entered
into an indemnification agreement with each of its officers and directors which
provide the Registrant's officers and directors with indemnification to the
maximum extent permitted by the Delaware General Corporation Law. In addition,
the Registrant's Certificate of Incorporation provides that, pursuant to
Delaware law, its directors shall not be liable for monetary damages for a
breach of the directors' fiduciary duty as a director to Registrant and its
stockholders, provided that such liability does not arise from certain
proscribed conduct. Registrant also currently maintains officer and director
liability insurance.

-2-

<PAGE> 3
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.

Not applicable.

ITEM 8. INDEX TO EXHIBITS.

<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------ -----------------------
<S> <C>
5.1 Opinion of Counsel as to legality of securities being
registered.

10.4 1992 Stock Option Plan

23.1 Consent of Coopers & Lybrand L.L.P., Independent Accountants.

23.2 Consent of Counsel (contained in Exhibit 5.1).

24.1 Power of Attorney (see page 5).
</TABLE>

ITEM 9. UNDERTAKINGS.

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any material
information with respect to the plan of distribution not previously disclosed in
the Registration Statement or any material change to such information in the
Registration Statement.

(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.

(4) That, for purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

(5) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Registrant's Certificate of Incorporation, Bylaws,
indemnification agreements or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.

-3-

<PAGE> 4
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Jose, State of California, on this ______ day of
March, 1998.

DIAMOND MULTIMEDIA SYSTEMS, INC.

By:
-------------------------------
William J. Schroeder,
President and Chief Executive Officer

-4-

<PAGE> 5
POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints William J. Schroeder and James M. Walker jointly
and severally, his or her attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to this
Registration Statement on Form S-8 and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorney-in-fact, or his or her substitute or substitutes, may do or cause to be
done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>

____________________________ Director, Chief Executive Officer and March __, 1998
William J. Schroeder President (Principal Executive Officer)

____________________________ Chief Financial Officer (Principal March__, 1998
James M. Walker Financial Officer)

____________________________ Director March__, 1998
Jeffrey T. Chambers

____________________________ Director March__, 1998
Bruce C. Edwards

____________________________ Director March__, 1998
Walter G. Kortschak

____________________________ Director March__, 1998
Gregorio Reyes

____________________________ Director March__, 1998
Jeffrey D. Saper

____________________________ Director March__, 1998
Carl W. Neun
</TABLE>

<PAGE> 6
SIGNATURES

DIAMOND MULTIMEDIA SYSTEMS, INC.

By: /s/ William J Schroeder
-------------------------------
William J. Schroeder,
President and Chief Executive Officer

<PAGE> 7
POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/William J. Schroeder Director, Chief Executive Officer March__, 1998
- ------------------------------- and President (Principal Executive
William J. Schroeder Officer)

/s/James M. Walker Chief Financial Officer (Principal March__, 1998
- ------------------------------- Financial Officer)
James M. Walker

/s/ Jeffrey T. Chambers Director March__, 1998
- -------------------------------
Jeffrey T. Chambers

/s/ Bruce C. Edwards Director March__, 1998
- -------------------------------
Bruce C. Edwards

/s/ Walter G. Kortschak Director March__, 1998
- -------------------------------
Walter G. Kortschak

/s/ Gregorio Reyes Director March__, 1998
- -------------------------------
Gregorio Reyes

/s/ Jeffrey D. Saper Director March__, 1998
- -------------------------------
Jeffrey D. Saper

/s/ Carl W. Neun Director March__, 1998
- -------------------------------
Carl W. Neun
</TABLE>

<PAGE> 1
EXHIBIT 5.1

Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, CA 94304-1050
Telephone (650) 493-9300 Facsimile (650) 493-6811

March 30, 1998

Diamond Multimedia Systems, Inc.
2880 Junction Avenue
San Jose, CA 95134-1922

Re: Registration Statement on Form S-8

Gentlemen:

We have examined the Registration Statement on Form S-8 to be filed by you
with the Securities and Exchange Commission on or about March 31, 1998 (the
"Registration Statement") in connection with the registration under the
Securities Act of 1933, as amended, of 563,707 shares of your Common Stock under
the 1992 Stock Option Plan. Such shares of Common Stock are referred to herein
as the "Shares". As your counsel in connection with this transaction, we have
examined the proceedings taken and are familiar with the proceedings proposed to
be taken by you in connection with the issuance and sale of the Shares pursuant
to the Plan.

It is our opinion that, when issued and sold in the manner described in the
Plan and pursuant to the agreements which accompany each purchase under the
Plan, the Shares will be legally and validly issued, fully-paid and
non-assessable.

We consent to the use of this opinion as an exhibit to the Registration
Statement, and consent to the use of our name wherever appearing in the
Registration Statement and any amendments thereto.

Very truly yours,

WILSON SONSINI GOODRICH &ROSATI
Professional Corporation

/s/ Wilson Sonsini Goodrich & Rosati

<PAGE> 1
EXHIBIT 10.4

DIAMOND MULTIMEDIA SYSTEMS, INC.
1992 STOCK PLAN

SECTION 1. PURPOSE

The purpose of the Plan is to offer selected employees, directors and
consultants an opportunity to acquire a proprietary interest in the success of
the Company, or to increase such interest, to encourage such selected persons to
remain in the employ of the Company and to attract new employees with
outstanding qualifications by purchasing Shares of the Company's Common Stock.
The Plan provides both for the direct award or sale of Shares and for the grant
of Options to purchase Shares. Options granted under the Plan may include
Nonstatutory Options as well as Incentive Stock Options ("ISO") intended to
qualify under section 422 of the Internal Revenue Code.

SECTION 2. DEFINITIONS

(a) "Board of Directors" shall mean the Board of Directors of the
Company, as constituted from time to time.

(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.

(d) "Company" shall mean Diamond Multimedia Systems, Inc., a
California corporation.

(e) "Disability" shall mean the condition of an Optionee which
renders him or her unable to engage in his or her normal
occupation by reason of any medically determinable physical or
mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous
period of not less than twelve (12) months.

(f) "Employee" shall mean (i) any individual who is a common-law
employee of the Company or of a Subsidiary, (ii) a member of the
Board of Directors and (iii) an independent contractor who
performs services for the Company or a Subsidiary. Service as a
member of the Board of Directors or as an independent contractor
shall be considered employment for all purposes of the Plan
except the second and third sentences of Section 4(a).

(g) "Exercise Price" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as specified by the
Committee in the applicable Stock Option Agreement.

<PAGE> 2
(h) "Fair Market Value" shall mean the value of one (1) Share of
Stock, determined as follows:

(i) If the Shares are traded on an exchange, the price at which
Shares traded at the close of business on the date of
valuation;

(ii) If the Shares are traded over-the-counter on the NASDAQ
System, the closing price if one is available, or the mean
between the bid and asked prices on said System at the close
of business on the date of valuation; and

(iii) If neither (1) nor (2) applies, then the fair market value
of a Share, as determined by the Committee in good faith.
Such determination shall be conclusive and binding on all
persons.

(i) "ISO" shall mean an employee incentive stock option described in
section 422(b) of the Code.

(j) "Nonstatutory Option" shall mean an employee stock option that is
not an ISO.

(k) "Offeree" shall mean an individual to whom the Committee has
offered the right to acquire Shares under the Plan.

(l) "Option" shall mean an ISO or Nonstatutory Option granted under
the Plan and entitling the holder to purchase Shares.

(m) "Optionee" shall mean an individual who holds an Option.

(n) "Plan" shall mean this Diamond Multimedia Systems. Inc. 1992
Stock Plan.

(o) "Purchase Price" shall mean the consideration for which one Share
may be acquired under the Plan (other than upon exercise of an
Option), as specified by the Committee.

(p) "Service" shall mean service as an Employee.

(q) "Share" shall mean one share of Stock, as adjusted in accordance
with Section 9 (if applicable).

(r) "Stock" shall mean the Common Stock of the Company.

(s) "Stock Option Agreement" shall mean the agreement between the
Company and an Optionee which contains the terms, conditions and
restrictions pertaining to his or her Option.

(t) "Stock Purchase Agreement" shall mean the agreement between the
Company and an Offeree who acquires Shares under the Plan which
contains the terms, conditions and restrictions pertaining to the
acquisition of such Shares.

<PAGE> 3
(u) "Subsidiary" shall mean any corporation, of which the Company
and/or one or more other Subsidiaries own not less than 50
percent of the total combined voting power of all classes of
outstanding stock of such corporation. A corporation that attains
the status of a Subsidiary on a date after the adoption of the
Plan shall be considered a Subsidiary commencing as of such date.

SECTION 3. ADMINISTRATION

(a) Committee Membership. The Plan shall be administered by the
Committee, which shall consist of members of the Board of
Directors. The members of the Committee shall be appointed by the
Board of Directors. If no Committee has been appointed, the
entire Board of Directors shall constitute the Committee.

(b) Committee Procedures. The Board of Directors shall designate one
of the members of the Committee as chairman. The Committee may
hold meetings at such times and places as it shall determine. The
acts of a majority of the Committee members present at meetings
at which a quorum exists, or acts reduced to or approved in
writing by all Committee members, shall be valid acts of the
Committee.

(c) Committee Responsibilities. Subject to the provisions of the
Plan, the Committee shall have full authority and discretion to
take the following actions:

(i) To interpret the Plan and to apply its provisions;

(ii) To adopt, amend or rescind rules, procedures and forms
relating to the Plan;

(iii)To authorize any person to execute, on behalf of the
Company, any instrument required to carry out the purposes
of the Plan;

(iv) To determine when Shares are to be awarded or offered for
sale and when Options are to be granted under the Plan;

(v) To select the Offerees and Optionees;

(vi) To determine the number of Shares to be offered to each
Offeree or to be made subject to each Option;

(vii)To prescribe the terms and conditions of each award or sale
of Shares, including (without limitation) the Purchase
Price, and to specify the provisions of the Stock Purchase
Agreement relating to such award or sale;

(viii)To prescribe the terms and conditions of each Option,
including (without limitation) the Exercise Price, to
determine whether such Option is to be classified as an ISO
or as a Nonstatutory Option, and to specify the provisions
of the Stock Option Agreement relating to such Option;

<PAGE> 4
(ix) To amend any outstanding Stock Purchase Agreement or Stock
Option Agreement;

(x) To prescribe the consideration for the grant of each Option
or other right under the Plan and to determine the
sufficiency of such consideration; and

(xi) To take any other actions deemed necessary or advisable for
the administration of the Plan.

All decisions, interpretations and other actions of the Committee shall
be final and binding on all Offerees, all Optionees, and all persons deriving
their rights from an Offeree or Optionee. No member of the Committee shall be
liable for any action that he has taken or has failed to take in good faith with
respect to the Plan, any Option, or any right to acquire Shares under the Plan.

(d) Financial Reports. Not less often than annually, the Company
shall furnish to Optionees and Offerees Company summary financial
information including a balance sheet regarding the Company's
financial condition and results of operations, unless such
Optionees or Offerees have duties with the Company that assure
them access to equivalent information. Such financial statements
need not be audited.

SECTION 4. ELIGIBILITY

(a) General Rule. Only Employees, as defined in Section 2(f), shall
be eligible for designation as Optionees or Offerees by the
Committee. In addition, only individuals who are employed as
common-law employees by the Company or a Subsidiary shall be
eligible for the grant of ISOs.

(b) Ten-Percent Shareholders. An Employee who owns more than 10
percent of the total combined voting power of all classes of
outstanding stock of the Company or any of its Subsidiaries shall
not be eligible for designation as an Optionee or Offeree unless
(i) the Exercise Price is at least 110 percent of the Fair Market
Value of a Share on the date of grant, (ii) the Purchase Price
(if any) is at least 100 percent of the Fair Market Value of a
Share and (iii) in the case of an Option, such Option by its
terms is not exercisable after the expiration of five years from
the date of grant.

(c) Attribution Rules. For purposes of Subsection (b) above, in
determining stock ownership, an Employee shall be deemed to own
the stock owned, directly or indirectly, by or for his brothers,
sisters, spouse, ancestors and lineal descendants. Stock owned,
directly or indirectly, by or for a corporation, partnership,
estate or trust shall be deemed to be owned proportionately by or
for its shareholders, partners or beneficiaries. Stock with
respect to which such Employee holds an option shall not be
counted.

(d) Outstanding Stock. For purposes of Subsection (b) above,
"outstanding stock" shall include all stock actually issued and
outstanding immediately after the grant. "Outstanding stock"
shall not include shares authorized for issuance under
outstanding options held by the Employee or by any other person.

<PAGE> 5
SECTION 5. STOCK SUBJECT TO PLAN

(a) Basic Limitation. Shares offered under the Plan shall be
authorized but unissued Shares. The aggregate number of Shares
which may be issued under the Plan (upon exercise of Options or
other rights to acquire Shares) shall not exceed two million two
hundred seventy-five thousand (2,275,000) Shares, subject to
adjustment pursuant to Section 9. The number of Shares which are
subject to Options or other rights outstanding at any time under
the Plan shall not exceed the number of Shares which then remain
available for issuance under the Plan. The Company, during the
term of the Plan, shall at all times reserve and keep available
sufficient Shares to satisfy the requirements of the Plan.

(b) Additional Shares. In the event that any outstanding Option or
other right for any reason expires or is canceled or otherwise
terminated, the Shares allocable to the unexercised portion of
such Option or other right shall again be available for the
purposes of the Plan. In the event that Shares issued under the
Plan are reacquired by the Company pursuant to any forfeiture
provision, right of repurchase or right of first refusal, such
Shares shall again be available for the purposes of the Plan.

SECTION 6. TERMS AND CONDITIONS OF AWARDS OR SALES

(a) Stock Purchase Agreement. Each award or sale of Shares under the
Plan (other than upon exercise of an Option) shall be evidenced
by a Stock Purchase Agreement between the Offeree and the
Company. Such award or sale shall be subject to all applicable
terms and conditions of the Plan and may be subject to any other
terms and conditions which are not inconsistent with the Plan and
which the Committee deems appropriate for inclusion in a Stock
Purchase Agreement. The provisions of the various Stock Purchase
Agreements entered into under the Plan need not be identical.

(b) Duration of Offers and Nontransferability of Rights. Any right to
acquire Shares under the Plan (other than an Option) shall
automatically expire if not exercised by the Offeree within 30
days after the grant of such right was communicated to him by the
Committee. Such right shall not be transferable and shall be
exercisable only by the Offeree to whom such right was granted.

(c) Purchase Price. The Purchase Price of Shares to be offered under
the Plan shall not be less than 85 percent of the Fair Market
Value of such Shares, except as otherwise provided in Section
4(b). Subject to the preceding sentence, the Purchase Price shall
be determined by the Committee at its sole discretion. The
Purchase Price shall be payable in a form described in Section 8.

(d) Withholding Taxes. As a condition to the purchase of Shares, the
Offeree shall make such arrangements as the Committee may require
for the satisfaction of any federal, state, local or foreign
withholding tax obligations that may arise in connection with
such purchase.

<PAGE> 6
(e) Restrictions on Transfer of Shares. Any Shares awarded or sold
under the Plan shall be subject to such special forfeiture
conditions, rights of repurchase, rights of first refusal and
other transfer restrictions as the Committee may determine. Such
restrictions shall be set forth in the applicable Stock Purchase
Agreement and shall apply in addition to any restrictions that
may apply to holders of Shares generally. Any service-based
vesting conditions shall not be less rapid than the schedule set
forth in Section 7(c).

SECTION 7. TERMS AND CONDITIONS OF OPTIONS

(a) Stock Option Agreement. Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the
Optionee and the Company. Such Option shall be subject to all
applicable terms and conditions of the Plan and may be subject to
any other terms and conditions which are not inconsistent with
the Plan and which the Committee deems appropriate for inclusion
in a Stock Option Agreement. The provisions of the various Stock
Option Agreements entered into under the Plan need not be
identical.

(b) Number of Shares. Each Stock Option Agreement shall specify the
number of Shares that are subject to the Option and shall provide
for the adjustment of such number in accordance with Section 9.
The Stock Option Agreement shall also specify whether the Option
is an ISO or a Nonstatutory Option.

(c) Exercise Price. Each Stock Option Agreement shall specify the
Exercise Price. The Exercise Price of an ISO shall not be less
than one hundred percent (100%) of the Fair Market Value of a
Share on the date of grant, except as otherwise provided in
Section 4(b). The Exercise Price of a Nonstatutory Option shall
not be less than eighty-five percent (85%) of the Fair Market
Value of a Share on the date of grant, except as otherwise
provided in Section 4(b). Subject to the preceding two sentences,
the Exercise Price under any Option shall be determined by the
Committee at its sole discretion. The Exercise Price shall be
payable in a form described in Section 8.

(d) Withholding Taxes. As a condition to the exercise of an Option,
the Optionee shall make such arrangements as the Committee may
require for the satisfaction of any federal, state, local or
foreign withholding tax obligations that may arise in connection
with such exercise. The Optionee shall also make such
arrangements as the Committee may require for the satisfaction of
any federal, state, local or foreign withholding tax obligations
that may arise in connection with the disposition of Shares
acquired by exercising an Option.

(e) Exercisability. Each Stock Option Agreement shall specify the
date when all or any installment of the Option is to become
exercisable. An Option shall become exercisable no less rapidly
than the rate of 20% per year for each of the first five years
from the date of grant. Subject to the preceding sentence, the
vesting of any Option shall be determined by the Committee at its
sole discretion.

<PAGE> 7
(f) Term. The Stock Option Agreement shall specify the term of the
Option. The term shall not exceed ten (10) years from the date of
grant, except as otherwise provided in Section 4(b). Subject to
the preceding sentence, the Committee at its sole discretion
shall determine when an Option is to expire.

(g) Nontransferability. No Option shall be transferable by the
Optionee other than by will or by the laws of descent and
distribution. An Option may be exercised during the lifetime of
the Optionee only by him or by his guardian or legal
representative. No Option or interest therein may be transferred,
assigned, pledged or hypothecated by the Optionee during his
lifetime, whether by operation of law or otherwise, or be made
subject to execution, attachment or similar process.

(h) Exercise of Options on Termination of Service. Each Option shall
set forth the extent to which the Optionee shall have the right
to exercise the Option following termination of the Optionee's
service with the Company and its Subsidiaries. Such provisions
shall be determined in the sole discretion of the Committee, need
not be uniform among all Options issued pursuant to the Plan, and
may reflect distinctions based on the reasons for termination of
employment. Notwithstanding the foregoing, each Option shall
provide that the Optionee shall have the right to exercise the
Option for at least 30 days following termination of service with
the Company for any reason, and that the Optionee shall have the
right to exercise the Option for at least six months if the
Optionee's service terminates due to death or Disability.

(i) No Rights as a Shareholder. An Optionee. or a transferee of an
Optionee, shall have no rights as a shareholder with respect to
any Shares covered by his Option until the date of the issuance
of a stock certificate for such Shares.

(j) Modification, Extension and Assumption of Options. Within the
limitations of the Plan, the Committee may modify, extend or
assume outstanding Options or may accept the cancellation of
outstanding Options (whether granted by the Company or another
issuer) in return for the grant of new Options for the same or a
different number of Shares and at the same or a different
Exercise Price.

(k) Restrictions on Transfer of Shares. Any Shares issued upon
exercise of an Option shall be subject to such special forfeiture
conditions, rights of repurchase, rights of first refusal and
other transfer restrictions as the Committee may determine. Such
restrictions shall be set forth in the applicable Stock Option
Agreement and shall apply in addition to any restrictions that
may apply to holders of Shares generally.

SECTION 8. PAYMENT FOR SHARES

(a) General Rule. The entire Purchase Price or Exercise Price of
Shares issued under the Plan shall be payable in lawful money of
the United States of America at the time when such Shares are
purchased, except as provided in Subsections (b), (c), (d) and
(e) below.

<PAGE> 8
(b) Surrender of Stock. To the extent that a Stock Option Agreement
so provides, payment may be made all or in part with Shares which
have already been owned by the Optionee or his representative for
more than six months and which are surrendered to the Company in
good form for transfer. Such Shares shall be valued at their Fair
Market Value on the date when the new Shares are purchased under
the Plan.

(c) Services Rendered. At the discretion of the Committee, Shares may
be awarded under the Plan in consideration of services rendered
to the Company or a Subsidiary prior to the award. If Shares are
awarded without the payment of a Purchase Price in cash, the
Committee shall make a determination (at the time of the award)
of the value of the services rendered by the Offeree and the
sufficiency of the consideration to meet the requirements of
Section 6(c).

(d) Promissory Notes. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part with a full recourse
promissory note executed by the Optionee. The interest rate and
other terms and conditions of such note shall be determined by
the Committee. The Committee may require that the Optionee pledge
his or her Shares to the Company for the purpose of securing the
payment of such note. In no event shall the stock certificate(s)
representing such Shares be released to the Optionee until such
note shall be paid in full.

(e) Cashless Exercise. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part by delivery (on a
form prescribed by the Committee) of an irrevocable direction to
a securities broker to sell Shares and to deliver all or part of
the sale proceeds to the Company in payment of the aggregate
Exercise Price.

SECTION 9. ADJUSTMENT OF SHARES

(a) General. In the event of a subdivision of the outstanding Stock,
a declaration of a dividend payable in Shares, a declaration of a
dividend payable in a form other than Shares in an amount that
has a material effect on the value of Shares, a combination or
consolidation of the outstanding Stock into a lesser number of
Shares, a recapitalization, a reclassification or a similar
occurrence, the Committee shall make appropriate adjustments in
one or more of (i) the number of Shares available for future
grants under Section 5, (ii) the number of Shares covered by each
outstanding Option or (iii) the Exercise Price under each
outstanding Option.

(b) Reorganizations. In the event that the Company is a party to a
merger or reorganization, outstanding Options shall be subject to
the agreement of merger or reorganization. Such agreement may
provide for the assumption of outstanding Options for the
purchase of Shares by the surviving corporation or its parent or
for their continuation by the Company (if the Company is the
surviving corporation). In the event the Company is not the
surviving corporation and the surviving corporation will not
assume outstanding Options, the agreement of merger or
reorganization may provide for payment of a cash settlement for
exercisable Options equal to the

<PAGE> 9
difference between the amount to be paid for one Share under such
agreement and the Exercise Price and for the cancellation of
Options not exercised or settled, in either case without the
Optionees' consent.

(c) Reservation of Rights. Except as provided in this Section 9, an
Optionee or Offeree shall have no rights by reason of (i) any
subdivision or consolidation of shares of stock of any class,
(ii) the payment of any dividend or (iii) any other increase or
decrease in the number of shares of stock of any class. Any issue
by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect,
and no adjustment by reason thereof shall be made with respect
to, the number or Exercise Price of Shares subject to an Option.
The grant of an Option pursuant to the Plan shall not affect in
any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or
business structure, to merge or consolidate or to dissolve,
liquidate, sell or transfer all or any part of its business or
assets.

SECTION 10. LEGAL REQUIREMENTS

Shares shall not be issued under the Plan unless the issuance and
delivery of such Shares complies with (or is exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations, and the regulations of any stock exchange on which the
Company's securities may then be listed.

SECTION 11. NO EMPLOYMENT RIGHTS

No provision of the Plan, nor any right or Option granted under the
Plan, shall be construed to give any person any right to become, to be treated
as, or to remain an Employee. The Company and its Subsidiaries reserve the right
to terminate any person's Service at any time and for any reason.

SECTION 12. DURATION AND AMENDMENTS

(a) Term of the Plan. The Plan, as set forth herein, shall become
effective on the date of its adoption by the Board of Directors,
subject to the approval of the Company's shareholders. In the
event that the shareholders fail to approve the Plan within
twelve (12) months after its adoption by the Board of Directors,
any Option grants or Stock awards already made shall be null and
void, and no additional Option grants or Stock awards shall be
made after such date. The Plan shall terminate automatically ten
(10) years after its adoption by the Board of Directors and may
be terminated on any earlier date pursuant to Subsection (b)
below.

(b) Right to Amend or Terminate the Plan. The Board of Directors may
amend the Plan at any time and from time to time. Rights and
obligations under any Option or award granted before amendment of
the Plan shall not be materially altered, or impaired adversely,
by such amendment, except with consent of the person to whom the
Option or award was granted. An amendment of the Plan shall be
subject to the

<PAGE> 10
approval of the Company's stockholders only to the extent
required by applicable laws, regulations or rules.

(c) Effect of Amendment or Termination. No Shares shall be issued or
sold under the Plan after the termination thereof, except upon
exercise of an Option or award or sale of Shares granted prior to
such termination. The termination of the Plan, or any amendment
thereof, shall not affect any Share previously issued or any
Option previously granted under the Plan.

SECTION 13. EXECUTION

To record the adoption of the Plan by the Board of Directors on December
14, 1992, and as subsequently amended and restated, the Company has caused its
authorized officers to execute the same, on this 17th day of August, 1994.

Diamond Multimedia Systems, Inc.

- ----------------------------------------
William J. Schroeder, President and CEO

- ----------------------------------------
Gary B. Filler, Vice President,
Finance and CFO

<PAGE> 11
DIAMOND MULTIMEDIA SYSTEMS, INC.
A DELAWARE CORPORATION

1992 STOCK PLAN

AMENDED AND RESTATED

STOCK OPTION AGREEMENT -- EARLY EXERCISE

14. NOTICE OF STOCK OPTION GRANT

Name of Optionee: (Employee)

You have been granted an option to purchase Common Stock (as hereinafter
defined) of the Company, subject to the terms and conditions of this Option
Agreement, as follows:

Date of Grant: January 1, 1995 (replacement of option in
connection with merger of Diamond Multimedia
Systems, Inc., a California corporation,
into the Company)

Exercise Price per Share: $0.10

Total Number of Shares Granted: (M 1992 Plan)

Total Exercise Price: $(Ttl Ex Prc)

Type of Option: [X] Incentive Stock Option
[ ] Nonstatutory Stock Option

Term/Expiration Date: January 1, 2005

15. VESTING SCHEDULE:

The Shares (as hereinafter defined) subject to this Option (as
hereinafter defined) shall vest according to the following schedule:

(i) (Vested 1195) Shares are vested as of January 1, 1995.

(ii) The balance of the Shares shall vest in equal monthly
increments for a period of (Rem to Vest) months, commencing February 1, 1995,
assuming Optionee's Continuous Status as an Employee or Consultant does not
terminate.

(iii) Vesting under this section will cease in the event that
Optionee's Continuous Status as an Employee or Consultant terminates.

16. TERMINATION PERIOD:

<PAGE> 12
This Option may be exercised for thirty (30) days after termination of
Optionee's Continuous Status as an Employee or Consultant (as hereinafter
defined). Thereafter, to the extent the Option has not been exercised, the
Option shall terminate.

17. AGREEMENT

(a) Grant of Option. Diamond Multimedia Systems, Inc., a Delaware
corporation (the "Company"), hereby grants to the Optionee named in the Notice
of Grant (the "Optionee"), an option (the "Option") to purchase the total number
of shares of Common Stock (as hereinafter defined) set forth in the Notice of
Stock Option Grant (the "Notice of Grant"), at the Exercise Price per Share (as
hereinafter defined), subject to the terms, definitions and provisions contained
herein.

(b) Exercise of Option. This Option shall be exercisable during its term
as follows:

(i) Right to Exercise.

(1) Subject to subsections 2(a)(ii) through 2(a)(iv)
below, this Option may be exercised in whole or in part at any time or from time
to time, provided that this Option may only be exercised by delivery to the
Company of a restricted stock purchase agreement in the form attached hereto as
Exhibit A-1 (the "Restricted Stock Purchase Agreement") which provides, inter
alia, that all Unvested Shares acquired thereby shall be subject to a right of
repurchase by the Company on the terms set forth in such Agreement.

(2) This Option may not be exercised for a fraction of a
Share.

(3) In the event of Optionee's death, disability or other
termination of Optionee's Continuous Status as an Employee or Consultant, the
exercisability of the Option is governed by Sections 5, 6 and 7 below, subject
to the limitation contained in subsection 2(a)(iv).

(4) In no event may this Option be exercised after the
date of expiration of the term of this Option as set forth in the Notice of
Grant.

(ii) Method of Exercise. This Option shall be exercisable by
execution of a Restricted Stock Purchase Agreement which shall state the
election to exercise the Option and the number of Shares in respect of which the
Option is being exercised. Such Restricted Stock Purchase Agreement shall be
delivered in person or by certified mail to the Secretary of the Company and
shall be accompanied by payment of an amount equal to the Aggregate Exercise
Price (as hereinafter defined). This Option shall be deemed to be exercised upon
receipt by the Company of such Restricted Stock Purchase Agreement accompanied
by the Aggregate Exercise Price.

No Shares shall be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any stock exchange upon which the Shares may then be
listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.

<PAGE> 13
(c) Method of Payment. Payment of the Aggregate Exercise Price shall be
by any of the following, or a combination thereof, at the election of the
Optionee:

(i) cash; or

(ii) check; or

(iii) surrender of other Shares, in which case, the determination
of the Fair Market Value of the Shares so surrendered shall be made as of the
date of such surrender; provided that, upon any such surrender after such time
as the Company's Common Stock has been registered under the Exchange Act, any
Shares so surrendered which were acquired upon exercise of a Company option
shall have been owned by the Optionee for more than six (6) months on the date
of surrender; or

(iv) to the extent permitted by the Board, delivery of a properly
executed Restricted Stock Purchase Agreement together with such other
documentation as the Board, and a broker, if applicable, shall require to effect
an exercise of the Option and delivery to the Company of the proceeds of the
sale or loan, if applicable.

(d) Restrictions on Exercise. The Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of the
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.

(e) Termination of Relationship. In the event Optionee's Continuous
Status as an Employee or Consultant terminates, Optionee may exercise the Option
during the Termination Period set out in the Notice of Grant, provided that such
exercise is permitted only with regard to Shares that have become Vested Shares
as of the date of such termination. If Optionee does not exercise the Option to
the extent so entitled within the time specified in the Notice of Grant, the
Option shall terminate and the Optioned Stock shall revert to the Company.

(f) Disability of Optionee. Notwithstanding the provisions of Section 5
above, in the event Optionee's Continuous Status as an Employee or Consultant
terminates as a result of Optionee's permanent disability, Optionee may, but
only within six (6) months from the date of such termination (and in no event
later than the expiration date of the term of the Option as set forth in Section
9 below), exercise the Option, provided that such exercise is permitted only
with regard to Shares that have become Vested Shares as of the date of such
termination. If Optionee does not exercise the Option to the extent so entitled
within the time specified herein, the Option shall terminate, and the Optioned
Stock shall revert to the Company.

(g) Death of Optionee. In the event that Optionee's Continuous Status as
an Employee or Consultant terminates as a result of the death of Optionee, the
Option may be exercised at any time within six (6) months following the date of
death (but in no event later than the date of expiration of the term of the
Option as set forth in Section 9 below) by Optionee's estate or by a

<PAGE> 14
person who acquired the right to exercise the Option by bequest or inheritance,
provided that such exercise is permitted only with regard to Shares that have
become Vested Shares as of the date of death.

(h) Non-Transferability of Option. The Option may not be transferred in
any manner other than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by Optionee. The terms of this
Option Agreement shall be binding upon the executors, administrators, heirs, the
successors and assigns of the Optionee.

(i) Term of Option. The Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the terms of this Option Agreement.

(j) Definitions. As used herein, the following definitions shall apply:

(i) "Aggregate Exercise Price" means, with respect to any
exercise of the Option, the product of (x) the number of Shares as to which the
Option is being exercised and (y) the Exercise Price per Share.

(ii) "Board" means the Board of Directors of the Company.

(iii) "Code" means the Internal Revenue Code of 1986, as amended.

(iv) "Common Stock" means the Common Stock of the Company.

(v) "Consultant" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.

(vi) "Continuous Status as an Employee or Consultant" means the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee shall not be considered interrupted
in the case of: (i) sick leave; (ii) military leave; (iii) any other leave of
absence approved by the Company, provided that such leave is for a period of not
more than ninety (90) days, unless reemployment upon the expiration of such
leave is guaranteed by contract or statute, or unless provided otherwise
pursuant to Company policy adopted from time to time; or (iv) in the case of
transfers between locations of the Company or between the Company, its
Subsidiaries or its successor.

(vii) "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company,
provided that the payment of a director's fee by the Company shall not, in and
of itself, be sufficient to constitute "employment" by the Company.

(viii) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.

(ix) "Exercise Price Per Share" means the exercise price per
Share set forth in the Notice of Grant.

<PAGE> 15
(x) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:

(1) if the Common Stock is listed on any established stock
exchange or a national market system, including, without limitation, the
National Market system of the National Association of Securities Dealers, Inc.
Automated Quotation ("Nasdaq") System, its Fair Market Value shall be the
closing sale price for such stock (or the closing bid, if no sales were
reported, as quoted on such system or exchange, for the last market trading day
prior to the time of determination) as reported in the Wall Street Journal or
such other source as the Administrator deems reliable;

(2) if the Common Stock is quoted on the Nasdaq System
(but not on the National Market system thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high and low asked prices for the
Common Stock or;

(3) in the absence of an established market for the Common
Stock, Fair Market Value thereof shall be determined in good faith by the Board.

(xi) "Incentive Stock Option" or "ISO" means an Option intended
to qualify as an incentive stock option within the meaning of Section 422 of the
Code.

(xii) "Nonstatutory Stock Option" or "NSO" means an Option not
intended to qualify as an Incentive Stock Option.

(xiii) "Option" means the stock option granted pursuant to this
Option Agreement.

(xiv) "Optioned Stock" means the Common Stock subject to the
Option.

(xv) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.

(xvi) "Share" means a share of the Common Stock.

(xvii) "Subsidiary" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.

(xviii)"Unvested Shares" means those Shares that, as of any
particular date, have not vested in accordance with the vesting schedule set
forth in the Notice of Grant.

(xix) "Vesting Commencement Date" means the date set forth as the
vesting commencement date in the Notice of Grant.

(xx) "Vested Shares" means those Shares that, as of any
particular date, have vested in accordance with the vesting schedule set forth
in the Notice of Grant.

<PAGE> 16
(k) Tax Consequences. Set forth below is a brief summary as of the date
of this Option of some of the federal and state tax consequences of exercise of
this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.

(i) Exercising the Option.

(1) Nonstatutory Stock Option. There may be a regular
federal income tax liability and state income tax liability upon the exercise of
an NSO. The Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Shares on the date of exercise over the Exercise Price per
Share. If Optionee is an Employee, the Company will be required to withhold from
Optionee's compensation or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise. If the Optionee is subject to Section 16 of the
Exchange Act the date of income recognition may be deferred for up to six
months.

(2) Incentive Stock Option. There is no regular federal
income tax or state income tax liability upon exercise of an ISO. Although the
excess, if any, of the Fair Market Value of the Exercised Shares on the date of
the exercise over their Aggregate Exercise Price will be treated as an
adjustment to alternative minimum taxable income for federal tax purposes and
may subject the optionee to alternative minimum tax in the year of exercise. In
the event that the Optionee undergoes a change of status from Employee to
Consultant, any Incentive Stock Option of the Optionee that remains unexercised
shall cease to qualify as an Incentive Stock Option and will be treated for tax
purposes as a Nonstatutory Stock Option on the ninety-first (91st) day following
such Change of Status.

(ii) Disposition of Shares.

(1) NSO. If Shares are held for at least one year, any
gain realized on disposition of the Shares will be treated as long-term capital
gain for federal and state income tax purposes.

(2) ISO. If the Optionee holds ISO shares for at least one
year after exercise and two years after the date of grant, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the Aggregate Exercise Price or (B) the difference between the sale price of
such Shares and the Aggregate Exercise Price.

(l) Additional Actions. The parties will execute such further
instruments and take such further action as may reasonably be necessary to carry
out the intent of this Agreement.

(m) Notices. All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given (a) five

<PAGE> 17
(5) days after deposit with the U.S. Postal Service, if delivered by first class
mail, postage prepaid, (b) upon delivery, if delivered by hand, or (c) one
business day after the business day of deposit with Federal Express or similar
overnight courier, freight prepaid, and shall be addressed (i) if to Optionee,
at Optionee's address as set forth beneath Optionee's signature to this
Agreement, or at such other address as Optionee shall have furnished to the
Company in writing, or (ii) if to the Company, to Diamond Multimedia Systems,
Inc., 1130 East Arques Avenue, Sunnyvale, California 94086, Attention: Assistant
Corporate Secretary and with copy to Wilson Sonsini Goodrich and Rosati, 650
Page Mill Road, Palo Alto, California 94304-1050, Attention: Howard Zeprun,
Esq., or at such other address as the Company shall have furnished to Optionee.

(n) Assignment. The Company may assign its rights and delegate its
duties under this Agreement. If any such assignment or delegation requires
consent of the California Department of Corporations, the parties agree to
cooperate in requesting such consent. This Agreement shall inure to the benefit
of the successors and assigns of the Company and, subject to the restrictions on
transfer herein set forth, shall be binding upon the Optionee, Optionee's heirs,
executors, administrators, successors and assigns.

(o) Entire Agreement; Amendment. This Agreement, the Restricted Stock
Purchase Agreement and, if applicable, any Joint Escrow Agreement or Security
Agreement executed in connection herewith, constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party
herein. Except as expressly provided herein, neither this Agreement nor any term
hereof may be amended, waived, discharged or terminated other than by a written
instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge or termination is sought.

<PAGE> 18
(p) Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California as they apply to
contracts entered into and wholly to be performed within such state.

DIAMOND MULTIMEDIA SYSTEMS, INC.,
a California corporation

-------------------------------------------
Name: William J. Schroeder
Title: President and Chief Executive Officer

OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION HEREOF IS EARNED ONLY BY CONTINUING EMPLOYMENT OR CONSULTANCY AT THE WILL
OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS OPTION AGREEMENT SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.

Optionee has reviewed this Option Agreement in its entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Option Agreement. Optionee
hereby agrees to accept as binding, conclusive and final all decisions or
interpretations of the Administrator upon any questions arising under this
Option Agreement. Optionee further agrees to notify the Company upon any change
in the residence address indicated below.

Dated: January 1, 1995 Name:
------------------------------------
Address:
--------------------------------

--------------------------------

<PAGE> 19
RESTRICTED STOCK PURCHASE AGREEMENT

THIS AGREEMENT is made between (Employee) ("Purchaser") and Diamond
Multimedia Systems, Inc., a Delaware corporation (the "Company") as of January
3, 1995.

WHEREAS, pursuant to the exercise of the stock option granted to
Purchaser pursuant to the Stock Option Agreement dated January 1, 1995 (the
"Option Agreement"), which Option Agreement is hereby incorporated by reference,
Purchaser has elected to purchase the Shares (as hereinafter defined), of which
a total of (Vested 1195) Shares are Vested Shares and a total of (M 92 Unvest
Optns) Shares are Unvested Shares on the date hereof;

WHEREAS, pursuant to the terms of the Option Agreement, as a condition
to Purchaser's exercise of the Option, Purchaser must execute this Restricted
Stock Purchase Agreement (the "Agreement"), which sets forth the rights and
obligation of the parties with respect to the Shares.

NOW, THEREFORE, the parties hereby agree as follows:

1. Purchase and Sale of Stock. Purchaser hereby purchases from the
Company, and the Company hereby issues and sells to Purchaser, an aggregate of
(M 1992 Plan) shares of Common Stock (as hereinafter defined) (the "Shares"), at
a price of $0. 10 per share, or an aggregate purchase price of $(Ttl Ex Prc)
(the "Aggregate Purchase Price"). The Aggregate Purchase Price is hereby paid by
check. The Company will, promptly after execution of this Agreement, issue a
certificate representing the Shares registered in the name of the Purchaser,
which certificate shall be held in escrow pursuant to the provisions of Section
5 hereof.

2. Adjustments. All references to the number of Shares and the purchase
price of the Shares in this Agreement shall be appropriately adjusted to reflect
any further stock split, stock dividend or other change in the Shares which may
be made by the Company after the date of this Agreement.

3. Definitions. As used herein, the following definitions shall apply:

(a) "Board" means the Board of Directors of the Company.

(b) "Code" means the Internal Revenue Code of 1986, as amended.

(d) "Consultant" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.

(e) "Continuous Status as an Employee or Consultant" means the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee shall not be considered interrupted
in the case of: (i) sick leave; (ii) military leave; (iii) any other leave of
absence approved by the Company, provided that such leave is for a period

<PAGE> 20
of not more than ninety (90) days, unless reemployment upon the expiration of
such leave is guaranteed by contract or statute, or unless provided otherwise
pursuant to Company policy adopted from time to time; or (iv) in the case of
transfers between locations of the Company or between the Company, its
Subsidiaries or its successor.

(f) "Disinterested Board" means the Board of Directors of the
Company excluding those members of the Board of Directors, if any, who are
parties to agreements or arrangements identical to or substantially similar to
this Agreement.

(g) "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company,
provided that the payment of a director's fee by the Company shall not, in and
of itself, be sufficient to constitute "employment" by the Company.

(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

(i) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:

(i) if the Common Stock is listed on any established stock
exchange or a national market system, including, without limitation, the
National Market system of the National Association of Securities Dealers, Inc.
Automated Quotation ("Nasdaq") System, its Fair Market Value shall be the
closing sale price for such stock (or the closing bid, if no sales were
reported, as quoted on such system or exchange, for the last market trading day
prior to the time of determination) as reported in the Wall Street Journal or
such other source as the Administrator deems reliable;

(ii) if the Common Stock is quoted on the Nasdaq System
(but not on the National Market system thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high and low asked prices for the
Common Stock or;

(iii) in the absence of an established market for the
Common Stock, Fair Market Value thereof shall be determined in good faith by the
Board.

(j) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.

(k) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.

(l) "Unvested Shares" means those Shares that, as of any
particular date, have not vested in accordance with the vesting schedule set
forth in Section 4.

(m) "Vested Shares" means those Shares that, as of any particular
date, have vested in accordance with the vesting schedule set forth in Section
4.

<PAGE> 21
4. Vesting.

The Shares shall vest and be released from the Company's Repurchase
Option (as hereinafter defined) in accordance with the following provisions:

(a) (Vested 1195) of the Shares are vested as of the date hereof,

(b) (Shs per Mo) of the Shares will vest on the first day of each
month beginning on February 1, 1995, assuming Purchaser's Continuous Status as
an Employee or Consultant does not terminate; and

(c) Vesting under this subsection will cease in the event that
Purchaser's Continuous Status as an Employee or Consultant terminates. At such
time, the repurchase provisions of Section 5 hereof will apply to all Shares
that are Unvested Shares as of the date of such termination.

5. Repurchase Option.

(a) If Purchaser's Continuous Status as an Employee or Consultant
terminates for any reason, including for cause, death, and disability, the
Company shall have the right and option to purchase from Purchaser all of
Purchaser's Shares which are Unvested Shares as of the date of such termination,
at the price paid by the Purchaser for such Shares (the "Repurchase Option").

(b) Upon the occurrence of such termination, the Company may
exercise its Repurchase Option by delivering personally, by registered or
certified mail, or by overnight courier, to Purchaser (or Purchaser's transferee
or legal representative, as the case may be) and to the Escrow Agent (as
hereinafter defined), within sixty (60) days of such termination, a notice in
writing indicating the Company's intention to exercise the Repurchase Option and
setting forth a date for closing not later than fifteen (15) days from the date
of such notice. The closing shall take place at the Company's office. At the
closing, the holder of the certificates for the Unvested Shares being
transferred shall deliver the stock certificate or certificates evidencing the
Unvested Shares, and the Company shall deliver the purchase price (the
"Repurchase Price") therefor.

(c) Payment of the Repurchase Price may be made, at the option of
the Company, in cash (by check), by cancellation of all or a portion of any
outstanding indebtedness of Purchaser to the Company or by any combination
thereof. If the Company elects to pay the entire Repurchase Price by check, it
may make such payment to a bank selected by the Company. The Company shall avail
itself of this option by a notice in writing to Purchaser which states the name
and address of the bank, the date of closing, and waives the closing at the
Company's office.

(d) If the Company does not elect to exercise the Repurchase
Option conferred above by giving the requisite notice within sixty (60) days
following the termination, the Repurchase Option shall terminate.

6. Transfer of Shares; Escrow.

<PAGE> 22
(a) Purchaser hereby authorizes and directs the secretary of the
Company, or such other person designated by the Company, to transfer any
Unvested Shares as to which the Repurchase Option has been exercised from
Purchaser to the Company.

(b) To ensure the availability for delivery of Purchaser's
Unvested Shares upon repurchase by the Company pursuant to the Repurchase Option
under Section 5, Purchaser hereby appoints Gary Filler, Chief Financial Officer
of the Company, or any other person designated by Mr. Filler, as escrow agent
(the "Escrow Agent") and as Purchaser's attorney-in-fact to sell, assign and
transfer unto the Company such Unvested Shares, if any, as may be repurchased by
the Company pursuant to the Repurchase Option and shall, upon execution of this
Agreement, deliver and deposit with the Escrow Agent the share certificates
representing the Unvested Shares, together with two stock assignments duly
endorsed in blank and in the form attached hereto as Exhibit A-1. The Unvested
Shares and stock assignment shall be held by the Escrow Agent in escrow pursuant
to Joint Escrow Instructions in the form attached hereto as Exhibit A-2 until
(i) the Company exercises its purchase right as provided in Section 5, (ii) such
Unvested Shares become Vested Shares, or (iii) such time as this Agreement no
longer is in effect. Upon vesting of the Unvested Shares, the Escrow Agent shall
promptly deliver to the Purchaser the certificate or certificates representing
such Shares in the Escrow Agent's possession belonging to the Purchaser, and the
Escrow Agent shall be discharged of all further obligations hereunder.
Notwithstanding any of the foregoing, however, the Escrow Agent shall
nevertheless retain such certificate or certificates as Escrow Agent if so
required pursuant to other restrictions imposed pursuant to this Agreement.

(c) The Escrow Agent shall not be liable for any act it may do or
omit to do with respect to holding the Shares in escrow and while acting in good
faith and in the exercise of its judgment.

(d) Transfer or sale of the Shares is subject to restrictions on
transfer imposed by any applicable state and federal securities laws. Any
transferee shall hold such Shares subject to all the provisions hereof and shall
acknowledge the same by signing a copy of this Agreement.

(e) No Shares may be sold, pledged, hypothecated or otherwise
transferred by Purchaser until such Shares have become Vested Shares and are no
longer subject to any security agreement for the benefit of the Company.

7. Ownership, Voting Rights, Duties. This Agreement shall not affect in
any way the ownership, voting rights or other rights or duties of Purchaser,
except as specifically provided herein. Purchaser shall enjoy rights as a
stockholder until such time as Purchaser disposes of the Shares or the Company
and/or its assignee(s) exercises either the Repurchase Option or the Right of
First Refusal hereunder. Upon any such exercise, Purchaser shall have no further
rights as a holder of the Shares so purchased except the right to receive
payment for the Shares so purchased in accordance with the provisions of this
Agreement, and Purchaser or the Escrow Agent, as the case may be, shall
forthwith cause the certificate(s) evidencing the Shares so purchased to be
surrendered to the Company for transfer or cancellation.

8. Company's Right of First Refusal. Before any Shares held by Purchaser
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have

<PAGE> 23
a right of first refusal to purchase the Shares on the terms and conditions set
forth in this Section (the "Right of First Refusal").

(a) Notice of Proposed Transfer. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares
at the Offered Price to the Company or its assignee(s).

(b) Exercise of Right of First Refusal. At any time within thirty
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.

(c) Purchase Price. The purchase price ("Purchase Price") for the
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board in good faith.

(d) Payment. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.

(e) Holder's Right to Transfer. If all of the Shares proposed in
the Notice to be transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section, then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within ninety (90) days after the date of the Notice and provided
further that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, a new Notice shall be
given to the Company, and the Company and/or its assignees shall again be
offered the Right of First Refusal before any Shares held by the Holder may be
sold or otherwise transferred.

(f) Exception for Certain Family Transfers. Anything to the
contrary contained in this Section notwithstanding, the transfer of any or all
of the Shares during Purchaser's lifetime or on Purchaser's death by will or
intestacy to Purchaser's Immediate Family or a trust for the benefit of
Purchaser's immediate family shall be exempt from the provisions of this
Section. "Immediate Family" as used herein shall mean spouse, lineal descendant
or antecedent, father, mother, brother or sister. In such case, the transferee
or other recipient shall receive and hold the Shares so

<PAGE> 24
transferred subject to the provisions of this Section, and there shall be no
further transfer of such Shares except in accordance with the terms of this
Section.

(g) Termination of Right of First Refusal. The Right of First
Refusal shall terminate as to any Shares ninety (90) days after (i) the first
sale of Common Stock of the Company to the general public pursuant to a
registration statement filed with and declared effective by the Securities and
Exchange Commission under the Securities Act of 1933, as amended, or (ii) a
merger of the Company with a corporation whose stock is publicly traded on a
national exchange.

9. Restrictive Legends; Stop-Transfer Orders; Market Standoff.

(a) Legends. Purchaser understands and agrees that the Company
shall cause the legends set forth below or legends substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of the Shares
together with any other legends that may be required by state or federal
securities laws:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE
SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN
COMPLIANCE THEREWITH.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS
ON TRANSFER, RIGHTS OF FIRST REFUSAL AND OTHER RESTRICTIONS FOR THE BENEFIT OF
THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN A RESTRICTED STOCK PURCHASE
AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, COPIES OF
WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER
RESTRICTIONS, RIGHTS OF FIRST REFUSAL AND OTHER RESTRICTIONS ARE BINDING ON
TRANSFEREES OF THESE SHARES.

(b) Stop-Transfer Notices. Purchaser agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.

(c) Market Standoff. Purchaser hereby agrees that if so requested
by the Company or any representative of the underwriters in connection with any
registration of the offering of any securities of the Company under the
Securities Act of 1933, as amended (the "Securities Act"), neither Purchaser nor
Purchaser shall sell or otherwise transfer any Shares or other securities of the
Company during such period as the Company and the representatives of the
underwriters may request (not to exceed 180 days) following the effective date
of any registration statement of the Company filed under the Securities Act for
an underwritten public offering. The Company may impose stop-transfer
instructions with respect to Shares subject to the foregoing restrictions until
the end of such market standoff period.

<PAGE> 25
(d) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.

10. Representations.

(a) Investment Representation. Purchaser represents to the
Company the following:

(i) Purchaser is aware of the Company's business affairs
and financial condition and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the Shares.
Purchaser is acquiring these Shares for investment for Purchaser's own account
only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").

(ii) Purchaser acknowledges and understands that the
Shares constitute "restricted securities" under the Securities Act and have not
been registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein. In this connection,
Purchaser understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Purchaser's representation was predicated solely upon a present intention to
hold these Shares for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Shares, or for a period of one year or any other fixed
period in the future. Purchaser further understands that the Shares must be held
indefinitely unless they are subsequently registered under the Securities Act or
an exemption from such registration is available. Purchaser further acknowledges
and understands that the Company is under no obligation to register the Shares.
Purchaser understands that the certificate evidencing the Shares will be
imprinted with a legend which prohibits the transfer of the Shares unless they
are registered or such registration is not required in the opinion of counsel
satisfactory to the Company, a legend prohibiting their transfer without the
consent of the Commissioner of Corporations of the State of California and any
other legend required under applicable state securities laws.

(iii) Purchaser understands that the Shares are restricted
securities within the meaning of Rule 144, promulgated under the Securities Act,
which limits the sale of Shares in a public market transaction. Purchaser also
understands that the exemption from registration under Rule 144 will not be
available, in any event, for at least two (2) years from the date of purchase of
and actual payment for the Shares, and even then will not be available unless
(A) a public trading market then exists for the Common Stock, (B) adequate
information concerning the Company is then available to the public, and (C)
other terms and conditions of Rule 144 are complied with. Purchaser understands
that there can be no assurance that the requirements of Rule 144 will be met, or
that the Shares will ever be eligible for sale.

(iv) Purchaser further understands that in the event all
of the applicable requirements of Rule 144 are not satisfied, registration under
the Securities Act, compliance with

<PAGE> 26
Regulation A, or some other registration exemption will be required, and that,
notwithstanding the fact that Rule 144 is not exclusive, the Staff of the
Securities and Exchange Commission has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a substantial burden
of proof in establishing that an exemption from registration is available for
such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk. Purchaser understands
that no assurances can be given that any such other registration exemption will
be available in such event.

(b) Tax Representations. Purchaser has reviewed with its own tax
advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. Purchaser is
relying solely on such advisors and not on any statements or representations of
the Company or any of its agents. Purchaser understands that it (and not the
Company) shall be responsible for its own tax liability that may arise as a
result of this investment or the transactions contemplated by this Agreement.

11. Section 83(b) Elections. Purchaser understands that Section 83 of
the Code, taxes as ordinary income the difference between the amount paid for
the Shares and the fair market value of the Shares as of the date any
restrictions on the Shares lapse. In this context, "restriction" means the right
of the Company to buy back the Shares pursuant to the Repurchase Option. In the
event the Company has registered under the Securities Exchange Act of 1934 (the
"Exchange Act"), "restriction" with respect to officers, directors, and 10%
shareholders also means the six-month period after the purchase of the Shares
during which sales of certain securities by such officers, directors, and 10%
shareholders would give rise to liability under Section 16(b) of the Exchange
Act. Purchaser understands that it may elect to be taxed at the time the Shares
are purchased rather than when and as the Repurchase Option or six-month Section
16(b) period expires, by filing an election under Section 83(b) of the Code with
the Internal Revenue Service within 30 days from the date of purchase. Even if
the fair market value of the Shares equals the amount paid for the Shares, the
election must be made to avoid adverse tax consequences in the future. Purchaser
understands that failure to make this filing in a timely manner will result in
the recognition of ordinary income by Purchaser, as the Repurchase Option
lapses, or after the lapse of the six-month Section 16(b) period, on any
difference between the purchase price and the fair market value of the Shares at
the time such restrictions lapse. A form of Election under Section 83(b) is
attached to the Option Agreement as Exhibit A-3 for reference.

PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER'S SOLE RESPONSIBILITY AND NOT THE
COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF PURCHASER
REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON PURCHASER'S
BEHALF.

12. Additional Actions. The parties will execute such further
instruments and take such further action as may reasonably be necessary to carry
out the intent of this Agreement.

13. Notices. All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given (a) five (5) days after deposit with the U.S. Postal
Service, if delivered by first class mail, postage prepaid, (b) upon delivery,
if delivered by hand, or (c) one business day after the business day of deposit
with

<PAGE> 27
Federal Express or similar overnight courier, freight prepaid, and shall be
addressed (i) if to purchaser, at Purchaser's address as set forth beneath
Purchaser's signature to this Agreement, or at such other address as Purchaser
shall have furnished to the Company in writing, (ii) if to the Company, to
Diamond Multimedia Systems, Inc., with copy to Wilson Sonsini Goodrich and
Rosati, 650 Page Mill Road, Palo Alto, California 94304-1050, Attention: Howard
S. Zeprun, Esq., or at such other address as the Company shall have furnished to
Purchaser, or (iii) if to the Escrow Agent, to Gary S. Filler, Diamond
Multimedia Systems, Inc., 1130 East Arques Avenue, Sunnyvale, California 94086

14. Assignment. The Company may assign its rights and delegate its
duties under this Agreement. If any such assignment or delegation requires
consent of the California Department of Corporations, the parties agree to
cooperate in requesting such consent. This Agreement shall inure to the benefit
of the successors and assigns of the Company and, subject to the restrictions on
transfer herein set forth, be binding upon Purchaser, Purchaser's heirs,
executors, administrators, successors and assigns.

15. Entire Agreement; Amendment. This Agreement and, if applicable, any
Joint Escrow Agreement or Security Agreement executed in connection herewith,
constitute(s) the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof, and no party shall be
liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein. Except as
expressly provided herein, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought.

16. Arbitration. At the option of either party, any and all disputes or
controversies, whether of law or fact, and of any nature whatsoever arising from
or respecting this agreement, unless otherwise expressly provided herein, shall
be decided by arbitration by the American Arbitration Association in accordance
with the rules and regulations of that Association.

(a) The arbitrators shall be selected as follows: In the event
the Company and the Purchaser agree on one arbitrator, the arbitration shall be
conducted by such arbitrator. In the event the Company and Purchaser do not so
agree, the Company and the Purchaser shall each select one independent,
qualified arbitrator and these two arbitrators shall select a third arbitrator.
The Company reserves the right to reject any individual arbitrator who shall be
employed by or affiliated with a competing organization.

(b) Arbitration shall take place in Santa Clara County,
California, or any other location mutually agreeable to the parties. At the
request of either party, arbitration proceedings will be conducted in secrecy.
In such case all documents, testimony, and records shall be received, heard, and
maintained by the arbitrators in secrecy under seal, available for inspection
only by the Company and Purchaser and their respective attorneys and their
respective experts who shall agree in advance and in writing to receive all such
information confidentially and to maintain such information in secrecy until
such information shall become generally known. The arbitrator, who shall act by
majority vote, shall be able to decree any and all relief of an equitable
nature, including but not limited to such relief as a temporary restraining
order, a temporary or a permanent injunction, or both, and shall also be able to
award damages, with or without an accounting, costs, and reasonable

<PAGE> 28
attorneys' fees. The decree or judgment of an award rendered by the arbitrators
may be entered in any court having jurisdiction thereof.

(c) Reasonable notice of the time and place of arbitration shall
be given to all persons, other than the parties, as shall be required by law, in
which case such persons or their authorized representatives shall have the right
to attend and participate in all the arbitration hearings to the extent and in
such manner as the law shall require.

17. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California as they apply to
contracts entered into and wholly to be performed within such state.

Purchaser represents that Purchaser has read this Agreement and is
familiar with its terms and provisions. Purchaser hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon
any questions arising under this Agreement.

<PAGE> 29
IN WITNESS WHEREOF, this Agreement is deemed made as of the date first
set forth above.

DIAMOND MULTIMEDIA SYSTEMS, INC.

By:
-------------------------------

William J. Schroeder, President & CEO

PURCHASER

----------------------------------

ADDRESS:
---------------------------

----------------------------------

<PAGE> 30
EXHIBIT A-1

ASSIGNMENT SEPARATE FROM CERTIFICATE

FOR VALUE RECEIVED, _____________ hereby sells, assigns and transfers
unto _________ (_______) shares of the Common Stock of Diamond Multimedia
Systems, Inc. standing in the undersigned's name on the books of said
corporation represented by Certificate No. ___, and do hereby irrevocably
constitute and appoint _____________ to transfer the said stock on the books of
the within named corporation with full power of substitution in the premises.

This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement between Diamond Multimedia Systems, Inc. and the
undersigned dated ________, 199__.

Dated: _____________, 199__

----------------------------------

INSTRUCTIONS: Please do not fill in any blanks other than the signature line(s).
The purpose of this assignment is to enable the Company to exercise its
"repurchase option," as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.

<PAGE> 31
EXHIBIT A-2

JOINT ESCROW INSTRUCTIONS

January 3, 1995

Gary B. Filler
Chief Financial Officer
Diamond Multimedia Systems
1130 East Arques Avenue
Sunnyvale, CA 94086

Dear Mr. Filler,

As Escrow Agent for both Diamond Multimedia Systems, Inc., a Delaware
corporation (the "Company") and the undersigned purchaser of stock of the
Company ("Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Restricted
Stock Purchase Agreement ("Agreement"), dated as of January 3, 1995, between the
Company and the undersigned, in accordance with the following instructions:

1. In the event that the Company and/or any assignee of the Company
(referred to collectively for convenience herein as the "Company") exercises the
Company's repurchase option set forth in the Agreement, the Company shall give
to Purchaser and you a written notice specifying the number of shares of stock
to be purchased, the purchase price, and the time for a closing hereunder at the
principal office of the Company. Purchaser and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in
accordance with the terms of said notice.

2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's repurchase option.

3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a stockholder of the Company while the
stock is held by you.

<PAGE> 32
4. Upon written request of Purchaser, but no more than once per calendar
year, unless the Company's repurchase option has been exercised, you will
deliver to Purchaser a certificate or certificates representing so many shares
of stock as are not then subject to the Company's repurchase option. Within
sixty (60) days after cessation of Purchaser's continuous employment by or
services to the Company, or any parent or subsidiary of the Company, you will
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's repurchase
option.

5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.

6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.

7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith,
and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith.

8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.

9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.

10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.

11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.

12. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be an officer or agent of the Company or if you shall resign
by written notice to each party. In the event of any such termination, the
Company shall appoint a successor Escrow Agent.

<PAGE> 33
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.

14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.

All notices and other communications required or permitted hereunder
shall be in writing, shall be effective when given, and shall in any event be
deemed to be given (a) five (5) days after deposit with the U.S. Postal Service,
if delivered by first class mail, postage prepaid, (b) upon delivery, if
delivered by hand, or (c) one business day after the business day of deposit
with Federal Express or similar overnight courier, freight prepaid, and shall be
addressed to each of the other parties thereunto entitled at the following
addresses or at such other addresses as a party may designate by ten days'
advance written notice to each of the other parties hereto.

COMPANY: Diamond Multimedia Systems, Inc.
1130 E. Arques Avenue
Sunnyvale, California 94086
Attn: Secretary

PURCHASER:

ESCROW AGENT: Gary B. Filler
Chief Financial Officer
Diamond Multimedia Systems, Inc.
1130 E. Arques Avenue
Sunnyvale, California 94086
Attn: Secretary

15. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.

16. This instrument shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted assigns.

17. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the laws of the State of California as they
apply to contracts entered into and wholly to be performed within such state.

Very truly yours,

<PAGE> 34
DIAMOND MULTIMEDIA SYSTEMS, INC.

By:

William J. Schroeder, President & CEO

PURCHASER:

-----------------------------------------

ESCROW AGENT

-----------------------------------------

Gary B. Filler, Senior Vice President and
Chief Financial Officer

<PAGE> 35
EXHIBIT A-3

ELECTION UNDER SECTION 83(b)

OF THE INTERNAL REVENUE CODE OF 1986

The undersigned taxpayer hereby elects, pursuant to the above-referenced
Federal Tax Code, to include in taxpayer's gross income for the current taxable
year, the amount of any compensation taxable to taxpayer in connection with his
receipt of the property described below:

1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:

NAME: TAXPAYER: _____________ SPOUSE: _____________

ADDRESS: _____________ _____________

_____________ _____________

IDENTIFICATION NO.: TAXPAYER: _____________ SPOUSE: _____________

TAXABLE YEAR: 199_

2. The property with respect to which the election is made is described
as follows: ______ shares (the "Shares") of the Common Stock of Diamond
Multimedia Systems, Inc. (the "Company").

3. The date on which the property was transferred is: ________, 199_.

4. The property is subject to the following restrictions:

The Shares may be repurchased by the Company, or its assignee, on
certain events. This right lapses with regard to a portion of the Shares based
on the continued performance of services by the taxpayer over time.

5. The fair market value at the time of transfer, determined without
regard to any restriction other than a restriction which by its terms will never
lapse, of such property is:

$_________.

6. The amount (if any) paid for such property is:

$_________.

The undersigned has submitted a copy of this statement to the person for
whom the services were performed in connection with the undersigned's receipt of
the above-described property. The

<PAGE> 36
transferee of such property is the person performing the services in connection
with the transfer of said Property.

The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.

Dated: ___________, 199__ __________________________________

__________________________________

<PAGE> 1

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the Registration Statement of
Diamond Multimedia Systems, Inc. on Form S-8 for 563,707 shares of Common
Stock reserved for issuance under the Company's 1992 Stock Option Plan of our
report dated January 23, 1998, on our audits of the consolidated financial
statements and financial statement schedule of Diamond Multimedia Systems, Inc.
as of December 31, 1997 and 1996 and for the years ended December 31, 1997,
1996, 1995, which reports are included in the Annual Report on Form 10-K for
the year ended December 31, 1997.

COOPERS & LYBRAND L.L.P.

San Jose, California
March 31, 1998