Tuesday January 6, 6:31 pm Eastern Time
Company Press Release
SOURCE: S3 Incorporated
S3 Sells 1/3 of Its Interest in United Semiconductor Corporation (USC) to
Receive Approximately US$72 Million
S3 Earns 3X Return on Original Investment Today with Potential to Earn up to 4.9X
SANTA CLARA, Calif., Jan. 6 /PRNewswire/ -- S3(R) Incorporated (Nasdaq: SIII - news) today announced a 3X gain on
its original investment in USC through an agreement to sell 80 million shares of USC stock. With this transaction, and upon
approval of the currency transfer involved by the local authorities, S3 will receive $2.4 billion New Taiwan (NT) or
approximately US$72.0 million* to be used for future internal and external investments, including R&D, intellectual property
and working capital. In addition, S3 has the potential to receive up to an additional $1.5 billion NT dollars if a ''Liquidity
Event,'' such as an initial public offering, occurs at any time in the future.
USC is a joint venture between S3, United Microelectronics Corporation (UMC) and Alliance Semiconductor in which S3
invested $2.4 billion NT dollars in 1996 for a 23.75 percent share (240 million shares) in the company. USC operates a
semiconductor manufacturing facility in Taiwan. Through the agreement to sell 80 million shares in USC, S3 receives its initial
$2.4 billion NT dollars and maintains an approximate 16 percent ownership in the manufacturing facility.
''We are extremely pleased to have earned a 3X return on the sale of 1/3 of our ownership in USC,'' said Gary Johnson, Vice
Chairman of S3 Incorporated. ''As a result, we believe our remaining 16 percent interest in the company represents substantial
financial and strategic value for S3 in the future.''
''The USC venture is an investment and manufacturing model for the industry to follow,'' said Don Brooks, chief executive
officer of UMC Group International Operations. ''Backed by industry leaders such as S3, we are confident that USC will
continue to be successful by delivering leading edge manufacturing technology at required capacity levels.''
Terms of the Agreement
Under the terms of the agreement, S3 will sell 80 million shares of USC common stock in return for $2.4 billion NT. If at any
time after the agreement is signed, a ''Liquidity Event'' occurs, S3 will receive not only the $2.4 billion NT dollars, but will also
be entitled to receive a contingent payment of up to $19 NT per share (or $1.5 billion NT dollars). A ''Liquidity Event'' is
defined as any event by which UMC, or its successor, will have the opportunity to receive value from transfer of its ownership
of shares of stock in USC in an arms-length transaction other than by way of transfer to employees for incentives, whether or
not UMC or its successor, in fact, participates in such opportunity. A ''Liquidity Event'' may include, for example, the
completion of a public offering of USC securities on a recognized securities exchange, a sale of USC stock owned by UMC
(or by a UMC successor) in an arms-length transaction; or a sale of all or substantially all of the assets of USC. S3's right to
purchase manufacturing capacity from USC will be unaffected by the sale of its shares.
S3 has approximately 52 million shares outstanding as of January 6, 1997.
About S3 Incorporated
S3 Incorporated, founded in 1989 with headquarters in Santa Clara, California, is the world's largest supplier of multimedia
acceleration hardware and its associated software.** S3 is committed to applying its expertise in audio, video, graphics and
platform acceleration to create innovative and affordable products for the home, desktop and mobile markets. The company's
vision for the future is to also bring a rich, consumer electronics-type experience to PC users -- integrating the best available
consumer multimedia technologies into the mainstream PC platform.
Except for the historical information contained herein, the matters set forth in this press release, such as statements relating to
the amount of US dollars receivable from the sale of S3's USC shares and the receipt of contingent payments upon the
occurrence of a Liquidity Event, are forward-looking statements that are subject to risk and uncertainties that may cause actual
results to differ materially, including general economic and stock market conditions in Taiwan, exchange rate fluctuations, and
other risks detailed from time to time in S3's SEC reports, including its Quarterly Report on Form 10-Q for the three months
ended September 30, 1997. These forward-looking statements speak only as of the date hereof. S3 disclaims any intent or
obligation to update these forward-looking statements.
S3 is a registered trademark of S3 Incorporated. The S3 corporate logo is a trademark of S3 Incorporated. Other marks
referenced herein are the property of their respective owners.
Based on exchange rates prevailing on December 29th, 1997.
Sources: Dataquest (San Jose, CA), In-Stat (Scottsdale, AZ), Jon Peddie Associates (Tiburon, CA) and Mercury
Research (Scottsdale, AZ).
SOURCE: S3 Incorporated
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