<PAGE>


                          SECURITIES AND EXCHANGE COMMISSION

                               Washington, D.C. 20549

                                      Form 10-K
                                           
(Mark One)

[X]                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended October 31, 1996

                                          or

[ ]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]


For the transition period from ________________ to ________________ 
Commission file number 0-25540


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


                  Texas                            75-1855896
    (State or other jurisdiction of             (I.R.S. Employer
    incorporation or organization)             Identification No.)

       1651 North Glenville Drive
            Richardson, Texas                        75081
 (Address of principal executive offices)          (Zip Code)

         Registrant's telephone number, including area code:  (972) 234-8750

             SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                         None

             SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:


                       Common Stock, par value $0.01 per share
                                   (Title of class)

<PAGE>


    Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  


                        Yes   X         No         
                           -------        -------  

    Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]  

    The aggregate market value on January 27, 1997 of the registrant's voting
securities held by non-affiliates was $122,584,214.

    Number of shares of registrant's Common Stock, par value $0.01 per share,
outstanding as of January 27, 1996: 4,521,394.

                         DOCUMENTS INCORPORATED BY REFERENCE

    (a)  Selected portions of the registrant's Annual Report to Shareholders
         for the fiscal year ended October 31, 1996. - Part II 

    (b)  Selected portions of the registrant's definitive Proxy Statement for
         the 1997 Annual Meeting of Shareholders. - Part III


<PAGE>

                                        PART I

ITEM 1.  BUSINESS.


    UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERM "COMPANY" OR "STB" WHEN
USED IN THIS REPORT REFERS TO STB SYSTEMS, INC., A TEXAS CORPORATION, AND ITS
CONSOLIDATED SUBSIDIARIES AND PRIOR AFFILIATES.  THIS REPORT CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE FEDERAL SECURITIES LAWS. 
ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS COULD DIFFER MATERIALLY FROM
THOSE PROJECTED IN OR CONTEMPLATED BY THE FORWARD-LOOKING STATEMENTS DUE TO A
NUMBER OF FACTORS, INCLUDING WITHOUT LIMITATION THOSE SET FORTH UNDER "--RISK
FACTORS" BELOW.

INTRODUCTION

    STB designs, manufactures and sells multimedia subsystem and specialized 
technology products.  The Company's multimedia subsystem products, which are 
designed for use primarily in desktop personal computers ("PCs"), include a 
full range of multimedia accelerators (formerly referred to as "graphics 
adaptors" or "video graphics adaptors"), almost all of which are capable of 
displaying full-motion video images on a monitor.  These multimedia 
accelerators enable users to take advantage of true-color graphics, 3D and 
video features found in the latest PC operating systems, such as Microsoft 
Windows 95 and Windows NT, and in multimedia applications and are designed 
for use primarily in mid-range to high-end PCs.  The Company's multimedia 
subsystem product line also includes several complementary products, 
including digital video products and sound cards.  The Company's multimedia 
subsystem products are sold to original equipment manufacturers ("OEMs") and, 
to a lesser extent, to commercial customers, such as retailers, distributors 
and direct-mail companies.  The Company's OEM and commercial customers 
include Gateway 2000, Dell Computer, Compaq Computer, IBM, CompUSA, Best Buy, 
Computer City, Tech Data, Ingram Micro and Avnet.

    STB's specialized technology products incorporate graphics technologies and
are usually designed to enable one computer to simultaneously control the
display of multiple monitors.  These products are sold to customers for
specialized applications in a number of industries, including the financial
services, hospitality, factory automation, transportation and emergency response
industries.  The Company's customers for specialized technology products include
Reuters and Citibank.

     According to International Data Corporation ("IDC"), STB has increased its
market share to become the second largest independent supplier of multimedia
accelerators (based on units shipped), with an estimated 16.7% worldwide market
share in 1995.  

INDUSTRY


    According to Dataquest, an estimated 71.7 million PCs were expected to be
shipped worldwide in 1996, compared to 60.2 million units in 1995 and 47.9
million units in 1994.  A substantial portion of the PCs shipped in recent
periods incorporate high performance 

                                     -1- 
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Intel Pentium and Pentium Pro processors and support multimedia functionality, 
including CD-ROM storage, higher-resolution graphics, digital video and audio 
and, in some systems, hardware 3D and telecommunications.  The evolution of 
these multimedia-enabled PCs has been driven by the proliferation of higher 
performance hardware, operating systems like Microsoft Windows 95 and Windows 
NT, the popularity of the Internet and the growth in the number of consumer and 
business applications featuring greater use of 3D graphics, video and sound.

    Multimedia applications typically place significantly higher processing
demands on a PC's central processing unit ("CPU"), which can substantially
degrade system performance.  The processing burden on the CPU can be reduced by
off-loading the multimedia-intensive processing functions to specialized video
graphics and other multimedia subsystems.  This allows for significant
improvements in a PC's performance and can be achieved either through the
placement of subsystems on the motherboard or the use of add-in subsystems. 
Motherboard implementations typically cost less but generally provide lower
levels of functionality and performance.  While add-in subsystems cost slightly
more, they generally can support higher levels of functionality and provide a
higher degree of flexibility in PC configuration, which allows PC manufacturers
to more rapidly integrate new technologies into their product lines and to meet
a range of price and performance requirements.

    The market continually demands more sophisticated multimedia products as
new technologies evolve and enter the mainstream.  Intel's incorporation of the
MMX extended instruction set in its microprocessors, as well as efforts to
develop specifications for an accelerated graphics port ("AGP"), demonstrate the
demand for higher CPU functionality and better integration between the CPU and
the PC graphics subsystem.  The incorporation of these architectural
enhancements, in addition to evolving standards such as MPEG-2 decompression,
Dolby Digital audio and DVD storage, are laying the foundation for using the PC
as an enabling platform for digital television, video teleconferencing and other
emerging multimedia capabilities.

    The accelerating pace of technological advancement in the PC industry has
made it increasingly difficult for OEMs to devote the resources necessary for
the timely internal development of multimedia subsystems incorporating the
latest innovations.  Furthermore, many OEMs are seeking to expand their product
lines in response to consumer demand for a broader range of price and
performance options.  As a result, the Company believes OEMs increasingly are
choosing to outsource many of their component and subsystem needs to specialized
subsystem vendors with focused development efforts.

STRATEGY

    The Company's goal is to become the leading supplier of multimedia
accelerators and certain other multimedia subsystems for PCs.  The Company's
focus on the design, manufacture and sale of multimedia accelerators has earned
it a reputation for providing advanced graphics display solutions.  With its
size and reputation, the Company has built relationships with chip suppliers
that allow it to obtain advance information about new 

                                     -2- 
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developments in video controller chip technology.  Additionally, close 
relationships with many of its OEM customers better enable the Company to 
determine what future performance features are most desired.  The Company 
believes that the strength of these relationships also places it in a strong 
position to be the provider of choice to OEMs for a number of other 
multimedia subsystem products.  STB believes that it is positioned to compete 
effectively by using its knowledge of technological advances and customer 
desires, together with its own value-added development of software drivers 
and utilities, to provide high-quality multimedia accelerators and other 
multimedia subsystems to the PC marketplace on a timely, cost-effective 
basis.  The Company also seeks to take advantage of its expertise gained in 
developing multimedia subsystem products to develop its specialized 
technology products.

    The major elements of the Company's strategic plan are as follows:

    FOCUS ON MULTIMEDIA ACCELERATOR MARKET AND EMERGING MULTIMEDIA SUBSYSTEM
OPPORTUNITIES.  The Company intends to continue focusing its efforts on the
multimedia accelerator market, where it has consistently demonstrated an ability
to introduce innovative multimedia accelerators designed to satisfy rapidly
evolving and increasingly demanding performance standards.  Furthermore, the
Company believes that it can leverage its strong OEM relationships and
technological and manufacturing expertise to be the provider of choice to OEMs
for other multimedia subsystem products.

    CONTINUED FOCUS ON OEM SALES CHANNEL.  The Company has continued to focus 
on the OEM sales channel, as evidenced by a significant increase in sales 
within this channel during fiscal 1996 and the fact that approximately 81% of 
the Company's revenues during the fiscal year were derived from sales to 
OEMs.  The expansion of the Company's business with several established OEM 
customers, such as Gateway 2000, as well as the recent addition of several 
new OEM customers, including Dell Computer, Compaq Computer and IBM, 
demonstrate the success of the Company's commitment to meeting the needs of 
OEMs.  Historically, the Company has provided OEMs with mid-range multimedia 
accelerators.  The Company recently has commenced delivery of high-end 
multimedia accelerators and other multimedia subsystem products in an effort 
to expand its product offerings to the OEM market.

    CONTROL OF MANUFACTURING.  The Company believes that it is the only major
independent supplier of multimedia accelerators that manufactures its own
products rather than outsourcing its manufacturing operations.  The Company
believes that having its own manufacturing facility in Juarez, Mexico enables it
to maintain lower manufacturing costs, meet expedited customer delivery
schedules, quickly adjust to changes in product orders, achieve shorter
production cycles and accommodate modified or unusual design specifications,
while at the same time ensuring product quality and reliability.

    CONTROLLER CHIP INDEPENDENCE.  Unlike some of its competitors, the Company
designs its products after evaluating controller chips produced by a number of
leading suppliers.  The selection of a controller chip is based on competitive
factors including cost, 

                                     -3- 
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performance, compatibility and reliability of supply. The Company believes 
that purchasing rather than internally developing controller chips allows it 
to consistently develop products incorporating the latest technological 
advances.  Moreover, the Company is able to leverage the substantial 
expenditures made by developers of controller chips, achieve component 
flexibility and decrease the time and expense required to develop new 
products.  See "--Risk Factors--Dependence on Suppliers."

    MINIMIZE DESIGN-TO-MARKET CYCLES.  By capitalizing on the foregoing
elements of its strategy, STB is able to design, manufacture, test and ship new
products in relatively short amounts of time, which is particularly important
for obtaining, maintaining and strengthening relationships with its OEM
customers, who also must operate under short design-to-market cycles.

    SELECTIVELY PURSUE OTHER SALES CHANNELS.  In addition to focusing on the
OEM sales channel, the Company intends to continue its efforts to further
penetrate the commercial market.  The Company believes that the high quality,
low cost standards that it must meet for its OEM customers better position it to
provide competitive products in the commercial market.  The Company believes
that increasing awareness of the STB brand, created in part by its penetration
in the OEM sales channel, has strengthened its position in the commercial
market.  This strength is demonstrated by the Company's substantial increase in
commercial channel sales during fiscal 1996 and by the addition of significant
retailers such as Best Buy to its customer base.  The Company also seeks to take
advantage of its expertise gained in developing multimedia subsystem products to
develop its specialized technology products.  The Company believes it is one of
the largest suppliers of specialized technology products in the world and
intends to continue marketing these products to current customers, as well as to
new customers in the same and other targeted industries.

    BRING NEW TECHNOLOGIES TO THE MARKETPLACE.  The Company's experienced
software and hardware engineers provide STB with industry-leading expertise. 
The Company intends to continue applying this expertise to respond quickly to
customer requirements, anticipate trends and advances in its industry and expand
its product line to take advantage of new technology applications.  In
particular, the Company believes that its video graphics expertise places it in
a strong position to develop competitive products employing the most advanced
digital video and audio technologies, including TV tuner cards, DVS products and
DVD products.


PRODUCTS

    The Company divides its products into two categories: multimedia subsystem
products and specialized technology products.  From its entry-level to its most
sophisticated products, the Company offers customers products that enhance the
video and audio capabilities for an increasingly broad range of PC
configurations and applications.

                                     -4- 
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MULTIMEDIA SUBSYSTEM PRODUCTS

    The Company's multimedia subsystem products include a full range of
multimedia accelerators at various price points, as well as other multimedia
subsystem products.  The Company's current major products include the following:

-------------------------------------------------------------------------------
PRODUCT NAME                         DESCRIPTION                      STATUS   
-------------------------------------------------------------------------------
                               MULTIMEDIA ACCELERATORS
-------------------------------------------------------------------------------
Powergraph64        Entry-level 2D multimedia accelerator           Mature     
Video               using either 1MB or 2MB of EDO DRAM
-------------------------------------------------------------------------------
Powergraph 3D       Consumer 3D multimedia accelerator              Shipping   
                    using 2MB of EDO DRAM                
-------------------------------------------------------------------------------
Lightspeed 128      High performance 2D multimedia accelerator      Shipping   
                    using either 2MB or 2.25MB of MDRAM (Multi-
                    bank DRAM)
-------------------------------------------------------------------------------
Velocity 3D         Workstation 3D multimedia accelerator using     Shipping   
                    4MB of EDO VRAM, upgradable to 8MB using 4MB 
                    of EDO DRAM 
-------------------------------------------------------------------------------
                         OTHER MULTIMEDIA SUBSYSTEM PRODUCTS
-------------------------------------------------------------------------------
Soundrage 32        Plug and play wavetable sound card with 32      Shipping   
                    voice synthesis                            
-------------------------------------------------------------------------------
Soundrage 32 3D     Soundrage 32 with special audio effects,        Shipping   
                    such as 3D sound 
-------------------------------------------------------------------------------
TV Tuner Card       TV tuner product allowing TV playback,          Shipping   
                    video capture, video conferencing and 
                    Intercast support on the multimedia PC
                    system
-------------------------------------------------------------------------------
DVS                 MPEG-2 video/audio decoder for displaying       Newly      
                    compressed television programming from          Introduced 
                    satellite or cable signal
-------------------------------------------------------------------------------
DVD                 MPEG-2 video and Dolby Digital audio            Under      
                    decoder for playback of DVD format              Development
                    multimedia applications
-------------------------------------------------------------------------------
Video               Enhanced multimedia accelerator with            Under      
Teleconferencing    camera interface, compression/decompression     Development
                    capability and user interface software
-------------------------------------------------------------------------------

                                     -5- 
<PAGE>

    The Company anticipates that its multimedia subsystem product line will 
continue to evolve based upon its assessment of strategic multimedia 
opportunities and the continuing demand for new generations of video and 
audio solutions from OEMs and end-users.  The Company's multimedia subsystem 
products tend to have relatively short life cycles, reflecting the dynamic 
nature of technological development within the PC industry.  OEMs introduce 
new system configurations as often as twice a year, and the Company must 
introduce its new products to comply with OEMs' schedules.  The life cycle 
for a multimedia accelerator typically is 6 to 9 months (plus a few 
additional months of sales of certain of such products in the commercial 
market).

    MULTIMEDIA ACCELERATORS.  Almost all of the Company's multimedia 
accelerators are capable of displaying full-motion video images on a monitor. 
A multimedia accelerator consists of a printed circuit board configured with 
a video controller chip, memory chips and software drivers and utilities.  
The Company believes that optimal graphics enhancement and video display 
require custom software and hardware design that maximize the performance and 
features of a PC system.  The Company distinguishes its products from those 
of its competitors through its innovative proprietary software drivers and 
utilities and through the hardware design of its multimedia accelerators.  
The Company incorporates its proprietary STB Vision software on all of its 
multimedia accelerator products.  STB, Vision software supports various chip 
sets, with a consistent interface that supports multiple languages, including 
German, English, French, Dutch, Polish, Japanese, Italian and Spanish, and 
enhances the performance of a multimedia accelerator.

    The Company's multimedia accelerator product line is comprised of 
products with varying degrees of performance based on display speed, 
resolution, color depth and 2D/3D capability.  The display speed of a 
multimedia accelerator is determined primarily by the controller chip and 
software drivers, while display resolution and color depth are determined 
primarily by the amount of display memory.  The Company offers a large family 
of multimedia accelerators that are compatible with the bus architectures 
prevalent in today's market.

    By offering a complete line of multimedia accelerators, the Company can 
better establish and build relationships with OEMs.  The Company currently 
offers a high-end multimedia accelerator that has 3D capability and 4 
megabytes of EDO (extended data out) VRAM (video random access memory) and 4 
megabytes of EDO DRAM (dynamic random access memory).  The Company offers a 
number of mid-range products, including products with 2D and 3D capability, 
which generally contain from 1 to 2 megabytes of EDO DRAM memory or 2 to 2.5 
megabytes of MDRAM memory.  The Company's entry-level multimedia accelerators 
generally perform at slower speeds but produce industry standard display 
resolution and color depth. Although entry-level products generate only a 
small portion of the Company's overall revenue and profit, they allow the 
Company to offer a complete line of multimedia accelerators.

                                     -6- 
<PAGE>

    OTHER MULTIMEDIA SUBSYSTEM PRODUCTS.  In addition to multimedia
accelerators, the Company also offers complementary multimedia subsystem
products that incorporate emerging technologies.

    -    SOUND CARDS.  A sound card, or "audio adapter," converts digital audio
         information into high-fidelity, stereo-quality sound.  A sound card
         incorporates an audio controller chip, memory chips and software
         drivers and utilities in configurations designed to produce high
         quality sound.  The Company began shipping sound card products in July
         1996 in response to OEM customer demand for this additional product
         offering.  The Company believes that its sound cards are an important
         complement to its video display products.  The sale of sound cards
         accounted for 4.6% of net sales in fiscal 1996.

    -    TV TUNER CARDS.  The Company's TV tuner cards are capable of receiving
         analog television broadcasts or cable transmissions and producing a
         full-motion television display on a PC monitor.  One important feature
         of these products is their ability to take advantage of Intel
         Intercast, which broadcasts information similar to a web page within
         an analog transmission signal.  These products are sold through the
         OEM channel, and are available through retailers such as CompUSA,
         Best Buy and Computer City.  The Company's Video Rage TV tuner/video
         graphics subsystem is used in Gateway 2000's Destination PC/TV product
         line.

    -    DVS PRODUCTS.  The Company's DVS products are capable of receiving
         MPEG-2 encoded data from a satellite source or other medium and
         displaying the data on a PC or TV monitor to produce full-screen,
         full-motion video images.  The Company's DVS products are intended to
         be used in conjunction with products of satellite entertainment
         providers, such as Direct TV and Echostar.  The Company began limited
         production of DVS products in the fourth quarter of fiscal 1996.

    In addition to the multimedia subsystem products that the Company currently
offers, it is currently developing the following products:

    -    DVD PRODUCTS.  DVD products are capable of producing broadcast quality
         video and audio playback of the digital information stored on DVD
         disks.  DVD disks are capable of storing seven or more times more data
         than a CD-ROM disk of the same physical size.  It is therefore
         anticipated that DVD will become the medium of choice for various
         entertainment and multimedia products that require increasing amounts
         of data storage capacity.  The Company believes that its knowledge of
         MPEG-2 video and Dolby Digital audio standards gained in developing
         its DVS products provides it with much of the expertise needed to
         produce DVD products.  The Company has not received any orders for
         these products to date.

                                      -7- 
<PAGE>

    -    VIDEO TELECONFERENCING PRODUCTS.  The Company is developing products
         that are capable of capturing, compressing and transmitting full-
         motion video images, while simultaneously receiving, decompressing and
         displaying full-motion video images.  These products are intended for
         the consumer and corporate markets and will provide fully synchronized
         video and audio teleconferencing capabilities for PC systems.  The
         Company has not received any orders for these products to date.

    The Company's multimedia subsystem products (other than multimedia
accelerators and sound cards) are still in the early, limited production stage
or are in development.  There can be no assurance that such products can be
produced in profitable quantities, if at all.  The Company anticipates that it
will continue to expend efforts to develop these and other potential products. 
See "--Risk Factors--Entry Into New Product Markets."

SPECIALIZED TECHNOLOGY PRODUCTS

    The Company's specialized technology products are characterized by their
incorporation of complex technologies, relatively low unit sales volumes and
relatively high unit prices and gross profit margins.  The Company's specialized
technology products are sold primarily to resellers and corporate customers for
specialized applications in a number of industries, including the financial
services, hospitality, factory automation, transportation and emergency response
industries.  Most specialized technology products are designed to enable a
single computer to control the display of more than one monitor.  The use of the
Company's multi-monitor specialized technology products in certain
configurations can allow one computer to control up to 32 monitors.  The Company
believes it is one of the largest suppliers of multi-monitor products in the
world.

    The Company offers two families of multi-monitor multimedia accelerator
products distinguished by the resolution of the monitors with which they are
designed to be used.  The MVP family of products is used with high-resolution
monitors, and the Channel family is used with low-resolution, television-type
monitors.  An important component that the Company incorporates into the MVP is
its "virtual screen" software driver and Mediator utility.  This software driver
allows multiple monitors to act as a single screen, displaying numerous
"windows" of information through only one computer.  The Mediator utility allows
the user to control the placement of applications on the available displays. 
Many financial institutions employ this capability in their trading rooms, where
large amounts of information must be continuously available to traders.  The
Company has made technological advances to its existing MVP product line,
including the introduction of new products, such as full motion digital video
scalers and five video/TV tuner input ports, which are based on the PCI bus
standard and new video graphics drivers and utilities.  Channel products are
used in applications, such as airport arrival and departure displays, where
lower cost and larger display size are more important than clarity of display. 
Channel products are also used to facilitate the selection of on-demand
programming for hotel room televisions.

                                      -8- 
<PAGE>

    The Company also recently introduced several specialized technology
products that incorporate digital video features that meet the MPEG-2
decompression standard and may or may not incorporate a multimedia accelerator. 
These products, some of which have multi-monitor control capability, may be used
for applications such as video-on-demand, storing video data for viewing at a
later time and receiving MPEG-2 encoded material over direct broadcast satellite
or advanced technology cable.  There can be no assurance that such products can
be produced in profitable quantities, if at all.  See "--Risk Factors--Entry
Into New Product Markets."

    Listed below are the principal industries and applications for the
Company's specialized technology products:

    INDUSTRY                 APPLICATION 
    --------                 ----------- 
Financial services      Support of simultaneous display of multiple data
                        sources on multiple monitors from a single PC for use
                        by financial traders

Hospitality             Control of display on hotel room televisions to allow
                        guests to view movie choices, review bill prior to
                        checking out and obtain other information

Factory automation      Dual-monitor graphical man-machine interface for
                        factory machinery

Transportation          Flight arrival and departure information

Emergency response      911 emergency call center displays to allow the operator
                        to follow multiple calls simultaneously, plus view a map
                        of the emergency location on a separate monitor

DESIGN AND DEVELOPMENT

    The timely development and introduction of new products is essential to
meeting the performance requirements of OEM customers as well as reinforcing the
Company's competitive position in STB's other sales channels.  The Company works
closely with its OEM customers and suppliers to develop new products that
satisfy specific OEM product requirements, such as performance and display
features.  The Company's software and hardware engineers design, develop and
test the new product prototype, selecting the most appropriate controller chip,
memory chips and other components for the product.

    Operating compatibility of the Company's products is critical for customer
acceptance.  STB's compatibility lab personnel ensure that the new product can
function properly in a variety of PC system configurations and with most popular
commercial application software and operating systems.  The compatibility lab
also compares the test performance of the Company's products against that of
competitors' products.  In addition, STB sends product 

                                      -9- 
<PAGE>

prototypes to OEM customers for performance and compatibility testing and to 
the Federal Communications Commission (the "FCC") and to the Cenelec branch 
of the European Economic Community ("EEC") for "CE Certification."  See 
"--Government Regulations." After any necessary modifications are made to a 
product, it is released for production.

    The Company's design and development personnel have enabled STB to 
repeatedly deliver the latest technologies to the OEM market.  The Company 
also has won numerous top awards from recognized industry magazines, 
including PC Magazine, PC World, Windows Magazine, PC Professional, 
Multimedia World, InfoWorld and New Media Magazine.

    The Company believes that the strength of its engineering resources is 
critical to its competitiveness.  The Company has substantially increased its 
engineering and technical resources, so that as of December 31, 1996 it had a 
total engineering staff of 67, including 39 engineers.  In particular, the 
Company added 13 software engineers during the period ended December 31, 
1996, bringing the total number of software engineers to 24 as of December 
31, 1996. The Company has also established software engineering centers in 
Houston, Texas and Eugene, Oregon and has made commitments to open an 
engineering design center in Ireland in fiscal 1997. The Company's 
engineering resources are critical to its strength in responding quickly to 
customer requirements, anticipating trends and advances in its industry and 
expanding its product line to take advantage of new technology applications. 
See "--Products" and "--Risk Factors--Dependence on Key Personnel." The
Company anticipates that it will continue to increase its engineering resources
in the future.

SUPPLIERS

    The Company believes that its close relationships with its component 
suppliers are essential to producing low-cost, innovative products and 
maintaining short design-to-market cycles.  The Company's primary products, 
multimedia accelerators, are printed circuit boards that contain a number of 
components, including a video controller chip, memory chips, logic chips, 
capacitors and resistors.  The video controller chip, which regulates the 
information that is displayed on the PC monitor, and the memory chip, which 
stores graphics information for display, are the most important components in 
determining the functions and manufacturing cost of a multimedia accelerator. 
The Company's other multimedia subsystem products generally contain 
components similar to those found on an STB multimedia accelerator but with 
different types of controller chips.

    The Company purchases memory chips from a number of manufacturers, 
including Hyundai, Mosel/Vitelic, NEC, Toshiba, IBM and Samsung. Memory chips 
generally are less expensive if purchased directly from the manufacturer, but 
manufacturers sometimes do not produce sufficient quantities of memory chips 
to satisfy market demand.  In times of restricted supply of memory chips, 
manufacturers may allocate the sale of their memory chips to customers based, 
among other factors, upon purchase volumes and the customer's 
creditworthiness.  The Company's ability to purchase from distributors, and 
possibly on the spot market, provides an alternative, but more costly, source 

                                      -10- 
<PAGE>

of supply if the Company cannot obtain necessary supplies from memory chip 
manufacturers.  See "--Risk Factors--Dependence on Suppliers."

    The Company purchases controller chips directly from a number of suppliers,
including S3, Cirrus Logic, Tseng Labs, Brooktree, SGS Thompson, Advanced Micro
Devices and Zoran.  These controller chips typically include related software
drivers, which the Company's software engineers often enhance for use in STB
products.  In addition to controller chips and the related software drivers,
several other components that are used in the Company's products are obtained
from single or limited sources.  The Company has no guaranteed supply
arrangements with any of its suppliers, and there can be no assurance that
current suppliers will be able to meet its requirements.  While the Company
believes that with respect to its single and limited source components it could
obtain similar products from other sources, it likely would be required to pay
significantly more for such products, alter product designs to use alternative
products or reduce or delay its production of the related products.  As a result
of delays in the delivery of components, lack of available components or the
lack of compatible software drivers from component vendors, the Company has in
the past experienced difficulty in meeting its own scheduled shipment dates to
customers, and such difficulties could recur.  See "--Risk Factors--Dependence
on Suppliers."

    The Company's unit component costs tend to be volatile, and a significant
increase or decrease in unit component costs may have a significant effect on
the Company's results of operations.  The Company may experience component cost
increases in the future, which could have a negative effect upon gross profit
margins and gross profits.  See "--Risk Factors--Dependence on Suppliers" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Results of Operations."

MANUFACTURING

    STB considers its ability to manufacture high quality products at a low
cost to be critical to its competitiveness.  STB began manufacturing at its
facility in Juarez, Mexico in 1988 and presently conducts substantially all of
its manufacturing operations at this ISO 9002 certified facility.  STB believes
that by operating its own manufacturing facility the Company has a competitive
advantage in terms of its ability to respond quickly to changing customer needs
and to control product quality.  The Company's manufacturing facility is located
in Juarez, Mexico to benefit from low labor and shipping costs, as well as
proximity to the Company's headquarters in Richardson, Texas.  The Company has
increased its monthly manufacturing capacity in Mexico from approximately
120,000 boards at the beginning of fiscal 1995 to approximately 400,000 boards
as of the end of fiscal 1996, depending on product mix.  This increase in
manufacturing capacity has been achieved primarily through the addition of new
high-volume surface-mount technology ("SMT") equipment, as well as through
upgrading existing equipment.  The Company believes that the addition of this
equipment has increased not only its manufacturing capacity but also the speed
and efficiency of its manufacturing operations.  With this additional equipment,
the Company believes its manufacturing capacity is sufficient for its current
level of operations.  

                                      -11- 
<PAGE>

Nevertheless, the Company recently entered into a lease for a larger facility 
near its present manufacturing facility, which should enable the Company to 
significantly increase its manufacturing capacity.  See "Properties," "--Risk 
Factors--Management of Growth" and "--Risk Factors--Single Manufacturing
Facility."

    The Company emphasizes a comprehensive quality control program at each step
in the manufacturing process.  The manufacturing process involves both automated
and manual placement and soldering of components on the circuit board.  After
final assembly is completed, each product unit undergoes an elevated temperature
burn-in, a process simulating a PC environment in which the product is placed in
an oven and connected to an electrical source for several hours.  After each
product has been burned-in, it is placed through a series of diagnostic tests to
detect defects.  The Company believes its comprehensive testing procedures
significantly contribute to its ability to satisfy its customers' stringent
product performance and reliability requirements.  The Company offers a limited
warranty ranging from 15 to 39 months for products sold to OEMs, a two-year
limited warranty on its specialized technology products and a limited lifetime
warranty on products sold to commercial customers.

    While the Company conducts substantially all of its manufacturing
operations at its facility in Juarez, Mexico, it maintains a smaller facility at
its Richardson, Texas headquarters for the development and testing of prototypes
and the first-run testing of new products.  The Company also maintains a
separate facility in Richardson, Texas for technical support and product repair.
In addition, the Company burns-in and functionally tests a small portion of its
products assembled in Mexico at its Richardson, Texas facilities.

    STB provides contract assembly services for third parties, providing
incremental gross profit and contributing to the absorption of overhead by
increasing utilization of manufacturing capacity.  Revenues from these assembly
services constituted approximately 2% of the Company's net sales for fiscal
1996.

SALES AND MARKETING

    SALES.  The Company presently sells its products in North America, most
countries in Europe and certain countries in the Pacific Rim.  United States
sales accounted for approximately 80% of the Company's net sales in fiscal 1996.

    The Company organizes its Richardson, Texas-based North American sales
force on the basis of its three sales channels.  The OEM sales force coordinates
the efforts of the Company's independent sales representatives and provides
direct sales coverage of selected OEMs.  The commercial market sales force
focuses on marketing and sales to retailers, distributors and direct mail
companies.  The specialized technology sales force coordinates its efforts with
the Company's engineering staff to create interest among prospects and customers
and to determine product features.

    The Company's North American sales force generally operates in tandem with
the Company's independent sales representative network.  These sales
representatives typically 

                                      -12- 
<PAGE>

are retained based on relationships they have with potential customers.  The 
Company believes that the services of independent sales representatives are 
important to obtaining and maintaining relationships with certain OEM and 
commercial customers.  The Company's independent sales representatives 
generally do not sell products competitive with those products that they 
handle for the Company.  The Company generally does not utilize independent 
sales representatives for its specialized technology products.

    The Company's European sales force, which is headquartered in London, is
responsible for OEM, commercial and specialized technology product sales in the
region.  The European sales force has more direct sales coverage responsibility
than the North American sales force because STB employs fewer European
independent sales representatives.  The Company's marketing and sales efforts
for countries outside of North America and Europe are coordinated from STB's
Richardson, Texas offices.

    The Company's net sales to OEMs, the commercial market and specialized 
technology customers represented approximately 81%, 11% and 6% of the 
Company's total net sales in fiscal 1996.  The Company's top three customers 
accounted for approximately 60% of net sales during fiscal 1996, and net 
sales to Gateway 2000 accounted for approximately 47% of the Company's net 
sales for the fiscal year. The Company recently has increased its marketing 
efforts in the commercial market.  The Company believes that its recent 
increase in commercial channel sales is attributable to these increased 
efforts.  The Company sells products to the commercial market through 
specialty retailers, such as CompUSA, Best Buy and Computer City, and to 
commercial distributors, such as Tech Data, Ingram Micro and Avnet.  The 
Company sells its specialized technology products primarily to resellers and 
corporate customers in the financial services, hospitality, factory 
automation, transportation and emergency response industries, which include 
customers such as Reuters and Citibank.

    The Company generally allows returns in the form of stock rotations only of
products sold through the commercial channel.  The Company's current stock
rotation policies typically permit a commercial channel customer to return
approximately 10% of products purchased from STB within the previous 90 days if
it places an order for other STB products of equal or greater value.  The
Company usually is able to resell returned products.  In addition, the Company
typically provides price protection to commercial channel customers in the form
of credits for price reductions on products remaining in customer inventories. 
See "Management's Discussion and Analysis of Financial Condition and Results of
Operation--Overview" and "--Risk Factors--Stock Rotation and Price Protection
Risks."

    The Company currently sells all its products at prices denominated in U.S.
dollars, but expects to sell its products in other currencies in the future,
thereby increasing its currency exposure risk.  Additionally, a substantial
portion of the Company's manufacturing labor costs are incurred in Mexican
pesos.  See "--Risk Factors--International Operations."

    MARKETING.  STB promotes its products to OEM customers and specialized
technology customers primarily through the efforts of the Company's sales force
and sales 

                                      -13- 
<PAGE>

representatives.  The Company believes such direct promotion enables it to 
develop products that are more in line with customers' needs and with market 
trends.  The Company supplements these efforts through the promotion of its 
products at industry trade shows.  The Company's commercial channel marketing 
efforts include advertising in recognized industry trade magazines and 
cooperative promotional efforts with retailers and commercial distributors.

TECHNICAL SUPPORT

    The Company believes that providing technical support to its customers is
essential to its ongoing competitiveness.  The Company maintains a toll-free
telephone line in the United States for technical support of its specialized
technology products and for its multimedia accelerator products and other
multimedia subsystem products sold in the commercial market.  The Company also
maintains electronic bulletin board systems in Richardson, Texas and London,
England to provide customers with new software drivers and utilities's that
update the capabilities of the Company's products.  The Company's technical
support group provides the software on disk at a nominal charge to customers who
are unable to obtain updates through the electronic bulletin board system.  The
Company's policy of providing updates allows products to maintain compatibility
with new versions of software and increases the useful life of these products. 
The Company also devotes significant efforts to the preparation of user manuals
and other product documentation that are informative and easy to understand.

COMPETITION

    The market for the Company's products is highly competitive.  The Company
competes with independent manufacturers of brand name multimedia subsystem
products, as well as contract manufacturers and certain OEM manufacturing
operations that produce multimedia subsystem products.  See "--Industry." The
Company's major competitors in the multimedia subsystem product market include
Diamond Multimedia, ATI Technologies, Number Nine Visual Technology, Matrox,
Miro, Elsa, Creative Labs, Ensoniq, CEI, Hauppauge and Aztec.  In the
specialized technology product market, the Company's major competitors include
ColorGraphics, Datapath and Miro.

    In addition to its major competitors, certain of the Company's suppliers
sell controller chips directly to OEMs for use in internally produced multimedia
accelerators, other multimedia subsystems or on motherboards.  If one or more of
the Company's significant OEM customers were to commence or increase internal
production of multimedia accelerators or other multimedia subsystems, the
Company's results of operations could be negatively impacted.  Furthermore, a
number of significant OEM s currently integrate video controller chips on the
motherboard of their PCs.  If one or more of the Company's significant OEM
customers begins to incorporate video controller chips or other controller chips
onto motherboards rather than using the Company's products, the Company's
results of operations could be negatively impacted.  See "--Risk Factors--
Dependence on Multimedia Accelerator Market; Migration to Motherboard."

                                      -14- 
<PAGE>

    The Company competes in its markets on the basis of a number of factors,
including the compatibility, reliability, price and performance of its products,
its ability to reach the market quickly with new products, its ability to meet
customer delivery and reliability requirements, the quality of its technical
support and its ability to develop and maintain relationships with customers and
suppliers.  Many of the Company's competitors and potential competitors have
greater financial, marketing, manufacturing and technical resources than the
Company.  In addition, some of the Company's competitors manufacture their own
controller chips, which in certain circumstances may provide these competitors
with an advantage over the Company.  Furthermore, while the Company believes it
is the only supplier of brand name multimedia accelerators that produces its own
products, some of STB's competitors internally manufacture other multimedia
subsystem products, such as sound cards and TV tuner cards.  The rapid pace of
change in the Company's industry places a premium on factors that include the
knowledge and experience of a company's management, engineers and other
personnel and their ability to develop and improve products.  The Company has
substantially increased its engineering resources over the last year and
believes that its ability to continue adding new engineers to its staff in the
future will affect its competitiveness.  See "--Risk Factors--Dependence on Key
Personnel."

INTELLECTUAL PROPERTY

    The Company's success depends in part upon its proprietary technology,
consisting of both its software drivers and utilities and its hardware designs. 
The Company relies upon copyright, trademark and trade secret laws to protect
its proprietary technology.  The Company generally also enters into
nondisclosure agreements with persons to whom it reveals its proprietary
information, such as OEMs that the Company works with concerning future
products.  There can be no assurance that the Company's present protective
measures will be adequate to prevent misappropriation of its technology or
independent third party development of the same or similar technology.  Many
foreign jurisdictions offer less protection of intellectual property rights than
the United States, and there can be no assurance that the protection provided to
the Company's proprietary technology by the laws of the United States or foreign
jurisdictions will be sufficient to protect the Company's technology.  See
"--Risk Factors--Proprietary Technology." While the Company's competitive
position may be affected by its ability to protect its proprietary information,
the Company believes that the rapid pace of technological change in the
multimedia accelerator industry will cause other factors to be more significant
in maintaining the Company's competitive position.  These factors include the
technical expertise, knowledge and innovative skill of the Company's management
and technical personnel, name recognition, the timeliness and quality of support
services provided by the Company and its ability to rapidly develop, produce,
enhance and market innovative products.

    STB generally enters into nondisclosure agreements with suppliers of
components for its products in connection with discussions regarding forthcoming
features of those components.  The Company also commonly enters into licensing
agreements with suppliers of components that the Company desires to incorporate
into its products.

                                      -15- 
<PAGE>

    The Company has filed one United States patent application and a
corresponding international patent application under the Patent Cooperation
Treaty for an invention associated with the Company's MPEG-2 related products. 
The Company also has a United States trademark registration for the STB logo,
and owns common law trademark rights with respect to certain other trademarks.

    It is common in the computer industry for companies to assert intellectual
property infringement claims against other companies.  As a consequence, the
Company indemnifies some OEM customers in certain respects against intellectual
property claims relating to STB's products.  The Company presently is unaware of
any material intellectual property claims pending against it.  If an
intellectual property claim were brought against the Company and one of the
Company's products were found to be infringing upon the rights of others, the
Company could be required to pay infringement damages, pay licensing fees,
modify its products so that they are not infringing or discontinue offering
products that were found to be infringing, any of which could materially
adversely affect the Company and its results of operations.  In addition, the
assertion of such claims against one or more of the Company's vendors could
adversely affect the availability from those vendors of components used by the
Company.  See "--Risk Factors--Intellectual Property Infringement Claims."

GOVERNMENT REGULATIONS

    The Company's business is regulated by federal, state, local and foreign
authorities.  The products produced by the Company are subject to approval by
the FCC and the EEC to assure that they do not interfere with the frequencies of
other consumer electronics products.  The Company installs certain filter
circuitry on its products to prevent them from disturbing other frequencies in
compliance with FCC and EEC regulations.  To date, regulations applicable to the
Company's business have had no material effect on the Company's capital
expenditures, earnings or competitive position.  Although historically the
Company has not experienced material delays in obtaining FCC or EEC approval of
any of its products, relatively recent government budget constraints have caused
delays in obtaining approval of certain of the Company's products.  The Company
believes that any delay in obtaining approvals could, in turn, result in delays
in making certain shipments on a timely basis.  

    The Company's relationships with its employees at its Mexican manufacturing
facility are regulated by the Mexican Federal Labor Law, which contains detailed
provisions regarding minimum employment conditions and specifies rights that
must be provided to all employees in Mexico.  Other Mexican federal laws require
employers to make contributions to the Mexican Social Security System and to
establish and make regular contributions, in specified amounts, to individual
retirement savings and housing accounts at a commercial bank for all employees. 
In addition, Mexican federal law requires the payment of substantial severance
amounts in the event of the termination of a Mexican employee.  Although Mexican
laws governing employment relationships are extensive, aggregate labor costs at
the Company's Mexican facility are nevertheless significantly less than labor
costs would be at a similar facility in the United States.  There can be no
assurance, however, that these laws 

                                     -16- 
<PAGE>

will not be amended or supplemented in the future to increase the 
compensation required to be paid to Mexican employees or the costs of 
compliance with such laws or that any such change would not have a material 
adverse effect on the Company and its results of operations.

    The Company's Mexican manufacturing operations are subject to regulation by
various Mexican environmental agencies.  In order to ensure compliance, the
Company regularly monitors changes in Mexican environmental laws, and
representatives of environmental agencies periodically inspect the Company's
Mexican facility.

    The Company spent approximately $19,000 in order to comply with Mexican
environmental regulations in fiscal 1996 and anticipates that it will spend
approximately $35,000 in each of fiscal 1997 and 1998.

BACKLOG

    As of December 31, 1996, the Company's backlog was approximately $23.5
million, as compared to approximately $25.6 million at December 31, 1995.  The
Company includes in its backlog accepted purchase orders with respect to which a
delivery schedule has been specified for product shipment within 60 days.  The
Company's business is characterized by short-term order and shipment schedules,
and backlog tends to fluctuate substantially from month to month.  Generally,
orders constituting backlog are subject to changes in delivery schedule or to
cancellation at the option of the purchaser.  The Company's agreements with its
customers typically specify penalties for cancellation of orders within 60 days
prior to shipment.  Other factors, including the Company's inability to obtain
components in sufficient quantities, may result in delays in shipment or
cancellation of orders included in backlog.  See "--Risk Factors--Dependence on
Suppliers." Therefore, although backlog is useful for scheduling production,
backlog as of any particular date should not be considered a reliable measure of
sales for the current or any future period.

EMPLOYEES

    As of December 31, 1996, the Company employed 1,551 individuals, of whom
1,297 were employed in operations, 67 in engineering, 60 in sales and marketing
and 127 in administration and finance.  Included in the foregoing figures are
1,310 employees in Mexico.  Competition for personnel in the PC industry is
intense.  The Company believe's that its future success will depend in part on
its ability to continue to attract and retain highly skilled technical,
marketing and management personnel.  None of the Company's employees is
represented by a labor union or is subject to a collective bargaining agreement.
The Company believes that its relations with its employees are good.  See
"--Government Regulations."



                                     -17- 
<PAGE>

SEASONALITY

    The Company's quarterly operating results vary significantly depending on
factors such as the timing of large customer orders, timing of new product
introductions, adequacy of component supply, changes in component costs,
variations in the Company's product mix, seasonal promotions by the Company and
its customers and competitive pricing pressures. Because the timing of these
factors may vary, the results of any particular quarter may not be indicative of
results for the full year or any future period.  In addition, the PC market
generally experiences weaker sales during the summer months.  Although the
Company has experienced sales growth for each year since fiscal 1990, there can
be no assurance that this growth will continue on a quarterly or annual basis.

RISK FACTORS

    This report contains certain forward-looking statements within the meaning
of the federal securities laws.  Actual results and the timing of certain events
could differ materially from those projected in or contemplated by the forward-
looking statements due to a number of factors, including, without limitation,
those set forth below and elsewhere in this report.  In addition to the other
information in this report, the following factors, which may affect the
Company's current position and future prospects, should be considered carefully
in evaluating the Company and an investment in the Common Stock of the Company.

    POTENTIAL FOR FLUCTUATING OPERATING RESULTS SEASONALITY.  The Company's
historical operating results have fluctuated significantly from period to period
and will likely fluctuate in the future.  Fluctuations result from a wide
variety of factors, including the timing and availability of components, changes
in product mix and pricing, the timing of customer orders, new product
developments or introductions, production interruptions, product reviews and
other media coverage, changes in sales channel mix and product returns or price
protection claims from customers.  Many of these factors are beyond the control
of the Company.  The volume and timing of orders received during a quarter are
difficult to forecast.  Customers generally order on an as-needed basis. 
Consequently, the Company historically has operated with a relatively small
backlog.  Moreover, as sometimes occurs in the PC industry, a disproportionate
percentage of the Company's net sales in any quarter may be generated in the
last month of a quarter.  As a result, a shortfall in sales in any quarter as
compared to expectations may not be identifiable until the end of the quarter. 
The Company's gross profit margins are impacted by product sales cycles, sales
channel mix, product mix, pricing pressures, the availability and cost of
components from the Company's suppliers and general economic conditions.  The
Company's markets are characterized by intense ongoing competition and a trend
of declining average selling prices.  Accordingly, the Company's margins may
decline in the future from the levels experienced to date.  In addition, the
Company's margins may be adversely affected by shortages in the availability of
key components for the Company's products, as well as by fluctuations in the
value of certain foreign currencies.  The Company's quarterly results are also
subject to seasonal fluctuations, with generally weaker fiscal third quarter
results.  See "Management's 

                                     -18- 
<PAGE>

Discussion and Analysis of Financial Condition and Results of Operations-
Selected Quarterly Operating Results" and "--Seasonality."

    DEPENDENCE ON SUPPLIERS.  Several components used in the Company's products
are obtained from single or limited sources and, in instances in which component
manufacturers do not allocate a sufficient supply of components to meet the
Company's needs, the Company must obtain such components from distributors or on
the spot market at a higher cost.  The Company has no guaranteed supply
arrangements with any of its suppliers, and there can be no assurance that
current suppliers will be able to meet its requirements.  The Company believes
that with respect to its single and limited source components, it could obtain
similar components from other sources but likely would be required to pay
significantly more for such products, alter product designs to use alternative
components (which would cause significant delays) or reduce its production of
the related multimedia accelerators.  As a result of delays in the delivery of
components or lack of available components, the Company in the past has
experienced difficulty in meeting certain product shipment dates to customers,
which in some instances has resulted in a loss of business.  In addition,
software drivers, which are essential to product performance, are included with
some of these single and limited source components.  In the past, the Company
has experienced delays in the delivery of its products due to the inadequacy or
the incompatibility of software drivers provided by component suppliers or
developed internally.  It is likely that delays in delivery of components,
shortages of components and problems with software drivers will continue to
occur in the future, and such delays or problems would materially adversely
affect the Company and its results of operations.  Additionally, in its attempt
to counter actual or perceived component shortages, the Company may overpurchase
certain components, resulting in excess inventory or, in the event of inventory
obsolescence or a decline in the market value of such inventory, causing
inventory write-offs against the Company's operating results.

    Significant increases in the prices of components, such as graphics
controller chips or memory chips, occur from time to time, and often the Company
is not able to quickly adjust the price of its products accordingly.  Occasional
worldwide shortages of DRAM and other memory and controller chips and
international tariff disputes have resulted in substantial component cost
increases in the past that have materially adversely affected the Company and
its results of operations.

    The Company relies upon outside suppliers to continue to develop, introduce
and manufacture in sufficient volumes controller chips, memory chips and other
components.  Moreover, the technology of these components must compare favorably
in terms of functionality, features and price with the offerings of other
manufacturers, including competitors of the Company that have internally
developed computer chips or manufacturing expertise.  The Company's dependence
on single and limited source suppliers, and the risks associated with any delay
or shortfall in supply, are exacerbated by the short life cycles which
characterize multimedia subsystem products.  See "--Suppliers."

                                     -19- 
<PAGE>

    DEPENDENCE ON MULTIMEDIA ACCELERATOR MARKET; MIGRATION TO MOTHERBOARDS.  A
substantial portion of the Company's net sales is derived from the sale of
multimedia accelerators.  According to Jon Peddie Associates, approximately 66%
of all graphics controller chips manufactured in the 12-month period ended
September 30, 1996, were incorporated onto multimedia accelerators, and
approximately 34% were incorporated onto motherboards.  Multimedia accelerators
generally are used in higher-end PCs offering the latest technology and
performance features.  However, as a given functionality becomes technologically
stable and widely accepted by PC users, it typically migrates to the PC
motherboard.  The Company anticipates that such migration could occur with
respect to the functionality provided by certain of its current products.  In
this regard, Intel Corporation's MMX instruction set and the expanded operating
systems provided by Microsoft Corporation incorporate several functions that
traditionally have been performed by multimedia accelerators.  In addition,
single chip solutions are currently available that provide 16-bit sound
functionality for implementation directly onto PC motherboards.  As a result of
this tendency of technology to migrate to the PC motherboard, the Company's
success is largely dependent on its ability to continue to develop products that
incorporate new and rapidly evolving technologies that manufacturers have not
yet fully incorporated onto PC motherboards.  While the Company believes that a
market will continue to exist for add-in subsystems that provide advanced
functionalities and offer flexibility in systems configuration, there can be no
assurance that the incorporation of new functionalities onto PC motherboards
will not adversely affect the market for the Company's products.  An increase in
the number or percentage of PCs that incorporate graphics circuitry on the
motherboard at the expense of add-in multimedia accelerators, an increase in the
number or percentage of multimedia accelerators manufactured internally by OEMs
or a decrease in PC sales volumes would effectively shrink the market for the
Company's products and could materially adversely effect the Company's business.
See "--Industry."

    TECHNOLOGICAL CHANGE AND NEW PRODUCTS.  The market for the Company's
products is characterized by short product life cycles, rapidly changing
technology, evolving industry standards and frequent introductions of new
products.  OEMs introduce new system configurations as often as twice a year,
and the life cycles of the Company's multimedia accelerators typically range
from 6 to 9 months (plus a few additional months of sales of certain of such
products in the commercial market).  If the Company does not successfully
introduce new products within a given product cycle, the Company's sales will be
adversely affected for that cycle and possibly for subsequent cycles.  Any such
failure could also impair the Company's brand name, reputation and relationships
with its OEM customers.  The Company's success depends upon market acceptance of
its existing products, its ability to enhance its existing products and its
ability to continually develop and introduce new products and features to meet
changing customer requirements.  Each new product cycle presents new
opportunities for current or prospective competitors of the Company to gain
market share.  The Company's competitors include manufacturers of products that
directly compete with the Company's products, as well as competitors that can
produce products that have a similar functionality to the Company's products. 
For instance, Intel Corporation has added new functionalities, such as MMX, to
its controller chips to enhance the power of the CPU of a PC to manage the
display features of a PC.  Similarly, Microsoft Corporation is 

                                     -20- 
<PAGE>

introducing new versions of its operating systems with features, such as 
Direct 3D, that increase the capability of its operating systems to control a 
PC's display features.  Moreover, because of the short product life cycles 
and the long lead times for many components used in the Company's products, 
the Company may not be able to quickly reduce its production or inventory 
levels in response to unexpected shortfalls in sales or, conversely, to 
increase production in response to unexpected demand.  There can be no 
assurance of the continued acceptance of the Company's existing products or 
that the Company will be successful in enhancing its existing products or 
identifying, developing, manufacturing or marketing new products.  Delays in 
developing new products or enhancements or the failure of such products or 
enhancements to gain market acceptance would materially adversely affect the 
Company and its results of operations.

    Sales of individual products and product lines are typically characterized
by declines in volumes, pricing and margins toward the end of the product's life
cycle, the precise timing of which may be difficult to predict.  As new products
are planned and introduced, the Company attempts to monitor closely the
inventory of older products (and older components) and to phase out their
manufacture in a controlled manner.  Nevertheless, the Company could experience
unexpected reductions in sales of older generation products as customers
anticipate new products.  These reductions could give rise to additional charges
for obsolete or excess inventory, returns of older generation products by
retailers or commercial distributors or substantial price protection claims.  To
the extent that the Company is unsuccessful in managing product transitions, its
business and operating results would be materially adversely affected.

    DEPENDENCE ON KEY CUSTOMERS AND DESKTOP PC MARKET.  The Company's top three
customers accounted for 55.5% and 59.7% of net sales during fiscal 1995 and
fiscal 1996, respectively.  In recent years, Gateway 2000 has been the Company's
top customer, although STB's other significant customers have changed from
period to period.  See "--Sales and Marketing--Sales."  The loss or reduction of
the business of Gateway 2000 or one or more of the Company's other major
customers would have a material adverse effect on the Company and its results of
operations.  In addition, the Company's future success will depend significantly
upon the success of its customers, particularly its OEM customers.  The Company
has no long-term commitments or contracts with its customers.  While a number of
the Company's OEM customers have achieved strong PC sales in recent periods,
such customers, and the PC industry in general are subject to dynamic
competitive conditions.  In particular, the loss of sales by the Company's OEM
customers to other OEMs or a decrease in the popularity of desktop PCs that
incorporate the Company's products would adversely affect the Company and its
results of operations.

    CHANGE IN PRODUCT OR SALES CHANNEL MIX.  The Company offers two broad
categories of products:  multimedia subsystem products that are sold to OEMs and
the commercial market and specialized technology products that are sold to
resellers and corporate customers in certain industries.  Sales of multimedia
accelerators to OEMs, which currently account for substantially all of the
Company's OEM multimedia subsystem product sales, are characterized by
relatively high unit volumes and relatively low gross profit margins.  The

                                     -21- 
<PAGE>

Company began shipping significant unit volumes of certain new multimedia
subsystem products (i.e., other than multimedia accelerators) to OEM customers
in the third quarter of its 1996 fiscal year but is not yet in a position to
forecast the effect that the sale of these new products will have on it results
of operations.  Sales to the commercial market are characterized by modest
volumes and moderate gross profit margins.  Sales of the Company's specialized
technology products are characterized by relatively low unit volumes and
relatively high gross profit margins.  The Company's sales to OEMs, the
commercial market and specialized technology products customers represented
approximately 81%, 11% and 6% of the Company's total net sales during fiscal
1996.  In the event the Company experiences a shift in the type of products that
it is able to sell or a shift in the sales channels into which such products are
sold, its results of operations could be materially adversely affected.  In
particular, a decrease in sales of multimedia subsystem products to the
commercial market or in sales of specialized technology products could result in
a disproportionately greater decrease in the Company's gross profit.  See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview" and "--Products."

    ENTRY INTO NEW PRODUCT MARKETS.  While the Company's business historically
has focused on the design, manufacture and sale of multimedia accelerators, in
the third quarter of fiscal 1996 the Company first began shipping significant
unit volumes of new multimedia subsystem products.  See "--Products."  There are
numerous risks inherent in the entry into new product markets, including the
reallocation of limited management, engineering and capital resources to
unproven product ventures, a greater likelihood for encountering technical
problems and a greater likelihood that the market will not accept the Company's
new products or the PCs into which they are incorporated.  The failure of one or
more of such products, or any negative effects upon the Company's core
multimedia accelerator business, could materially adversely affect the Company
and its results of operations.

    PRICE PROTECTION AND STOCK ROTATION RISKS.  As is common practice in its
industry, the Company's arrangements with its commercial customers generally
allow customers, in the event of a price decrease, credit equal to the
difference between the price originally paid and the new decreased price on
units in the customers' inventories on the date of the price decrease.  In
addition, commercial customers generally have the right to return slow-moving or
excess inventory for product credit up to an agreed upon percentage of shipments
within specified time periods.  While the Company establishes reserves to cover
these practices, there can be no assurance that these reserves will be
sufficient or that any future price protection claims or returns will not have a
material adverse effect on the Company and its results of operations,
particularly because results are heavily dependent on products for which the
Company has little or no operating history.  See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview" and
"--Sales and Marketing--Sales."

    COMPETITION.  The markets for the Company's products are highly
competitive.  The Company has competitors specifically dedicated to the
multimedia subsystem market or specific segments within that market.  Companies
in related markets also offer products with 

                                     -22- 
<PAGE>

functions similar to the Company's products.  For example, the Company's 
suppliers sell video graphics controller chips directly to OEMs for use in 
internally produced multimedia accelerators or on motherboards.  Increased 
sales of competitive products could result in price reductions by the Company 
or loss of its market share, which would materially adversely affect the 
Company and its results of operations.  In addition, the Company's OEM 
customers could commence or increase internal production of multimedia 
accelerators or other multimedia subsystems.  Furthermore, the Company's 
markets are expected to become increasingly competitive as multimedia 
functions continue to converge and companies that previously supplied 
products providing distinct functions (for example, companies in the sound 
board and telephony markets) emerge as competitors across broader product 
categories.  The Company also anticipates that as the breadth of its product 
lines expand, the markets in which it competes and the number of competitors 
against which it competes also will expand.  There can be no assurance that 
the Company will be able to continue to compete successfully in its markets 
or that it will be able to compete successfully against current and new 
competition as these markets continue to evolve.  Many of the Company's 
current and potential competitors design and manufacture some of their own 
product components.  While the Company believes that its controller chip 
independence enables it to select from among the most advanced components 
available, there may be instances in which these internally developed 
components have better features and performance characteristics than those 
available from third party vendors.  Furthermore, the Company believes that 
certain of its current and potential competitors compete largely on the basis 
of price, which may result in significant price competition, lower margins 
for the Company's products or otherwise affect the market for the Company's 
products.  Certain of the Company's current and potential competitors also 
are located in foreign jurisdictions that may have lower labor costs, impose 
significantly lower taxes than the United States or levy duties on product 
imports.  Many of the Company's current and potential competitors have 
greater financial, marketing, manufacturing and technological resources than 
the Company.  There can be no assurance that the Company will be able to 
continue to compete successfully with its existing competitors or with new 
competitors.  See "--Competition."

    DEPENDENCE ON KEY PERSONNEL.  The Company's success depends upon the
services of its management, sales, marketing and engineering personnel.  While
the Company has entered into employment agreements with a number of such
personnel, the loss of the services of one or more of such personnel could have
a material adverse effect on the Company and its results of operations.  See
"Executive Compensation--Executive Compensation and Other Matters--Employment
Agreements."  The success of the Company will depend, in part, on its ability to
retain its key management, sales, marketing and engineering personnel and to
attract other personnel to satisfy the Company's current and future needs. 
There is substantial competition for such personnel in the computer industry,
and the inability to retain key personnel or to attract additional personnel to
satisfy the Company's needs could have a material adverse effect on the Company
and its results of operations.

                                     -23- 

<PAGE>

    MANAGEMENT OF GROWTH.  The Company has experienced rapid growth, and future
growth may require larger quantities of components, additional marketing, sales
and engineering personnel, additional manufacturing equipment and improved
operating, financial and administrative controls, any of which could require
significant additional capital expenditures.  The Company may experience
difficulty securing adequate quantities of components or additional
manufacturing equipment, attracting or retaining skilled personnel, improving
infrastructure and information systems or overcoming other difficulties
associated with growth.  In addition, gross profit margins derived from initial
orders with new OEM customers are frequently lower than the Company's typical
gross profit margins.  There can be no assurance that the Company will be able
to manage any future growth successfully or that difficulties in doing so will
not have a material adverse effect on the Company and its results of operations.

    SINGLE MANUFACTURING FACILITY.  The Company's primary manufacturing
facility is located in Juarez, Mexico.  Since the Company is substantially
dependent on this single manufacturing facility, a disruption of the Company's
manufacturing operations at this facility would have a material adverse effect
on the Company and its results of operations.  Such disruption could result from
various factors, including a labor dispute, human error, governmental or
political risks or a natural disaster such as an earthquake, tornado, fire or
flood.  In addition, in comparison to those of its competitors that do not
maintain their own manufacturing facilities, the Company incurs higher relative
fixed overhead and labor costs as a result of operating its own manufacturing
facility.  Any failure to generate the level of product revenues needed to
absorb these overhead and labor costs would have a material adverse effect on
the Company and its results of operations.  See "--Manufacturing."

    INTERNATIONAL OPERATIONS.  A substantial portion of the Company's
manufacturing operations are carried out in Mexico.  The Company's export sales
(which primarily consist of European sales) were approximately 20% of net sales
in fiscal 1996.  The Company is subject to the general risks of conducting
business internationally, including unexpected changes in regulatory
requirements, fluctuations in currency exchange rates, delays resulting from
difficulty in obtaining export licenses for certain technology, state imposed
restrictions on the repatriation of funds, tariffs and other barriers and
restrictions and the burdens of complying with a variety of foreign laws.  In
addition, the Company is subject to general geopolitical risks, such as
political instability and changes in diplomatic and trade relationships, in
connection with its international operations.  Although the Company has not to
date experienced any material adverse effect on its operations as a result of
such factors, there can be no assurance that such factors will not materially
adversely impact the Company and its results of operations in the future or
require the Company to modify its current business practices.  The Company
currently sells its products at prices denominated in U.S. dollars, and an
increase in the value of the U.S. dollar relative to foreign currencies could
make the Company's products more expensive and potentially less competitive in
foreign markets.  The Company expects to sell a portion of its products in the
future at prices denominated in other currencies and will therefore increase its
currency exposure risk.  In addition, a substantial portion of the Company's
manufacturing labor costs are paid in Mexican pesos, so any decrease in the
value of the U.S. dollar relative to the Mexican peso 

                                     -24- 
<PAGE>

could increase the Company's manufacturing costs and adversely affect the 
Company and its results of operations.  See "--Manufacturing" and "--Sales 
and Marketing."

    DEPENDENCE ON SALES REPRESENTATIVES AND DISTRIBUTORS.  The Company markets
and distributes a significant portion of its products in the United States to
OEM customers and commercial channel customers through independent sales
representatives and distributors.  The Company's sales representatives work in
tandem with the Company's sales force and are organized by customer account. 
The services of an independent sales representative are important in obtaining
and maintaining a customer relationship.  The Company's distributors resell the
Company's products to retailers and other resellers in the commercial market.
The Company's agreements with its sales representatives and distributors are
cancelable upon 30-days' notice.  There can be no assurance that future sales by
sales representatives or distributors will continue at present levels.  The loss
of one or more sales representatives or distributors, or the decision by one or
more distributors to reduce the number of the Company's products offered or to
carry the product lines of the Company's competitors, could have a material
adverse effect on the Company and its results of operations.  See "--Sales and
Marketing."

    PROPRIETARY TECHNOLOGY.  The Company's success partially depends upon its
proprietary technology, consisting of its software drivers and utilities and, to
a lesser extent, its hardware designs.  The Company relies upon copyright and
trade secret laws and agreements with its suppliers and customers to protect its
proprietary technology.  There can be no assurance that the Company's present
protective measures will be adequate to prevent misappropriation of its
technology or independent third party development of the same or similar
technology.  Many foreign jurisdictions offer less protection of intellectual
property rights than the United States, and there can be no assurance that the
protection provided to the Company's proprietary technology by the laws of the
United States or foreign jurisdictions will be sufficient to protect the
Company's technology.  See "--Intellectual Property."

    The Company has and may in the future find it necessary or desirable to
procure licenses from third parties relating to current or future products or
technologies, but there can be no assurance that the Company will continue to be
able to obtain such licenses or other rights or, if it is able to obtain them,
that it will be able to do so on commercially acceptable terms.  The Company
could be placed at a disadvantage if its competitors obtain licenses with lower
royalty fee payments or other terms more favorable than those received by the
Company.  If the Company or its suppliers were unable to obtain licenses
relating to current or future products or technologies, the Company could be
forced to market products without certain technological features.  The Company's
inability to obtain licenses necessary to use certain technology or its
inability to obtain such licenses on competitive terms could have a material
adverse effect on the Company and its results of operations.  See
"--Intellectual Property."

    INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS.  It is common in the computer
industry for companies to assert intellectual property infringement claims
against other companies.  As 

                                     -25- 
<PAGE>

a consequence, the Company indemnifies some OEM customers in certain respects 
against intellectual property claims relating to its products.  If an 
intellectual property claim were to be brought against the Company and the 
Company were found to be infringing upon the rights of others, the Company 
could be required to pay infringement damages, pay licensing fees, modify its 
products so that they are not infringing or discontinue offering products 
that were found to be infringing, any of which could materially adversely 
affect the Company and its results of operations.

    If an intellectual property claim were to be brought against one or more of
the Company's suppliers and the supplier were found to be infringing upon the
rights of others, the supplier could be enjoined from further shipments of its
products to the Company, which could materially adversely affect the Company and
its results of operations.

    STOCK MARKET VOLATILITY.  There has been significant volatility in the
market price of the Company's Common Stock, as well as in the market price of
securities of technology-based companies.  Factors such as announcements of new
products by the Company or its competitors, variations in the Company's
quarterly operating results or general economic or stock market conditions
unrelated to the Company's operating performance may have a significant impact
on the market price of the Common Stock.  See "Market for Registrant's Common
Equity and Related Stockholder Matters."

    SHARES ELIGIBLE FOR FUTURE SALE.  The Company currently has outstanding 
4,521,394 shares of Common Stock, of which 3,063,051 shares are currently freely
tradeable.  The executive officers and directors and the Founding Shareholders 
of the Company, who beneficially own 1,535,343 outstanding shares of Common 
Stock, are free to sell the shares beneficially owned by them, subject to 
compliance with the Securities Act of 1933, as amended (the "Securities Act"), 
including Rule 144 promulgated thereunder, and the terms of a Right of First 
Refusal Agreement, to which certain of such shares are subject.  A substantial 
portion of the shares held by such beneficial owners may be sold into the public
market effectively free of any significant restrictions.  See "Certain 
Relationships and Related Transactions--Right of First Refusal." No prediction 
can be made as to the effect, if any, that market sales of the above shares or 
the availability of such shares for future sale will have on the market price of
shares of Common Stock prevailing from time to time. Future sales of substantial
amounts of Common Stock by existing shareholders could adversely affect the 
prevailing market price of the Common Stock and the Company's ability to raise 
additional capital.

ITEM 2.  PROPERTIES.

    The Company leases a 56,100 square foot facility in Richardson, Texas
(16,200 square feet of which are subleased to the Company pursuant to a sublease
that commenced November 1, 1996 and expires October 31, 1998) that serves as its
headquarters and as a site for product development and testing.  The Company
also leases an additional 

                                     -26- 
<PAGE>

approximately 11,700 square foot facility that is near its headquarters in 
Richardson, Texas and is used for technical support and product repair.  The 
foregoing leases both expire in December 1998.  The Company currently leases 
a 79,100 square foot manufacturing facility in Juarez, Mexico, and recently 
entered into a lease for an approximately 125,000 square foot manufacturing 
facility on an adjacent site that would provide increased space and improved 
layout for manufacturing operations, as well as options to acquire additional 
space.  The term of the new lease is ten years from the date that the new 
facility is available for the Company's occupancy (plus four optional renewal 
periods of five years each).  The Company has negotiated an extension of its 
current lease covering the 79,100 square foot Juarez facility to cover the 
period through the occupancy date of its new facility.  See 
"Business--Manufacturing."

    Additionally, the Company leases 6,900 square feet of storage space in El
Paso, Texas, under a lease expiring in December 1997, a software development
office in Houston, Texas under a lease expiring in May 1999, a software
development office in Eugene, Oregon under a lease on a month-to-month basis,
and sales offices in London and Paris under leases expiring in October 1998 and
December 2004, respectively.  The Company also maintains a Munich sales office
under a lease on a month-to-month basis.  The Company also maintains product
inventories in Austin, Texas and Shannon, Ireland under bonded warehouse
arrangements in order to permit the timely delivery of certain products to
nearby customers.  The Company has made commitments to open an engineering 
design center in Ireland in fiscal 1997.  The Company believes that its existing
facilities are well maintained and in good operating condition and, together 
with those facilities that it plans to open in fiscal 1997, are adequate for its
present and anticipated levels of operations.

ITEM 3.  LEGAL PROCEEDINGS.

    The Company is a party from time to time to certain legal proceedings
arising in the ordinary course of its business.  Although the amount of any
liability that could arise with respect to these proceedings cannot be predicted
accurately, in the opinion of the Company any liability that might result from
such claims will not have a material adverse effect on the financial position of
the Company.

    A plaintiff class action denoted TEICH V. STB SYSTEM, INC., ET. AL,
(Citation No. 95-9681-G) was filed on September 6, 1995 in the Texas State
District Court of Dallas County against the Company and certain of its officers
and directors.  The complaint alleged that the Registration Statement for the
Company's initial public offering, which was declared effective on February 14,
1995, contained false and misleading statements of material facts and omitted to
state material facts.  The complaint asserted claims under Section 11 and 12(2)
of the Securities Act of 1933 and Section 581-33 of the Texas Securities Act on
behalf of a purported class of persons who purchased or otherwise acquired the
Company's Common Stock during the period February 14, 1995 through May 25, 1995.
The complaint sought unspecified damages.  The defendants deny the allegations
in the complaint and have defended this action vigorously.  In August 1996, the
trial court dismissed the complaint for want of prosecution.  The deadline for
the plaintiffs to file a motion with the trial court to 

                                     -27- 
<PAGE>

reinstate the complaint has passed.  The plaintiffs have an additional period 
within which to appeal this dismissal.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 

    No matter was submitted to a vote of the Company's shareholders during the
fourth quarter of fiscal 1996.


                                       PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

    The Company's Common Stock has traded on the NASDAQ National Market under
the symbol "STBI" since February 14, 1995.  At January 27, 1997, there were
approximately 35 record holders of the Company's Common Stock, although the
Company believes that the number of beneficial owners of its Common Stock is
substantially greater.  The following table sets forth the high and low sale
prices of the Company's Common Stock for the quarters indicated, as reported by
the NASDAQ National Market:

                                                            HIGH       LOW   
                                                           -------   ------- 
    Fiscal 1996
         Fourth quarter................................... $ 25.88   $ 12.25 
         Third quarter.................................... $ 18.50   $ 10.25 
         Second quarter................................... $ 11.25   $  8.13 
         First quarter.................................... $ 12.25   $  7.38 
    Fiscal 1995
         Fourth quarter................................... $ 13.38   $  7.75 
         Third quarter.................................... $ 11.75   $  6.75 
         Second quarter (from February 14, 1995).......... $ 15.50   $ 10.50 

    The Company intends to retain any future earnings for use in its business 
and does not intend to pay cash dividends in the foreseeable future.  The 
payment of future dividends, if any, will be at the discretion of the 
Company's Board of Directors and will depend, among other things, upon future 
earnings, operations, capital requirements, restrictions in future financing 
agreements, the general financial condition of the Company and general 
business conditions. The Company's Revolving Credit Facility permits the 
Company to pay dividends of up to 25% of its annual net income.  See 
"Management's Discussion and Analysis of financial Conditions and Results of 
Operations--Liquidity and Capital Resources."

    Prior to its initial public offering, the Company declared a dividend 
(the "S Corporation Distribution") in an amount equal to its undistributed S 
corporation earnings through the date immediately prior to the completion of 
the initial public offering, or approximately $4.2 million (the "Undistributed 
S Corporation Earnings"), approximately one-

                                     -28- 
<PAGE>

half of which was paid in cash to William E. Ogle, Mark S. Sims and William D.
Balthaser, Jr. (the "Founding Shareholders") out of the proceeds of the 
Company's initial public offering. The remaining half of the S Corporation 
Distribution was distributed  to the Founding Shareholders in the form of 
promissory notes providing for 12 equal monthly payments of both principal and 
interest and bearing interest at 9%, the prime rate in effect on the date of 
issuance (the "Founding Shareholder Notes"). The Company paid $1,427,208 and 
$713,604 in fiscal 1995 and fiscal 1996, respectively, from cash generated from 
operations in connection with its obligations under the Founding Shareholder 
Notes.  The final payment on the remaining outstanding balance under the 
Founding Shareholder Notes was made in February 1996.

ITEM 6.  SELECTED FINANCIAL DATA. 

    This information is set forth under the caption "Selected Consolidated
Financial Data" for each of the five years in the period ended October 31, 1996,
of the Company's 1996 Annual Report to Shareholders, which portion of such
Annual Report is filed herein as Exhibit 13 and incorporated herein by
reference.  

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS.

    This information is set forth under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" of the Company's
1996 Annual Report to Shareholders, which portion of such Annual Report is filed
herein as Exhibit 13 and incorporated herein by reference.  

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

    The financial statements of the Company including the independent 
accountant's report thereon of the Company's 1996 Annual Report to 
Shareholders, which financial statements are filed herein as Exhibit 13, are 
incorporated herein by reference.  

ITEM 9.  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

    None.  


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

    The information set forth under the captions "Election of Directors" and
"Executive Officers of the Company" of the Company's definitive Proxy Statement
for the Company's 1997 Annual Meeting of Shareholders is incorporated herein by
reference.

                                     -29- 
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION.

    The information set forth under the caption "Executive Compensation and
Other Matters" of the Company's definitive Proxy Statement for the Company's
1997 Annual Meeting of Shareholders is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

    The information set forth under the caption "Outstanding Capital Stock and
Stock Ownership of Directors, Certain Executive Officers and Principal
Shareholders" of the Company's definitive Proxy Statement for the Company's 1997
Annual Meeting of Shareholders is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

    The information set forth under the caption "Certain Transactions" of the
Company's definitive Proxy Statement for the Company's 1997 Annual Meeting of
Shareholders is incorporated herein by reference.


                                       PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

    (a)  1.   The following financial statements are incorporated by reference
              from the Company's 1996 Annual Report to Shareholders, which
              financial statements are filed herein as Exhibit 13:

              Report of Independent Accountants.
              Consolidated Balance Sheets dated October 31, 1996 and 1995.
              Consolidated Statement of Operations for the three years ended
               October 31, 1996.
              Consolidated Statement of Changes in Shareholders' Equity for
               the three years ended October 31, 1996.
              Consolidated Statement of Cash Flows for the three years ended
               October 31, 1996.
              Notes to Consolidated Financial Statements.

                                     -30-
<PAGE>

         2.  Consolidated Financial Statement Schedule                  Page
                                                                         ----
              Report of Independent Accountants on
               Financial Statement Schedule.                              S-1

              Consolidated Valuation and Qualifying
               Accounts.                                                  S-2

              All other schedules for which provision is made in the applicable
              accounting regulation of the Securities & Exchange Commission are
              not required under the related instructions or are inapplicable
              and therefore have been omitted.

         3.   The following documents are filed or incorporated by reference
              as exhibits to this Report:

              2    Share Exchange Agreement dated December 16, 1994 by and among
                   the Company and the shareholders of STB Assembly, Inc.
                   (incorporated by reference to Exhibit 2 to the Company's
                   Registration Statement on Form S-1 (Registration No.
                   33-87612))

              3.1  Amended and Restated Articles of Incorporation of the Company
                   (incorporated by reference to Exhibit 3.1 to the Company's
                   Registration Statement on Form S-1 (Registration No.
                   33-87612))

              3.2  Amended and Restated Bylaws of the Company (incorporated by
                   reference to Exhibit 3.2 to the Company's Registration
                   Statement on Form S-1 (Registration No. 33-87612))

              4.1  Specimen of Common Stock Certificate (incorporated by
                   reference to Exhibit 4.1 to the Company's Registration
                   Statement on Form S-1 (Registration No. 33-87612))

              4.2  Amended and Restated Articles of Incorporation and Bylaws of
                   the Company (see Exhibits 3.1 and 3.2)

              4.3  Right of First Refusal Agreement dated December 16, 1994 by
                   and among the Company and Messrs. Ogle, Balthaser and Sims
                   (incorporated by reference to Exhibit 4.3 to the Company's
                   Registration Statement on Form S-1 (Registration No.
                   33-87612))

                                     -31-
<PAGE>
              10.1 Lease Agreement dated December 6, 1988 by and between STB de
                   Mexico S.A. de C.V. (formerly known as Industrias Fronterizas
                   de Chihuahua, S.A. de C.V.) (a subsidiary of the Company, as
                   lessee) and Complejo Industrial Fuentes, S.A. de C.V (as
                   lessor), including an Agreement for Modification dated
                   February 25, 1994 by and between the same parties
                   (incorporated by reference to Exhibit 10.1 to the Company's
                   Registration Statement on Form S-1 (Registration No.
                   33-87612))

              10.2 Lease Agreement, as amended, dated July 8, 1986 by and
                   between the Company (as lessee) and Central Park Associates,
                   Ltd. (as lessor) (incorporated by reference to Exhibit 10.2
                   to the Company's Registration Statement on Form S-1
                   (Registration No. 33-87612))

              10.3 Intentionally omitted.

              10.4 Loan and Security Agreement dated December 21, 1993 by and
                   between Sanwa Business Credit Corporation and STB Systems,
                   Inc. (incorporated by reference to Exhibit 10.4 to the
                   Company's Registration Statement on Form S-1 (Registration
                   No. 33-87612))

              10.5 First Amendment to Loan and Security Agreement dated October
                   14, 1994 by and between Sanwa Business Credit Corporation and
                   the Company (incorporated by reference to Exhibit 10.5 to the
                   Company's Registration Statement on Form S-1 (Registration
                   No. 33-87612))

              10.6 Second Amendment to Loan and Security Agreement dated
                   December 9, 1994 by and between Sanwa Business Credit
                   Corporation and the Company (incorporated by reference to
                   Exhibit 10.6 to the Company's Registration Statement on
                   Form S-1 (Registration No. 33-87612))

              10.7 Amended and Restated Support Agreements dated October 14,
                   1994 from each of Messrs. Ogle, Balthaser and Sims to Sanwa
                   Business Credit Corporation (incorporated by reference to
                   Exhibit 10.7 to the Company's Registration Statement on
                   Form S-1 (Registration No. 33-87612))

              10.8 Depository Account Agreement dated December 21, 1993 by and
                   among Sanwa Business Credit Corporation, Bank One, Texas,
                   N.A. and the Company (incorporated by reference to Exhibit
                   10.8 to the Company's Registration Statement on Form S-1
                   (Registration No. 33-87612))

                                     -32-
<PAGE>

              10.9  Trademark Security Agreement dated December 21, 1993 by and
                    between Sanwa Business Credit Corporation and the Company
                    (incorporated by reference to Exhibit 10.9 to the Company's
                    Registration Statement on Form S-1 (Registration No.
                    33-87612))

             10.10  Contingent Payment Agreement dated October 17, 1994 by and
                    between Sanwa Business Credit Corporation and the Company
                    (incorporated by reference to Exhibit 10.10 to the Company's
                    Registration Statement on Form S-1 (Registration No.
                    33-87612))

             10.11  Collateral Agency Agreement dated November 30, 1994 by and
                    among STB de Mexico, S.A. de C.V. (formerly known as
                    Industrias Fronterizas de Chihuahua, S.A. de C.V.), Sanwa
                    Business Credit Corporation and the Company (incorporated by
                    reference to Exhibit 10.11 to the Company's Registration
                    Statement on Form S-1 (Registration No. 33-87612))

            *10.12  Company's Stock Option Plan for Non-Employee Directors
                    (incorporated by reference to Exhibit 10.12 to the Company's
                    Registration Statement on Form S-1 (Registration No.
                    33-87612))

            *10.13  Company's 1995 Long Term Incentive Plan (incorporated by
                    reference to Exhibit 10.13 to the Company's Registration
                    Statement on Form S-1 (Registration No. 33-87612))

             10.14  Intentionally omitted.

             10.15  Tax Allocation and Indemnification Agreement dated December
                    16, 1994 by and among the Company and Messrs. Ogle,
                    Balthaser and Sims (incorporated by reference to Exhibit
                    10.15 to the Company's Registration Statement on Form S-1
                    (Registration No. 33-87612))

            *10.16  Founding Shareholder Note by and between the Company and
                    William E. Ogle (incorporated by reference to Exhibit 10.16
                    to the Company's Annual Report on Form 10-K for the fiscal
                    year ended October 1, 1995)

            *10.17  Agreements by and between Breedlove Wesneski & Co. (and one
                    of its affiliates) and the Company dated July 16, 1993,
                    April 6, 1994 and October 18, 1994 (incorporated by
                    reference to Exhibit 10.17 to the Company's Registration
                    Statement on Form S-1 (Registration No. 33-87612))

             10.18  Intentionally omitted.

             10.19  Intentionally omitted.

             10.20  Intentionally omitted.


                                     -33-
<PAGE>
             10.21  Agreement dated September 9, 1994, by and between the
                    Company and Gateway 2000, Inc. (incorporated by reference
                    to Exhibit 10.21 to the Company's Registration Statement on
                    Form S-1 (Registration No. 33-87612))

             10.22  Third Amendment to Loan and Security Agreement dated
                    February 8, 1995 by and between Sanwa Business Credit
                    Corporation and the Company (incorporated by reference to
                    Exhibit 10.22 to the Company's Registration Statement on
                    Form S-1 (Registration No. 33-87612))

            *10.23  Indemnification Agreement dated February 8, 1995 by and
                    between William E. Ogle and the Company (incorporated by
                    reference to Exhibit 10.23 to the Company's Registration
                    Statement on Form S-1 (Registration No. 33-87612))

            *10.24  Indemnification Agreement dated February 8, 1995 by and
                    between Randall D. Eisenbach and the Company (incorporated
                    by reference to Exhibit 10.24 to the Company's Registration
                    Statement on Form S-1 (Registration No. 33-87612))

            *10.25  Indemnification Agreement dated February 8, 1995 by and
                    between James L Hopkins and the Company (incorporated by
                    reference to Exhibit 10.25 to the Company's Registration
                    Statement on Form S-1 (Registration No. 33-87612))

            *10.26  Indemnification Agreement dated February 8, 1995 by and
                    between Mark S. Sims and the Company (incorporated by
                    reference to Exhibit 10.26 to the Company's Registration
                    Statement on Form S-1 (Registration No. 33-87612))

            *10.27  Indemnification Agreement dated February 8, 1995 by and
                    between William D. Balthaser Jr. and the Company
                    (incorporated by reference to Exhibit 10.27 to the
                    Company's Registration Statement on Form S-1 (Registration
                    No. 33-87612))

            *10.28  Indemnification Agreement dated February 8, 1995 by and
                    between James J. Byrne and the Company (incorporated by
                    reference to Exhibit 10.28 to the Company's Registration
                    Statement on Form S-1 (Registration No. 33-87612))

                                     -34-
<PAGE>

            *10.29  Indemnification Agreement dated February 8, 1995 by and
                    between Lawrence E. Wesneski and the Company (incorporated
                    by reference to Exhibit 10.29 to the Company's Registration
                    Statement on Form S-1 (Registration No. 33-87612))

            *10.30  Indemnification Agreement dated February 8, 1995 by and
                    between J. Shane Long and the Company (incorporated by
                    reference to Exhibit 10.30 to the Company's Registration
                    Statement on Form S-1 (Registration No. 33-87612))

             10.31  Underwriting Agreement by and among the Company, Messrs.
                    Balthaser and Sims (the selling shareholders) and Rauscher
                    Pierce Refsnes, Inc. and Sutro & Co. Incorporated
                    (incorporated by reference to Exhibit 10.31 to the Company's
                    Annual Report on Form 10-K for the fiscal year ended
                    October 31, 1995)

             10.32  Lease Agreement dated June, 1995, by and between the Company
                    (as lessee) and Springcreek Place, Ltd. (as lessor)
                    (incorporated by reference to Exhibit 10.32 to the Company's
                    Annual Report on Form 10-K for the fiscal year ended October
                    31, 1995)

             10.33  Lease Agreement dated December 19, 1994, by and between the
                    Company (as lessee) and 50 Walter Jones Blvd., Inc. (as
                    lessor) (incorporated by reference to Exhibit 10.33 to the
                    Company's Annual Report on Form 10-K for the fiscal year
                    ended October 31, 1995)

             10.34  Fourth Amendment to Loan and Security Agreement dated
                    January 5, 1996, by and between Sanwa Business Credit
                    Corporation and the Company (incorporated by reference to
                    Exhibit 10.34 to the Company's Annual Report on Form 10-K or
                    the fiscal year ended October 31, 1995)

            *10.35  Founding Shareholder Note by and between the Company and
                    William D. Balthaser, Jr. (incorporated by reference to
                    Exhibit 10.35 to the Company's Annual Report on Form 10-K
                    for the fiscal year ended October 31, 1995)

            *10.36  Founding Shareholder Note by and between the Company and
                    Mark S. Sims (incorporated by reference to Exhibit 10.36 to
                    the Company's Annual Report on Form 10-K for the fiscal year
                    ended October 31, 1995)

                                     -35-
<PAGE>

             10.37  Addendum to Lease Agreement dated March 7, 1996 by and
                    between the Company (as lessee) and Springcreek Place, Ltd.
                    (as lessor) (incorporated by reference to Exhibit 10.37 to
                    the Company's Quarterly Report on Form 10-Q for the quarter
                    ended January 31, 1996)

            *10.38  STB Systems, Inc. 1995 Employee Stock Option Purchase Plan
                    (as amended) (incorporated by reference to Exhibit 10.38 to
                    the Company's Quarterly Report on Form 10-Q for the quarter
                    ended January 31, 1996)

             10.39  Lease Agreement dated April 18, 1996 by and between the
                    Company (as lessee) and I Cypresswood Building (as lessor)
                    (incorporated by reference to Exhibit 10.39 to the Company's
                    Quarterly Report on Form 10-Q for the quarter ended April
                    30, 1996)

             10.40  Sublease Agreement dated August 1996 by and between ADC
                    Telecommunications, Inc. (as sublessor) and the Company (as
                    sublessee) (incorporated by reference to Exhibit 10.40 to
                    the Company's Registration Statement on Form S-1
                    (Registration No. 333-14313))

             10.41  Lease Contract dated October 4, 1996 by and between STB de
                    Mexico, S.A. de C.V. (as lessee) and Complejo Industrial
                    Fuentes, S.A. de C.V. (as lessor) (incorporated by reference
                    to Exhibit 10.41 to the Company's Registration Statement on
                    Form S-1 (Registration No. 333-14313))

            *10.42  Employment Agreement dated November 1, 1996 by and between
                    the Company and William E. Ogle (incorporated by reference
                    to Exhibit 10.42 to the Company's Registration Statement on
                    Form S-1 (Registration No. 333-14313))

            *10.43  Employment Agreement dated November 1, 1996 by and between
                    the Company and Randall D. Eisenbach (incorporated by
                    reference to Exhibit 10.43 to the Company's Registration
                    Statement on Form S-1 (Registration No. 333-14313))

            *10.44  Employment Agreement dated November 1, 1996 by and between
                    the Company and James L. Hopkins (incorporated by reference
                    to Exhibit 10.44 to the Company's Registration Statement on
                    Form S-1 (Registration No. 333-14313))

                                     -36-
<PAGE>

            *10.45  Employment Agreement dated November 1, 1996 by and between
                    the Company and J. Shane Long (incorporated by reference to
                    Exhibit 10.45 to the Company's Registration Statement on
                    Form S-1 (Registration No. 333-14313))

             10.46  Modification Agreement dated October 4, 1996 by and between
                    STB de Mexico, S.A. de C.V. and Complejo Industrial Fuentes,
                    S.A. de C.V. (relating to the Lease Agreement filed as
                    Exhibit 10.1 hereto) (incorporated by reference to Exhibit
                    10.46 to the Company's Registration Statement on Form S-1
                    (Registration No. 333-14313))

            *10.47  Amended and Restated Profit Sharing Incentive Plan
                    (incorporated by reference to Exhibit 10.47 to the Company's
                    Registration Statement on Form S-1 (Registration No.
                    333-14313))

             10.48  Lease Agreement by and between the Company and Banc One
                    Leasing Corporation dated October 30, 1996, together with
                    related attachments (incorporated by reference to Exhibit
                    10.48 to the Company's Registration Statement on Form S-1
                    (Registration No. 333-14313))

             11.1   Computation of Earnings Per Common Share and Common
                    Equivalent Share

             13     Selected portions of the Company's Annual Report to
                    Shareholders for fiscal year ended October 31, 1996

             21     Subsidiaries of the Company

                    (a)  STB Assembly, Inc., a Texas corporation
                    (b)  STB de Mexico, S.A. de C.V., a Mexican corporation
                    (c)  Maquilados Continentales de Chihuahua, a Mexican
                         corporation (an inactive shell corporation)

             23   Consent of Price Waterhouse LLP

             24   Powers of Attorney (included on first signature page)

             27   Financial Data Schedule

             -------------------
             *    Management contract or compensatory plan or arrangement.


                                     -37-
<PAGE>
                  The Company will furnish a copy of any exhibit listed above
                  to any shareholder without charge upon written request to
                  Mr. Bryan F. Keyes, Treasurer, 1651 North Glenville Drive,
                  Richardson, Texas 75081.

    (b)  No reports on Form 8-K were filed during the last quarter of the
period covered by this Report.








                                     -38-


<PAGE>

                             POWER OF ATTORNEY


    KNOW ALL MEN BY THESE PRESENTS that each of STB Systems, Inc., a Texas
corporation, and the undersigned directors and officers of STB Systems, Inc.,
hereby constitutes and appoints William E. Ogle, Randall D. Eisenbach and Bryan
F. Keyes, or any one of them, its or his true and lawful attorney-in-fact and
agent, for it or him and in its or his name, place and stead, in any and all
capacities, with full power to act alone, to sign any and all amendments to this
Report, and to file each such amendment to the Report, with all exhibits
thereto, and any and all other documents in connection therewith, with the
Securities and Exchange Commission, hereby granting unto said attorney-in-fact
and agent full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to all
intents and purposes as it or he might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent may lawfully do or cause
to be done by virtue hereof.



                                 SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                         STB SYSTEMS, INC.


                                         By:  /s/ William E. Ogle
                                              ------------------------------
                                              William E. Ogle
                                              Chairman of the Board
                                              and Chief Executive Officer


Dated:  January 28, 1997







                                     -39-
<PAGE>

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Company
in the capacities indicated on January 28, 1997.

              SIGNATURE                              TITLE
              ---------                              -----


/s/ William E. Ogle                    Chairman of the Board of Directors
------------------------------------   and Chief Executive Officer
William E. Ogle                        (Principal Executive Officer)


/s/ Randall D. Eisenbach               Executive Vice President, Chief
------------------------------------   Operating Officer, Assistant 
Randall D. Eisenbach                   Secretary and Director


/s/ James L. Hopkins                   Chief Financial Officer, Vice President
------------------------------------   of Strategic Marketing and Director
James L. Hopkins


/s/ Bryan F. Keyes                     Director of Legal and Finance,
------------------------------------   Secretary and Treasurer (Principal
Bryan F. Keyes                         Financial and Accounting Officer)


/s/ J. Shane Long                      Vice President of Sales and
------------------------------------   Marketing and Director
J. Shane Long



/s/ Lawrence E. Wesneski               Director
------------------------------------
Lawrence E. Wesneski


/s/ James J. Byrne                     Director
------------------------------------
James J. Byrne

                                     -40-
<PAGE>
                                       
                      REPORT OF INDEPENDENT ACCOUNTANTS ON
                          FINANCIAL STATEMENT SCHEDULE
                          ----------------------------



To the Board of Directors and
Shareholders of STB Systems, Inc.


Our audits of the consolidated financial statements referred to in our report 
dated December 2, 1996 appearing in the 1996 Annual Report to Shareholders of 
STB Systems, Inc. (which report and consolidated financial statements are 
incorporated by reference in this Annual Report on Form 10-K) also included 
an audit of the Financial Statement Schedules listed in Item 14(a) of this 
Form 10-K. In our opinion, the Financial Statement Schedule presents fairly, 
in all material respects, the information set forth therein when read in 
conjunction with the related consolidated financial statements.



PRICE WATERHOUSE LLP

Dallas, Texas
December 2, 1996



                                      S-1

<PAGE>
                                      
              CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS 

<TABLE>

 FISCAL                                         BALANCE AT   CHARGED TO                  BALANCE  
  YEAR                                          BEGINNING    COSTS AND                    AT END  
  ENDED              DESCRIPTION                 OF YEAR     EXPENSES      DEDUCTIONS     OF YEAR 
------------------------------------------------------------------------------------------------- 
<S>         <C>                                 <C>          <C>           <C>          <C>       
31-Oct-94   Allowance for Bad Debts                295,000     383,270       315,145     363,125 
            Allowance for Obsolete Inventory       630,000     607,525       612,525     625,000 

31-Oct-95   Allowance for Bad Debts                363,125     231,040       145,092     449,073 
            Allowance for Obsolete Inventory       625,000     692,830       317,830   1,000,000 

31-Oct-96   Allowance for Bad Debts                449,073     489,837       607,078     331,832 
            Allowance for Product Returns and 
              Price Protection                      45,000     405,000       175,000     275,000 
            Allowance for Obsolete Inventory     1,000,000   1,928,013     1,528,013   1,400,000 
</TABLE>











                                      S-2 
<PAGE>

                               EXHIBIT INDEX 


 EXHIBIT 
 ------- 
    2     Share Exchange Agreement dated December 16, 1994 by and among the
          Company and the shareholders of STB Assembly, Inc. (incorporated
          by reference to Exhibit 2 to the Company's Registration Statement
          on Form S-1 (Registration No. 33-87612))

    3.1   Amended and Restated Articles of Incorporation of the Company
          (incorporated by reference to Exhibit 3.1 to the Company's
          Registration Statement on Form S-1 (Registration No. 33-87612))

    3.2   Amended and Restated Bylaws of the Company (incorporated by
          reference to Exhibit 3.2 to the Company's Registration Statement
          on Form S-1 (Registration No. 33-87612))

    4.1   Specimen of Common Stock Certificate (incorporated by reference
          to Exhibit 4.1 to the Company's Registration Statement on Form 
          S-1 (Registration No. 33-87612))

    4.2   Amended and Restated Articles of Incorporation and Bylaws of the
          Company (see Exhibits 3.1 and 3.2)

    4.3   Right of First Refusal Agreement dated December 16, 1994 by and
          among the Company and Messrs. Ogle, Balthaser and Sims
          (incorporated by reference to Exhibit 4.3 to the Company's
          Registration Statement on Form S-1 (Registration No. 33-87612))

   10.1   Lease Agreement dated December 6, 1988 by and between STB de Mexico
          S.A. de C.V. (formerly known as Industrias Fronterizas de Chihuahua,
          S.A. de C.V.) (a subsidiary of the Company, as lessee) and Complejo
          Industrial Fuentes, S.A. de C.V (as lessor), including an Agreement
          for Modification dated February 25, 1994 by and between the same
          parties (incorporated by reference to Exhibit 10.1 to the Company's
          Registration Statement on Form S-1 (Registration No. 33-87612))

   10.2   Lease Agreement, as amended, dated July 8, 1986 by and between the
          Company (as lessee) and Central Park Associates, Ltd. (as lessor)
          (incorporated by reference to Exhibit 10.2 to the Company's
          Registration Statement on Form S-1 (Registration No. 33-87612))

   10.3   Intentionally Omitted

   10.4   Loan and Security Agreement dated December 21, 1993 by and between
          Sanwa Business Credit Corporation and STB Systems, Inc. (incorporated
          by reference to Exhibit 10.4 to the Company's Registration Statement
          on Form S-1 (Registration No. 33-87612))

<PAGE>

 EXHIBIT 
 ------- 
   10.5   First Amendment to Loan and Security Agreement dated October 14, 1994
          by and between Sanwa Business Credit Corporation and the Company
          (incorporated by reference to Exhibit 10.5 to the Company's
          Registration Statement on Form S-1 (Registration No. 33-87612))

   10.6   Second Amendment to Loan and Security Agreement dated December 9, 1994
          by and between Sanwa Business Credit Corporation and the Company
          (incorporated by reference to Exhibit 10.6 to the Company's
          Registration Statement on Form S-1 (Registration No. 33-87612))

   10.7   Amended and Restated Support Agreements dated October 14, 1994 from
          each of Messrs. Ogle, Balthaser and Sims to Sanwa Business Credit
          Corporation (incorporated by reference to Exhibit 10.7 to the
          Company's Registration Statement on Form S-1 (Registration No. 
          33-87612))

   10.8   Depository Account Agreement dated December 21, 1993 by and among
          Sanwa Business Credit Corporation, Bank One, Texas, N.A. and the
          Company (incorporated by reference to Exhibit 10.8 to the Company's
          Registration Statement on Form S-1 (Registration No. 33-87612))

   10.9   Trademark Security Agreement dated December 21, 1993 by and between
          Sanwa Business Credit Corporation and the Company (incorporated by
          reference to Exhibit 10.9 to the Company's Registration Statement on
          Form S-1 (Registration No. 33-87612))

   10.10  Contingent Payment Agreement dated October 17, 1994 by and between 
          Sanwa Business Credit Corporation and the Company (incorporated by 
          reference to Exhibit 10.10 to the Company's Registration Statement on 
          Form S-1 (Registration No. 33-87612))

   10.11  Collateral Agency Agreement dated November 30, 1994 by and among STB
          de Mexico, S.A. de C.V. (formerly known as Industrias Fronterizas de 
          Chihuahua, S.A. de C.V.), Sanwa Business Credit Corporation and the 
          Company (incorporated by reference to Exhibit 10.11 to the Company's
          Registration Statement on Form S-1 (Registration No. 33-87612))

  *10.12  Company's Stock Option Plan for Non-Employee Directors (incorporated 
          by reference to Exhibit 10.12 to the Company's Registration Statement
          on Form S-1 (Registration No. 33-87612))

  *10.13  Company's 1995 Long Term Incentive Plan (incorporated by reference to
          Exhibit 10.13 to the Company's Registration Statement on Form S-1 
          (Registration No. 33-87612))

   10.14  Intentionally Omitted

<PAGE>

 EXHIBIT 
 ------- 
   10.15  Tax Allocation and Indemnification Agreement dated December 16, 1994 
          by and among the Company and Messrs. Ogle, Balthaser and Sims 
          (incorporated by reference to Exhibit 10.15 to the Company's 
          Registration Statement on Form S-1 (Registration No. 33-87612))

  *10.16  Founding Shareholder Note by and between the Company and William E. 
          Ogle (incorporated by reference to Exhibit 10.16 to the Company's 
          Annual Report on Form 10-K for the fiscal year ended October 1, 1995)

  *10.17  Agreements by and between Breedlove Wesneski & Co. (and one of its 
          affiliates) and the Company dated July 16, 1993, April 6, 1994 and 
          October 18, 1994 (incorporated by reference to Exhibit 10.17 to the 
          Company's Registration Statement on Form S-1 (Registration No. 
          33-87612))

   10.18  Intentionally Omitted

   10.19  Intentionally Omitted

   10.20  Intentionally Omitted

   10.21  Agreement dated September 9, 1994, by and between the Company and
          Gateway 2000, Inc. (incorporated by reference to Exhibit 10.21 to
          the Company's Registration Statement on Form S-1 (Registration No. 
          33-87612))

   10.22  Third Amendment to Loan and Security Agreement dated February 8, 1995
          by and between Sanwa Business Credit Corporation and the Company 
          (incorporated by reference to Exhibit 10.22 to the Company's 
          Registration Statement on Form S-1 (Registration No. 33-87612))

  *10.23  Indemnification Agreement dated February 8, 1995 by and between 
          William E. Ogle and the Company (incorporated by reference to 
          Exhibit 10.23 to the Company's Registration Statement on Form S-1 
          (Registration No. 33-87612))

  *10.24  Indemnification Agreement dated February 8, 1995 by and between 
          Randall D. Eisenbach and the Company (incorporated by reference to 
          Exhibit 10.24 to the Company's Registration Statement on Form S-1 
          (Registration No. 33-87612))

  *10.25  Indemnification Agreement dated February 8, 1995 by and between 
          James L. Hopkins and the Company (incorporated by reference to
          Exhibit 10.25 to the Company's Registration Statement on Form S-1
          (Registration No. 33-87612))

  *10.26  Indemnification Agreement dated February 8, 1995 by and between Mark 
          S. Sims and the Company (incorporated by reference to Exhibit 10.26 
          to the Company's Registration Statement on Form S-1 (Registration No.
          33-87612))

  *10.27  Indemnification Agreement dated February 8, 1995 by and between
          William D. Balthaser Jr. and the Company (incorporated by reference to
          Exhibit 10.27 to the Company's Registration Statement on Form S-1 
          (Registration No. 33-87612))

<PAGE>

 EXHIBIT 
 ------- 
  *10.28  Indemnification Agreement dated February 8, 1995 by and between
          James J. Byrne and the Company (incorporated by reference to Exhibit 
          10.28 to the Company's Registration Statement on Form S-1 
          (Registration No. 33-87612))
    
  *10.29  Indemnification Agreement dated February 8, 1995 by and between 
          Lawrence E. Wesneski and the Company (incorporated by reference to 
          Exhibit 10.29 to the Company's Registration Statement on Form S-1 
          (Registration No. 33-87612))

  *10.30  Indemnification Agreement dated February 8, 1995 by and between J. 
          Shane Long and the Company (incorporated by reference to Exhibit 10.30
          to the Company's Registration Statement on Form S-1 (Registration No.
          33-87612))

   10.31  Underwriting Agreement by and among the Company, Messrs. Balthaser and
          Sims (the selling shareholders) and Rauscher Pierce Refsnes, Inc. and 
          Sutro & Co. Incorporated (incorporated by reference to Exhibit 10.31 
          to the Company's Annual Report on Form 10-K for the fiscal year ended
          October 31, 1995)

   10.32  Lease Agreement dated June, 1995, by and between the Company (as 
          lessee) and Springcreek Place, Ltd. (as lessor) (incorporated by
          reference to Exhibit 10.32 to the Company's Annual Report on Form 10-K
          for the fiscal year ended October 31, 1995)

   10.33  Lease Agreement dated December 19, 1994, by and between the Company 
          (as lessee) and 50 Walter Jones Blvd., Inc. (as lessor) (incorporated
          by reference to Exhibit 10.33 to the Company's Annual Report on Form 
          10-K for the fiscal year ended October 31, 1995)

   10.34  Fourth Amendment to Loan and Security Agreement dated January 5, 1996,
          by and between Sanwa Business Credit Corporation and the Company 
          (incorporated by reference to Exhibit 10.34 to the Company's Annual 
          Report on Form 10-K or the fiscal year ended October 31, 1995)

  *10.35  Founding Shareholder Note by and between the Company and William D.
          Balthaser, Jr. (incorporated by reference to Exhibit 10.35 to the 
          Company's Annual Report on Form 10-K for the fiscal year ended 
          October 31, 1995)

  *10.36  Founding Shareholder Note by and between the Company and Mark S. Sims
          (incorporated by reference to Exhibit 10.36 to the Company's Annual 
          Report on Form 10-K for the fiscal year ended October 31, 1995)

   10.37  Addendum to Lease Agreement dated March 7, 1996 by and between the 
          Company (as lessee) and Springcreek Place, Ltd. (as lessor) 
          (incorporated by reference to Exhibit 10.37 to the Company's Quarterly
          Report on Form 10-Q for the quarter ended January 31, 1996)

<PAGE>

 EXHIBIT 
 ------- 
  *10.38  STB Systems, Inc. 1995 Employee Stock Option Purchase Plan (as 
          amended) (incorporated by reference to Exhibit 10.38 to the Company's
          Quarterly Report on Form 10-Q for the quarter ended January 31, 1996)

   10.39  Lease Agreement dated April 18, 1996 by and between the Company (as 
          lessee) and I Cypresswood Building (as lessor) (incorporated by 
          reference to Exhibit 10.39 to the Company's Quarterly Report on Form 
          10-Q for the quarter ended April 30, 1996)

   10.40  Sublease Agreement dated August 1996 by and between ADC 
          Telecommunications, Inc. (as sublessor) and the Company (as sublessee)
          (incorporated by reference to Exhibit 10.40 to the Company's 
          Registration Statement on Form S-1 (Registration No. 333-14313)) 

   10.41  Lease Contract dated October 4, 1996 by and between STB de Mexico, 
          S.A. de C.V. (as lessee) and Complejo Industrial Fuentes, S.A. de C.V.
          (as lessor) (incorporated by reference to Exhibit 10.41 to the 
          Company's Registration Statement on Form S-1 (Registration No. 
          333-14313)) 

  *10.42  Employment Agreement dated November 1, 1996 by and between the Company
          and William E. Ogle (incorporated by reference to Exhibit 10.42 to the
          Company's Registration Statement on Form S-1 (Registration No. 
          333-14313)) 

  *10.43  Employment Agreement dated November 1, 1996 by and between the Company
          and Randall D. Eisenbach (incorporated by reference to Exhibit 10.43 
          to the Company's Registration Statement on Form S-1 (Registration No.
          333-14313)) 

  *10.44  Employment Agreement dated November 1, 1996 by and between the Company
          and James L. Hopkins (incorporated by reference to Exhibit 10.44 to 
          the Company's Registration Statement on Form S-1 (Registration No. 
          333-14313)) 

  *10.45  Employment Agreement dated November 1, 1996 by and between the Company
          and J. Shane Long (incorporated by reference to Exhibit 10.45 to the 
          Company's Registration Statement on Form S-1 (Registration No. 
          333-14313)) 

   10.46  Modification Agreement dated October 4, 1996 by and between STB de 
          Mexico, S.A. de C.V. and Complejo Industrial Fuentes, S.A. de C.V. 
          (relating to the Lease Agreement filed as Exhibit 10.1 hereto) 
          (incorporated by reference to Exhibit 10.46 to the Company's 
          Registration Statement on Form S-1 (Registration No. 333-14313))

<PAGE>

 EXHIBIT 
 ------- 
  *10.47  Amended and Restated Profit Sharing Incentive Plan (incorporated by 
          reference to Exhibit 10.47 to the Company's Registration Statement on
          Form S-1 (Registration No. 333-14313)) 

   10.48  Lease Agreement by and between the Company and Banc One Leasing
          Corporation dated October 30, 1996, together with related attachments
          (incorporated by reference to Exhibit 10.48 to the Company's 
          Registration Statement on Form S-1 (Registration No. 333-14313)) 

   11.1   Computation of Earnings Per Common Share and Common Equivalent Share

   13     Selected portions of the Company's Annual Report to Shareholders for
          fiscal year ended October 31, 1996

   21     Subsidiaries of the Company 

          (a)  STB Assembly, Inc., a Texas corporation
          (b)  STB de Mexico, S.A. de C.V., a Mexican corporation
          (c)  Maquilados Continentales de Chihuahua, a Mexican corporation
               (an inactive shell corporation)

   23     Consent of Price Waterhouse LLP 

   24     Powers of Attorney (included on first signature page)

   27     Financial Data Schedule 

          -------------------- 
          *  Management contract or compensatory plan or arrangement. The 
             Company will furnish a copy of any exhibit listed above to any 
             shareholder without charge upon written request to Mr. Bryan F. 
             Keyes, Treasurer, 1651 North Glenville Drive, Richardson, Texas 
             75081.