<PAGE> 1
As filed with the Securities and Exchange Commission on August 4, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
THREE-FIVE SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 86-0654102
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
1600 North Desert Drive
Tempe, Arizona 85281
(Address of Principal executive offices)(zip code)
THREE-FIVE SYSTEMS, INC.
1997 Employee Stock Option Plan
(Full Title of the Plan)
David R. Buchanan
Chairman of the Board, President,
and Chief Executive Officer
THREE-FIVE SYSTEMS, INC.
1600 North Desert Drive, Tempe, Arizona 85281
(602) 389-8600
(Telephone number, including area code, of agent for service)
This Registration Statement shall become effective immediately upon filing with
the Securities and Exchange Commission, and sales of the registered securities
will begin as soon as reasonably practicable after such effective date.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================
Proposed maximum Proposed maximum Amount of
Title of Securities to be Amount to be offering price per aggregate offering registration fee
Registered registered(1) share price
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 5,000 Shares $ 12.375 $61,875.00 $18.75
Common Stock 4,000 Shares $ 14.875 $59,500.00 $18.03
Common Stock 500 Shares $ 16.75 $8,375.00 $ 2.54
Common Stock 500 Shares $ 22.6875 $11,343.75 $ 3.44
Common Stock 90,000 Shares $ 22.469(2) $2,022,210.00 $612.79
------- ------------- -------
100,000 Shares $2,163,303.75 $655.55
============= =======
====================================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the 1997 Employee Stock Option
Plan by reason of any stock dividend, stock split, recapitalization or any
other similar transaction without receipt of consideration which results
in an increase in the number of outstanding shares of Common Stock of
Three-Five Systems, Inc.
(2) Calculated for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, using the average of the high and low
sales prices for the Common Stock of Three-Five Systems, Inc. on July 31,
1997, as reported on the New York Stock Exchange.
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
Three-Five Systems, Inc. (the "Registrant") hereby
incorporates by reference into this Registration Statement the following
documents previously filed with the Securities and Exchange Commission (the
"Commission"):
(a) The Registrant's latest annual report on Form 10-K (Commission
File No. 1-4373) for the fiscal year ended December 31, 1996
filed on March 14, 1997;
(b) The Registrant's latest quarterly report on Form 10-Q (File
No. 1-4373) for the quarter ended June 30, 1997 filed on July
15, 1997; and
(c) The description of the Registrant's Capital Stock contained in
the Registrant's Registration Statement on Form 8-A filed with
the Commission on October 18, 1994.
All reports and definitive proxy or information statements
filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the
date of this Registration Statement and prior to the filing of a post-effective
amendment which indicates that all securities offered hereby have been sold or
which deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents.
Item 4. Description of Securities
Not applicable.
Item 5. Interests of Named Experts and Counsel
The firm of O'Connor, Cavanagh, Anderson, Killingsworth &
Beshears, a professional association, Phoenix, Arizona, has acted as counsel for
the Registrant in the preparation of this Registration Statement. As of July 15,
1997, certain members of such firm beneficially owned a total of 12,600 shares
of the Registrant's Common Stock. In addition, Michelle Buchanan, who practices
in the firm's environmental law group, is the spouse of Jeffrey D. Buchanan.
Item 6. Indemnification of Directors and Officers
The Company's Restated Certificate of Incorporation provides that no
director of the Company shall be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except to the extent such exemption or limitation of liability is not permitted
under the Delaware GCL. Under the Delaware GCL, directors may be held liable (i)
for any breach of the directors' duty of loyalty to the Company of its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock purchases, or (iv) for any
transaction from which the director derived an improper personal benefit. The
effect of this provision in the Restated Certificate is to eliminate the rights
of the Company and its stockholders (through stockholders' derivative suits on
behalf of the Company) to recover monetary damages from a director for breach of
the fiduciary duty of care as a director (including breaches resulting from
negligent or grossly negligent behavior) except in the situations described in
clauses (i) through (iv) above. In addition, the Restated Certificate provides
that any repeal or modification of this provision by the Company's stockholders
will not adversely affect any right or protection of
II.1
<PAGE> 3
a director of the Company existing at the time of such repeal or modification
with respect to acts or omissions occurring prior to such repeal or
modification. This provision does not limit or eliminate the rights of the
Company or any stockholder to seek non-monetary relief such as an injunction or
rescission in the event of a breach of a directors' duty of care.
The Company's Restated Certificate requires the Company to indemnify
its directors, officers and certain other representatives of the Company against
expenses and certain other liabilities arising out of their conduct on behalf of
the Company to the maximum extent and under all circumstances permitted by law.
In addition, the Bylaws of the Company provide more particularly that directors
and officers of the Company shall be indemnified against expenses and certain
other liabilities arising out of legal actions brought or threatened against
them for their conduct on behalf of the Company, provided that each such person
acted in good faith and in a manner he reasonably believed was in or not opposed
to the Company's best interests. Indemnification by the Company is available in
a criminal action only if such person also had no reasonable cause to believe
that his conduct was unlawful. In the case of an action by or in the right of
the Company, indemnification is available if such person acted in good faith and
in a manner that he reasonably believed was in or not opposed to the Company's
best interests, except as regards a person adjudged to be liable to the Company,
unless a court shall determine that such person is fairly and reasonably
entitled to indemnity for certain expenses. Indemnification is not available
with respect to proceedings, claims, or actions initiated or brought voluntarily
by an officer or director against the Company.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is therefore unenforceable.
Item 7. Exemption from Registration Claimed
Not applicable.
Item 8. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- ------ -------
<S> <C>
4 Three-Five Systems, Inc. 1997 Employee Stock Option Plan
5 Opinion and consent of O'Connor, Cavanagh, Anderson, Killingsworth &
Beshears, a professional association
23.1 Consent of Independent Public Accountants - Arthur Andersen LLP
23.2 Consent of O'Connor, Cavanagh, Anderson, Killingsworth & Beshears,
P.A. is contained in Exhibit 5
24 Power of Attorney (included on page II.4 of this Registration
Statement)
</TABLE>
Item 9. Undertakings
A. The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or
sales are being made, a post-effective amendment to this Registration Statement
(i) to include any prospectus required by Section 10(a)(3) of the Securities
Act; (ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed
II.2
<PAGE> 4
that which was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement;
(2) that, for the purpose of determining any
liability under the Securities Act, each such post- effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof; and
(3) to remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the 1997 Employee Stock Option Plan.
B. The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
1934 Act that is incorporated by reference into the Registration Statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
C. The undersigned Registrant hereby undertakes to deliver or
cause to be delivered with the prospectus, to each person to whom the prospectus
is sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to be
presented by Article 3 of Regulation S-X is not set forth in the prospectus, to
deliver, or cause to be delivered, to each person to whom the prospectus is sent
or given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial information.
D. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers or
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II.3
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Scottsdale, State of Arizona, on July 24, 1997.
THREE-FIVE SYSTEMS, INC.
By: /s/ David R. Buchanan
------------------------------------
David R. Buchanan, Chairman of
the Board, President, and Chief
Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints jointly and severally, David R.
Buchanan and Jeffrey D. Buchanan and each of them, as his true and lawful
attorney-in-fact and agents, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE POSITION DATE
--------- -------- ----
<S> <C> <C>
/s/ David R. Buchanan Chairman of the Board, President, July 24, 1997
- ------------------------- and Chief Executive Officer
David R. Buchanan (Principal Executive Officer)
/s/ Jeffrey D. Buchanan Vice President-Finance, Administration,
- ------------------------- Legal; Chief Financial Officer; Secretary
Jeffrey D. Buchanan and Treasurer (Principal Financial and
Accounting Officer) and Director July 24, 1997
/s/ David C. Malmberg Director
- -------------------------
David C. Malmberg July 24, 1997
/s/ Burton E. McGillivray Director July 24, 1997
- -------------------------
Burton E. McGillivray
/s/ Gary R. Long Director July 24, 1997
- -------------------------
Gary R. Long
/s/ Kenneth M. Julien Director July 24, 1997
- -------------------------
Kenneth M. Julien
</TABLE>
II.4
<PAGE> 1
EXHIBIT 4
THREE-FIVE SYSTEMS, INC.
1997 EMPLOYEE STOCK OPTION PLAN
SECTION 1. PURPOSE OF PLAN; TERM
(a) General Purpose. The purpose of the Plan is to further the
interests of Three-Five Systems, Inc., a Delaware corporation (the "Company"),
and its stockholders by encouraging employees associated with the Company (or
parent or subsidiary corporations of the Company) to acquire shares of the
Company's common stock, thereby acquiring a proprietary interest in its business
and an increased personal interest in its continued success and progress. Such
purpose shall be accomplished by providing for the granting of options to
acquire the Company's common stock ("Options"). A "parent corporation" for
purposes of this Plan is any corporation in the unbroken chain of corporations
ending with the employer corporation, where, at each link of the chain, the
corporation and the link above owns at least 50 percent of the combined total
voting power of all classes of the stock in the corporation in the link below. A
"subsidiary corporation" for purposes of this Plan is any corporation in the
unbroken chain of corporations starting with the employer corporation, where, at
each link of the chain, the corporation and the link above owns at least 50
percent of the combined voting power of all classes of stock in the corporation
below.
(b) Options. All Options granted under this Plan will be
nonqualified options and shall not be "incentive stock options" as defined in
section 422 of the Code.
(c) Duration of Plan. The term of the Plan is 10 years
commencing on the date of adoption of the Plan by the Board. No Option shall be
granted under the Plan unless granted within 10 years of the adoption of the
Plan by the Board, but Options outstanding on that date shall not be terminated
or otherwise affected by virtue of the Plan's expiration.
SECTION 2. STOCK AND MAXIMUM NUMBER OF SHARES SUBJECT TO PLAN
(a) Description of Stock and Maximum Shares Allocated. The
stock subject to the provisions of the Plan and issuable upon the grant of
Options granted under the Plan is shares of the Company's common stock, $.01 par
value per share (the "Stock"), which may be either unissued or treasury shares,
as the Board may from time to time determine. Subject to adjustment as provided
in Section 7 hereof, the aggregate number of shares of Stock covered by the Plan
and issuable thereunder shall be 100,000 shares of Stock.
(b) Calculation of Available Shares. For purposes of
calculating the maximum number of shares of Stock that may be issued under the
Plan, the shares issued (including the shares, if any, withheld for tax
withholding requirements) upon exercise of an Option shall be counted.
(c) Restoration of Unpurchased Shares. If an Option expires or
terminates for any reason prior to its exercise in full and before the term of
the Plan expires, the shares of Stock subject to, but not issued under, such
Option shall, without further action or by or on behalf of the Company, again be
available under the Plan. If shares of Stock are used to pay for the exercise
price, those shares shall be added to the shares available under the Plan.
<PAGE> 2
SECTION 3. ADMINISTRATION; APPROVAL; AMENDMENTS
(a) General Administration. The power to administer the Plan
with respect to Eligible Persons shall be vested exclusively with the Board.
(b) Plan Administrator. The Board shall be referred to herein
as the "Plan Administrator." The Board may, at any time, appoint a committee of
one or more persons who are members of the Board and delegate to that committee
the power to administer the Plan. Members of such committee shall serve for such
period of time as the Board may determine and shall be subject to removal by the
Board at any time. The Board may, at any time, terminate the functions of any
such committee and reassume all powers and authority previously delegated to
that committee. The Plan Administrator shall have the authority and discretion
to select which Eligible Persons shall participate in the Plan, to grant Options
under the Plan, to establish such rules and regulations as they may deem
appropriate with the proper administration of the Plan and to make such
determinations under, and issue such interpretations of, the Plan and any
outstanding Option as they may deem necessary or advisable. Decisions of the
Plan Administrator shall be final and binding on all parties who have an
interest in the Plan or any outstanding Option.
(c) Approval of Plan. This Plan shall not require the approval
of the stockholders of the Company and shall be effective as of the date adopted
by the Board.
(d) Amendments to Plan. The Board may, without action on the
part of the Company's stockholders, make such amendments to, changes in and
additions to the Plan as it may, from time to time, deem necessary or
appropriate and in the best interests of the Company; provided, the Board may
not, without the consent of the Optionholder, take any action which adversely
affects or impairs the rights of the Optionholder of any Option outstanding
under the Plan.
SECTION 4. PARTICIPANTS
(a) Eligibility and Participation. Options may be granted only
to persons ("Eligible Persons") who at the time of grant are employees of or
consultants to the Company or parent or subsidiaries of the Company; provided,
however, that any person that is an Affiliate shall not be an Eligible Person
under this Plan. The Plan Administrator shall have full authority to determine
which Eligible Persons in its administered group are to receive Option grants
under the Plan, the number of shares to be covered by each such grant, the time
or times at which each such Option is to become exercisable, and the maximum
term for which the Option is to be outstanding.
(b) Guidelines for Participation. In designating and selecting
Eligible Persons for participation in the Plan, the Plan Administrator shall
consult with and give consideration to the recommendations and criticisms
submitted by appropriate managerial and executive officers of the Company. The
Plan Administrator also shall take into account the duties and responsibilities
of the Eligible Persons, their past, present and potential contributions to the
success of the Company and such other factors as the Plan Administrator shall
deem relevant in connection with accomplishing the purpose of the Plan.
SECTION 5. TERMS AND CONDITIONS OF OPTIONS
(a) Allotment of Shares. The Plan Administrator shall
determine the number of shares of Stock to be optioned from time to time and the
number of shares to be optioned to any Eligible Person (the "Optioned Shares").
The grant of an Option to a person shall neither entitle such person to, nor
2
<PAGE> 3
disqualify such person from, participation in any other grant of Options under
this Plan or any other stock option plan of the Company.
(b) Exercise Price. Upon the grant of any Option, the Plan
Administrator shall specify the option price per share. In no event may the
option price per share specified by the Plan Administrator be less than 100
percent of the fair market value per share of the Stock on the date the Option
is granted.
(c) Calculation of Fair Market Value of Stock. The fair market
value of a share of Stock on any relevant date shall be the closing selling
price per share of Stock on the date in question on the stock exchange
determined by the Board to be the primary market for the Stock, as such price is
officially quoted in the composite tape of transactions on such exchange. If
there is no reported sale of Stock on such exchange on the date in question,
then the fair market value shall be the closing selling price on the exchange on
the last preceding date for which such quotation exists.
(d) Individual Stock Option Agreements. Options granted under
the Plan shall be evidenced by option agreements in such form and content as the
Plan Administrator from time to time approves, which agreements shall
substantially comply with and be subject to the terms of the Plan, including the
terms and conditions of this Section 5. As determined by a Plan Administrator,
each option agreement shall state (i) the total number of shares to which it
pertains, (ii) the exercise price for the shares covered by the Option, (iii)
the time at which the Options vest and become exercisable and (iv) the Option's
scheduled expiration date. The option agreements may contain such other
provisions or conditions as the Plan Administrator deems necessary or
appropriate to effectuate the sense and purpose of the Plan, including covenants
by the Optionholder not-to-compete and remedies to the Company in the event of
the breach of any such covenant.
(e) Option Period. No Option granted under the Plan shall be
exercisable for a period in excess of 10 years from the date of its grant
subject to earlier termination in the event of termination of employment,
retirement or death of the Optionholder. An Option may be exercised in full or
in part at any time or from time to time during the term of the Option or
provide for its exercise in stated installments at stated times during the
Option's term.
(f) Vesting; Limitations. The time at which the Optioned
Shares vest with respect to a participant shall be in the discretion of the Plan
Administrator.
(g) No Fractional Shares. Options shall be exercisable only
for whole shares; no fractional shares will be issuable upon exercise of any
Option granted under the Plan.
(h) Method of Exercising Options; Full Payment. Options shall
be exercised by written notice to the Company, addressed to the Company at its
principal place of business. Such notice shall state the election to exercise
the Option and the number of shares with respect to which it is being exercised,
and shall be signed by the person exercising the Option. Such notice shall be
accompanied by payment in full of the exercise price for the number of shares
being purchased. Payment may be made in cash or by check as prescribed by the
applicable Plan Administrator or by tendering duly endorsed certificates
representing shares of Stock then owned by the Optionholder and held for the
requisite period necessary to avoid a charge to the Company's earnings and
valued at fair market value on the date of exercise (as determined in accordance
with Section 5(c) hereof). Upon the exercise of any Option, the Company shall
deliver, or cause to be delivered, to the Optionholder a certificate or
certificates representing the shares of Stock purchased upon such exercise as
soon as practicable after payment for those shares has been received by the
Company. If an Option is exercised pursuant to Section 5(j) hereof by any person
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<PAGE> 4
other than the Optionholder, such notice shall be accompanied by appropriate
proof of the right of such person to exercise the Option. All shares that are
purchased and paid for in full upon the exercise of an Option shall be fully
paid and non-assessable.
(i) Rights of a Stockholder. An Optionholder shall have no
rights as a stockholder with respect to shares covered by his Option until such
Optionholder shall have exercised the Option and paid the full exercise price
for the Optioned Shares. No adjustment will be made for dividends or other
rights with respect to any Optioned Shares for which the record date is prior to
the date on which the Optionholder exercises the Option for such shares.
(j) Exercise of Options After Cessation of Service;
Termination of Employment. If any Optionholder ceases to be in Service to the
Company for a reason other than death, such Optionholder may, within one month
after the date of termination of such Service, but in no event after the
Option's stated expiration date, exercise some or all of the Options that the
Optionholder was entitled to exercise on the date the Optionholder's Service
terminated; provided, that (i) if the Optionholder's Service is terminated by
the Company in its good faith judgment, for (A) commission of a crime by the
Optionholder or for reasons involving moral turpitude; (B) an act by the
Optionholder which tends to bring the Company into disrepute; or (C) negligent,
fraudulent or willful misconduct by the Optionholder, or (ii) if after the
Service of the Optionholder is terminated, the Optionholder commits acts
detrimental to the Company's interests, then the Option shall thereafter be void
for all purposes. Notwithstanding the foregoing, if any Optionholder who is an
employee of the Company ceases to be in Service to the Company by reason of
permanent disability within the meaning of section 22(e)(3) of the Internal
Revenue Code (as determined by the applicable Plan Administrator), the
Optionholder shall have 12 months after the date of termination of Service, but
in no event after Optionholder's Option's stated expiration date, to exercise
Options that the Optionholder was entitled to exercise on the date the
Optionholder's Service terminated as a result of disability.
(k) Death of Optionholder. If an Optionholder dies while in
the Company's Service, the Optionholder's vested Options on the date of death
shall be exercisable within three months of such death or until the stated
expiration date of the Optionholder's Option, whichever occurs first, by the
person or persons ("successors") to whom the Optionholder's rights pass under a
will or by the laws of descent and distribution. An Option may be exercised and
payment of the option price made in full by the successors only after written
notice to the Company specifying the number of shares to be purchased. Such
notice shall state that the Option price is being paid in full in the manner
specified in Section 5(h) hereof. As soon as practicable after receipt by the
Company of such notice and of payment in full of the Option price, a certificate
or certificates representing such shares shall be registered in the name or
names specified by the successors in the written notice of exercise and shall be
delivered to the successors.
(l) Other Plan Provisions Still Applicable. If an Option is
exercised upon the termination of Service or death of an Optionholder under this
Section 5, the other provisions of the Plan shall still be applicable to such
exercise.
(m) Definition of "Service." For purposes of this Plan, unless
it is evidenced otherwise in the option agreement with the Optionholder, the
Optionholder shall be deemed to be in "Service" to the Company so long as such
individual renders services on a periodic basis to the Company (or to any parent
or subsidiary corporation) in the capacity of an employee or a consultant or
independent contractor. The Optionholder shall be considered to be an employee
for so long as such individual remains in the employ of the Company or one or
more of its parent or subsidiary corporations.
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<PAGE> 5
(n) Nonassignability. Except as specifically allowed by the
Plan Administrator at the time of grant and as set forth in the documents
evidencing an Option, no Option granted under the Plan or any of the rights and
privileges conferred thereby shall be assignable or transferable by an
Optionholder other than by will or the laws of descent and distribution, and
such Option shall be exercisable during the Optionholder's lifetime only by the
Optionholder.
SECTION 6. CERTAIN ADJUSTMENTS.
(a) Capital Adjustments. The aggregate number of shares of
Stock subject to the Plan (and the number of shares covered by outstanding
Options and the price per share stated in such Options) shall be proportionately
adjusted for any increase or decrease in the number of outstanding shares of
Stock of the Company resulting from a subdivision or consolidation of shares or
any other capital adjustment or the payment of a stock dividend or any other
increase or decrease in the number of such shares effected without the Company's
receipt of consideration therefor in money, services or property.
(b) Mergers, Etc. If the Company is the surviving corporation
in any merger or consolidation, any Option granted under the Plan shall pertain
to and apply to the securities to which a holder of the number of shares of
Stock subject to the Option would have been entitled prior to the merger or
consolidation. A dissolution or liquidation of the Company shall cause every
Option outstanding hereunder to terminate. A merger or consolidation in which
the Company is not the surviving corporation shall also cause every Option
outstanding hereunder to terminate.
(c) Change in Control. With respect to any Change in Control,
the Plan Administrator shall have the discretion and authority, exercisable at
any time, whether before or after the Change in Control, to provide for the
automatic acceleration of one or more outstanding Options granted by it under
the Plan upon the occurrence of such Change in Control. The Plan Administrator
may also impose limitations upon the automatic acceleration of such Options to
the extent it deems appropriate. Any Options accelerated upon a Change in
Control will remain fully exercisable until the expiration or sooner termination
of the Option term.
SECTION 7. MISCELLANEOUS
(a) Use of Proceeds. The proceeds received by the Company from
the sale of Stock pursuant to the exercise of Options hereunder, if any, shall
be used for general corporate purposes.
(b) Cancellation of Options. The Plan Administrator shall have
the authority to effect, at any time and from time to time, with the consent of
the affected Optionholders, the cancellation of any or all outstanding Options
granted under the Plan by the Plan Administrator and to grant in substitution
therefore new Options under the Plan covering the same or different numbers of
shares of Stock as long as such new Options have an exercise price per share of
Stock no less than the minimum exercise price as set forth in Section 5(b)
hereof on the new grant date.
(c) Regulatory Approvals. The implementation of the Plan, the
granting of any Option hereunder, and the issuance of Stock upon the exercise of
any such Option shall be subject to the procurement by the Company of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the Options granted under it and the Stock issued pursuant to it.
(d) Indemnification. In addition to such other rights of
indemnification as they may have, the members of the Plan Administrator shall be
indemnified and held harmless by the Company, to
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the extent permitted under applicable law, for, from and against all costs and
expenses reasonably incurred by them in connection with any action, legal
proceeding to which any member thereof may be a party by reason of any action
taken, failure to act under or in connection with the Plan or any rights granted
thereunder and against all amounts paid by them in settlement thereof or paid by
them in satisfaction of a judgment of any such action, suit or proceeding,
except a judgment based upon a finding of bad faith.
(e) Plan Not Exclusive. This Plan is not intended to be the
exclusive means by which the Company may issue options or warrants to acquire
its Stock, stock awards or any other type of award. To the extent permitted by
applicable law, any such other option, warrants or awards may be issued by the
Company other than pursuant to this Plan without stockholder approval.
(f) Governing Law. The Plan shall be governed by, and all
questions arising hereunder shall be determined in accordance with, the laws of
the State of Arizona.
(g) Withholding Taxes. Whenever the Company issues Stock under
the Plan pursuant to an Option, the Company shall have the right to require the
grantee to remit to the Company an amount sufficient to satisfy any federal,
state and/or local withholding or employment tax requirements prior to the
delivery of any certificate or certificates for such shares. Alternatively, the
Company may issue or transfer such shares of Stock net of the number of shares
sufficient to satisfy the withholding or employment tax requirements. For such
purposes, the shares of Stock shall be valued on the date the withholding or
employment tax obligation is incurred.
SECTION 8. SECURITIES RESTRICTIONS
(a) Legend on Certificates. All certificates representing
shares of Stock issued upon exercise of Options granted under the Plan shall be
endorsed with a legend reading as follows:
The shares of Common Stock evidenced by this
certificate have been issued to the registered owner
in reliance upon written representations that these
shares have been purchased solely for investment.
These shares may not be sold, transferred or assigned
unless in the opinion of the Company and its legal
counsel such sale, transfer or assignment will not be
in violation of the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
(b) Private Offering for Investment Only. The Options are, and
shall be, made available only to a limited number of present and future
employees of the Company, and their permitted transferees, who have knowledge of
the Company's financial condition, management and its affairs. The Plan is not
intended to provide additional capital for the Company, but to encourage
ownership of Stock among the Company's employees. By the act of accepting an
Option, each grantee or such permitted transferee agrees (i) that, any shares of
Stock acquired will be solely for investment and not with any intention to
resell or redistribute those shares and (ii) such intention will be confirmed by
an appropriate certificate at the time the Stock is acquired if requested by the
Company. The neglect or failure to execute such a certificate, however, shall
not limit or negate the foregoing agreement.
(c) Registration Statement. If a Registration Statement
covering the shares of Stock issuable upon exercise of options granted under the
Plan is filed under the Securities Exchange Act of 1933, as amended, and is
declared effective by the Securities Exchange Commission, the provisions of
Sections
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8(a) and (b) shall terminate during the period of time that such Registration
Statement, as periodically amended, remains effective.
SECTION 9. DEFINITIONS
The following capitalized terms used in this Plan shall have
the meaning described below:
"Affiliates" shall mean all "executive officers" (as that term
is defined in Rule 16a-1(f) promulgated under the Securities Exchange Act of
1934) and directors of the Company and all persons who own 10 percent or more of
the Company's issued and outstanding Stock.
"Board" shall mean the Board of Directors of the Company.
"Change in Control" shall mean (i) a person or related group
of persons, other than the Company or a person that directly or indirectly
controls, is controlled by, or under common control with the Company, acquires
ownership of 40 percent or more of the Company's outstanding common stock
pursuant to a tender or exchange offer which the Board of Directors recommends
that the Company's stockholders not accept, or (ii) the change in the
composition of the Board occurs such that those individuals who were elected to
the Board at the last stockholders' meeting at which there was not a contested
election for Board membership subsequently ceased to comprise a majority of the
Board by reason of a contested election.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Company" shall mean Three-Five Systems, Inc., a Delaware
corporation.
"Eligible Persons" shall mean those persons who, at the time
that the Option is granted, are employees of the Company, who provide valuable
services to the Company or parent or subsidiaries of the Company.
"Optionholder" shall mean an Eligible Person to whom Options
have been granted.
"Optioned Shares" shall be those shares of Stock to be
optioned from time to time to any Eligible Person.
"Options" shall mean options to acquire Stock granted under
the Plan.
"Plan" shall mean this stock option plan for Three-Five
Systems, Inc.
"Plan Administrator" shall mean the Board of Directors or a
committee thereof.
"Service" shall have the meaning set forth in Section 5(m)
hereof.
"Stock" shall mean shares of the Company's common stock, $.01
par value per share, which may be unissued or treasury shares, as the Board may
from time to time determine.
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This Plan is hereby executed this ________ day of
_________________, 1997.
THREE-FIVE SYSTEMS, INC.
By: ----------------------------------
Name: David R. Buchanan
Its: President and Chairman
ATTESTED BY:
- ----------------------------------
Secretary
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EXHIBIT 5
[O'CONNOR, CAVANAGH, ANDERSON, KILLINGSWORTH & BESHEARS, P.A. letterhead]
July 31, 1997
Three-Five Systems, Inc.
1600 North Desert Drive
Tempe, Arizona 85281
RE: REGISTRATION STATEMENT ON FORM S-8
THREE-FIVE SYSTEMS, INC.
Gentlemen:
As legal counsel to Three-Five Systems, Inc., a Delaware
corporation (the "Company"), we have assisted in the preparation of the
Company's Registration Statement on Form S-8 (the "Registration Statement") to
be filed with the Securities and Exchange Commission on or about August 4, 1997
in connection with the registration under the Securities Act of 1933, as
amended, of 100,000 shares of Common Stock, par value $0.01 per share, of the
Company (the "Shares") issuable pursuant to the 1997 Employee Stock Option Plan
(the "Plan"). The facts, as we understand them, are set forth in the
Registration Statement.
With respect to the opinion set forth below, we have examined
originals, certified copies, or copies otherwise identified to our satisfaction
as being true copies, only of the following:
A. The Certificate of Incorporation of the Company, as filed
with the Secretary of State of the State of Delaware as amended through the date
hereof;
B. The Bylaws of the Company, as amended through the date
hereof;
C. Resolutions of the Board of Directors of the Company dated
May 12, 1997, reserving an aggregate of 100,000 shares of the Company's Common
Stock for the Plan; and
D. The Registration Statement.
Subject to the assumptions that (i) the documents and
signatures examined by us are genuine and authentic and (ii) the persons
executing the documents examined by us have the
<PAGE> 2
Three-Five Systems, Inc.
July 31, 1997
Page 2
legal capacity to execute such documents, and subject to the further limitations
and qualifications set forth below, it is our opinion that the Shares, when
issued and sold in accordance with the terms of the Plan, will be validly
issued, fully paid and nonassessable.
Please be advised that we are members of the State Bar of
Arizona, and our opinion is limited to the legality of matters under the laws of
the State of Arizona and the General Corporation Laws of the State of Delaware.
Further, our opinion is based solely upon existing laws, rules and regulations,
and we undertake no obligation to advise you of any changes that may be brought
to our attention after the date hereof.
We hereby expressly consent to any reference to our firm in
the Registration Statement, inclusion of this Opinion as an exhibit to the
Registration Statement, and to the filing of this Opinion with any other
appropriate governmental agency.
Very truly yours,
/s/ O'Connor, Cavanagh, Anderson,
---------------------------------
Killingsworth & Beshears, P.A.
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EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report dated January 17, 1997
included in Three-Five Systems, Inc.'s Form 10-K for the year ended December 31,
1996 and to all references to our firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
July 31, 1997
