As filed with the Securities and Exchange Commission on April 22, 1998
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.
1998 Directors' Stock Plan
1998 Stock Option Plan
(Full Title of the Plans)
------------------------------------------------------
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
(Name, Address, and 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
Title of Securities to be Amount to be Offering price per aggregate offering Amount of
Registered registered(1) share(2) price registration fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 20,000 Shares $19.8125 $ 396,250 $ 116.89
Common Stock 300,000 Shares $19.8125 5,943,750 1,753.41
-------------- --------- --------
Total 320,000 Shares $ 6,340,000 $ 1,870.30
====================================================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the 1998 Directors' Stock Plan
and the 1998 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 April 17,
1998, as reported on the New York Stock Exchange.
<PAGE>
PART II
Information Required in the Registration Statement
Item 3. Incorporation of Documents by Reference
---------------------------------------
Three-Five Systems, Inc. (the "Company") hereby incorporates
by reference into this Registration Statement the following documents previously
filed with the Securities and Exchange Commission (the "Commission"):
(a) The Company's latest annual report filed pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), or the latest prospectus filed
pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), that contains audited financial statements
for the Company's latest fiscal year for which such statements
have been filed;
(b) All other reports filed pursuant to Section 13(a) or 15(d) of
the 1934 Act since the end of the fiscal year covered by the
document referred to in (a) above; and
(c) The description of the Company's Capital Stock contained in
the Company's Registration Statement on Form 8-A (File No.
1-4373) filed with the Commission on December 21, 1994 and
declared effective on December 28, 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 Company in the preparation of this Registration Statement. As of April 20,
1998, certain members of such firm beneficially owned a total of 14,250 shares
of the Company's Common Stock. In addition, Michelle Buchanan, who practices in
the firm's environmental law group, is the spouse of Jeffrey D. Buchanan, who is
an executive officer of the Company.
Item 6. Indemnification of Directors and Officers
-----------------------------------------
The Company's Restated Certificate of Incorporation (the
"Restated Certificate") 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 General Corporation
Law (the "Delaware GCL"). Under the Delaware GCL, directors may be held liable
for any breach of the directors' duty of loyalty to the Company of its
stockholders, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, in respect of certain
unlawful dividend payments or stock purchases, or 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
II.1
<PAGE>
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 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
--------
Exhibit
Number Exhibit
- ------ -------
5 Opinion and consent of O'Connor, Cavanagh, Anderson, Killingsworth &
Beshears, a professional association
10.w 1998 Stock Option Plan
10.x 1998 Directors' Stock Plan
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)
II.2
<PAGE>
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 to
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
B. The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 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. 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 Securities
and Exchange 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>
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 Tempe, State of Arizona, on this 21st day of
April, 1998.
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, April 21, 1998
- ------------------------------------- and Chief Executive Officer
David R. Buchanan (Principal Executive Officer)
/s/Jeffrey D. Buchanan Vice President - Finance, Administration, April 21, 1998
- ------------------------------------- Legal; Chief Financial Officer; Secretary;
Jeffrey D. Buchanan and Treasurer (Principal Financial and
Accounting Officer)
/s/David C. Malmberg Director April 21, 1998
- -------------------------------------
David C. Malmberg
/s/Burton E. McGillivray Director April 21, 1998
- -------------------------------------
Burton E. McGillivray
/s/Gary R. Long Director April 21, 1998
- -------------------------------------
Gary R. Long
/s/Kenneth M. Julien Director April 21, 1998
- -------------------------------------
Kenneth M. Julien
</TABLE>
II.4
EXHIBIT 5
The Law Offices of
O'CONNOR, CAVANAGH, ANDERSON, KILLINGSWORTH &
BESHEARS One East Camelback Road, Suite 1100
Phoenix, Arizona 85012
Telephone: (602) 263-2400
Fax: (602) 263-2900
April 21, 1998
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 April 22, 1998
in connection with the registration under the Securities Act of 1933, as
amended, of 20,000 shares of the Company's common stock, par value $0.01 per
share, (the "Common Stock") issuable pursuant to the Company's 1998 Directors'
Stock Plan (the "Directors' Plan") and 300,000 shares of Common Stock issuable
pursuant to the Company's 1998 Stock Option Plan (the "1998 Plan"). The shares
of Common Stock issuable pursuant to the Directors' Plan and the 1998 Plan are
collectively referred to as the "Shares." 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;
<PAGE>
Three-Five Systems, Inc.
April 21, 1998
Page 2
B. The Bylaws of the Company, as amended through the date
hereof;
C. Resolutions of the Board of Directors of the Company dated
January 29, 1998, reserving an aggregate of 320,000 shares of the Company's
Common Stock for issuance pursuant to the Directors' Plan and the 1998 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 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 Directors' Plan and the 1998 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.
THREE-FIVE SYSTEMS, INC. 1998 STOCK OPTION PLAN
1. Purpose. The purpose of this 1998 Stock Option Plan (the "Plan") is
to attract, retain and motivate employees, independent contractors and
non-employee board members by providing them with the opportunity to acquire a
proprietary interest in THREE-FIVE SYSTEMS, INC. (the "Company") and to link
their interests and efforts to the long-term interests of the Company's
shareholders.
2. Plan Administration
2.1 In General. The Plan shall be administered by the
Company's Board of Directors (the "Board"). Except for the power to amend the
Plan as provided in Section 11, the Board, in its sole discretion, may delegate
its authority and duties under the Plan to one or more committees appointed by
the Board, under such conditions and limitations as the Board may from time to
time establish. The Board and/or any committee that has been delegated the
authority to administer the Plan shall be referred to as the "Plan
Administrator". Except as otherwise explicitly set forth in the Plan, the Plan
Administrator shall have the authority, in its discretion, to determine all
matters relating to options granted under the Plan, including selection of the
individuals to be granted options, the type of options granted, the number of
shares of the Company's Common Stock ("Common Stock") subject to an option,
vesting conditions, and any and all other terms, conditions, restrictions and
limitations, if any, of an option. Notwithstanding the foregoing, no options
granted under the Plan shall have a vesting period of less than one year from
the date of grant. All decisions made by the Plan Administrator pursuant to the
Plan and related orders and resolutions shall be final and conclusive.
2.2 Rule 16b-3 and Code Section 162(m). Notwithstanding any
provision of this Plan to the contrary, only the Board or a committee composed
of two or more or Non-Employee Directors may make determinations regarding
grants of options to officers, directors and 10% shareholders of the Company
("Affiliates"). (The term "Non-Employee Directors shall satisfy the meaning set
forth in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended). The Plan Administrator shall have the authority and discretion to
determine the extent to which option grants will conform to the requirements of
Section 162(m) Internal Revenue Code of 1986, as amended (the "Code"), and to
take such action, establish such procedures, and impose such restrictions as the
Plan Administrator determines to be necessary or appropriate to conform to such
requirements.
3. Eligibility. Any employee of the Company (the term "employee" shall
include a person who has signed an agreement to become an employee) shall be
eligible to receive Incentive Stock Options and/or Nonqualified Stock Options
(as such terms are defined in Section 5.1). An independent contractor or
non-employee board member shall be eligible to receive only Nonqualified Stock
Options. For purposes of this Section 3, "Company" includes any parent or
subsidiary of the Company as defined in Section 424 of the Code.
<PAGE>
4. Shares Subject to the Plan
4.1 Number and Source. The stock offered under the Plan shall
be shares of Common Stock and may be unissued shares or shares now held or
subsequently acquired by the Company as treasury shares, as the Plan
Administrator may from time to time determine. Any shares subject to an option
granted under the Plan that is forfeited, terminated or canceled shall again be
available for the granting of options under the Plan. Subject to adjustment as
provided in Section 4.2, the aggregate number of shares of Common Stock that may
be issued under the Plan shall not exceed 300,000. The aggregate number of
shares of Common Stock that may be covered by options granted to any one
individual in any year shall not exceed 150,000.
4.2 Capital Adjustments. The aggregate numbers and type of
shares available for options under the Plan, the maximum number and type of
shares that may be subject to options to any individual under the Plan, the
number and kind of shares covered by each outstanding option, and the exercise
price per share (but not the total price) for stock options outstanding under
the Plan shall all be proportionately adjusted for any increase or decrease in
the number of issued shares of Common Stock resulting from any split-up,
combination or exchange of shares, consolidation, spin-off or recapitalization
of shares or any like capital adjustment or the payment of any stock dividend.
4.3 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
Common 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 under this Plan to terminate. A merger or consolidation in
which the Company is not the surviving corporation shall also cause every option
outstanding under this Plan to terminate, but each optionholder shall have the
right, immediately prior to such merger or consolidation in which the Company is
not a surviving corporation, to exercise vested options in whole or in part,
subject to the other provisions of this Plan and the applicable option
agreement.
5. Stock Options
5.1 Grant. The Plan Administrator may grant stock options,
designated as either "Incentive Stock Options" which comply with the provisions
of Section 422 of the Code or any successor statutory provision, or
"Nonqualified Stock Options" The price at which shares may be purchased upon
exercise of a particular option shall be determined by the Plan Administrator;
however, the exercise price of any stock option shall not be less than 100% of
the Fair Market Value of such shares on the date such option is granted (110% if
options are intended to be Incentive Stock Options and are granted to a
stockholder who at the time the option is granted owns or is deemed to own stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company). For purposes of the Plan, "Fair Market Value" as to a
particular day equals the closing price for the Common Stock on the New York
Stock Exchange as reported in the Wall Street Journal or in such other source as
2
<PAGE>
the Plan Administrator deems reliable. If there is no reported sale of Common
Stock on the New York Stock Exchange on the date in question, then Fair Market
Value shall be the closing selling price on the New York Stock Exhange on the
last preceding date for which an actual reported sale exists. The Plan
Administrator shall set the term of each stock option, but no stock option shall
be exercisable more than 10 years after the date such option is granted and, to
the extent the aggregate Fair Market Value (determined as of the date the option
is granted) of Common Stock with respect to which Incentive Stock Options
granted to a particular individual become exercisable for the first time during
any calendar year (under the Plan and all other stock option Plans of the
Company) exceeds $100,000 (or such corresponding amount as may be set by the
Code) such options shall be treated as Nonqualified Stock Options. An
optionholder and the Plan Administrator can agree at any time to convert an
Incentive Stock Option to a Nonqualified Stock Option.
5.2 No Repricing Without Shareholder Approval. No Stock
Options granted to Affiliates may be repriced without the approval of the
stockholders of the Company ("Repricing") within 12 months of such repricing.
Stockholder approval shall be evidenced by the affirmative vote of the holders
of the majority of the shares of the Company's Common Stock present and person
by proxy and voting at the meeting. For purposes of this Agreement, "Repricing"
shall mean that situation in which new options are issued to an optionholder in
place of cancelled options and which would be reportable in the repricing table
of the annual proxy.
5.3 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. The option
agreements may contain other provisions or conditions as the Plan Administrator
deems necessary or appropriate to effectuate the sense and purpose of the Plan
and may be amended from time to time in accordance with the terms thereof.
6. Option Exercise
6.1 Precondition to Stock Issuance. No shares shall be
delivered pursuant to the exercise of any stock option, in whole or in part,
until qualified for delivery under such securities laws and regulations as may
be deemed by the Plan Administrator to be applicable thereto and until, in the
case of the exercise of an option, payment in full of the option price thereof
(in cash or stock as provided in Section 6.2) is received by the Company. No
holder of an option, or any legal representative, legatee or distributee shall
be or be deemed to be a holder of any shares subject to such option or right
unless and until such shares are issued. No option may at any time be exercised
with respect to a fractional share.
6.2 Form of Payment An optionholder may exercise a stock
option using as the form of payment (a) cash or cash equivalent, (b)
stock-for-stock payment (as described below) (c) any combination of the above,
or (d) such other means as the Plan Administrator may approve. Any optionholder
who owns Common Stock may use such shares, the value of which shall be as the
Fair Market Value on the date the stock option is exercised, as a form of
3
<PAGE>
payment to exercise stock options under the Plan. The Plan Administrator, in its
discretion, may restrict or rescind the right to use stock-for-stock payment. A
stock option may be exercised in such manner only by tendering (actually or by
attestation) to the Company whole shares of Common Stock having a Fair Market
Value equal to or less than the aggregate exercise price. The Plan Administrator
may permit an optionholder to elect to pay the exercise price of a stock option
by authorizing a third party to sell shares of Common Stock (or a sufficient
portion of the shares) acquired upon exercise of the stock option and remit to
the Company a sufficient portion of the sale proceeds to pay the entire exercise
price plus any tax withholding resulting from such exercise. If an option is
exercised by surrender of stock having a Fair Market Value less than the
aggregate exercise price, the optionholder must pay the difference in cash.
7. Transferability. Any Incentive Stock Option granted under the Plan
shall, during the recipient's lifetime, be exercisable only by such recipient
and shall not be assignable or transferable by such recipient other than by will
or the laws of descent and distribution. Except as specifically allowed by the
Plan Administrator, a Nonqualified Stock Option granted under the Plan or any of
the rights and privileges conferred thereby shall not be assignable or
transferable by the 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.
8. Withholding Taxes; Other Deductions. The Company shall have the
right to deduct from any settlement of an option granted under the Plan,
including the delivery or vesting of shares, (a) an amount sufficient to cover
withholding as required by law for any federal, state or local taxes, and (b)
any amounts due from the recipient of such option to the Company or to any
subsidiary of the Company or to take such other action as may be necessary to
satisfy any such withholding or other obligations, including withholding from
any other cash amounts due or to become due from the Company to such recipient
an amount equal to such taxes or obligations.
9. Termination of Services. The terms and conditions under which an
option may be exercised following termination of an optionholder's employment or
independent contractor relationship with the company shall be determined by the
Plan Administrator; provided, however, that Incentive Stock Options shall not be
exercisable at any time after the earliest of the date that is (a) three months
after termination of employment, unless due to death or Disability (as defined
in Section 22(e)(3) of the Code); (b) one year after termination of employment
due to death or Disability.
10. Term of the Plan. The Plan shall become effective as of January 29,
1998, and shall remain in full force and effect through January 28, 2008, unless
sooner terminated by the Board. After the Plan is terminated, no future options
may be granted, but options previously granted shall remain outstanding in
accordance with their applicable terms and conditions and the Plan's terms and
conditions.
4
<PAGE>
11. Plan Amendment. The Board may amend, suspend or terminate the Plan
at any time; provided that no such amendment shall be made without the approval
of the Company's stockholders if such approval is: (a) required to comply with
Section 422 of the Code with respect to Incentive Stock options; (b) required
for purposes of Section 162(m) of the Code; (c) required to comply with New York
Stock Exchange rules and regulations; (d) required to comply with SEC or state
rules and regulations; (e) to increase the number of shares available for
issuance under the Plan; (f) to reduce the minimum exercise price of an option
below Fair Market Value on the date of grant; or (g) to allow Repricings without
shareholder approval. This Plan was unanimously adapted by the Board of
Directors on January 29, 1997.
12. Approval by stockholders. The Plan shall be submitted to the
stockholders of the Company for their approval at a regular meeting to be held
within 12 months after the adoption of the Plan by the Board. Stockholder
approval shall be evidenced by the affirmative vote of the holder of a majority
of the shares of the Company's Common Stock present in person or by proxy and
voting in the meeting.
THREE-FIVE SYSTEMS, INC.
By:
------------------------
Its: Secretary
5
THREE FIVE SYSTEMS, INC.
DIRECTORS' STOCK PLAN
SECTION 1. Purpose
The purpose of the Three Five Systems, Inc. Directors' Stock Plan (the "Plan")
is to further strengthen the alignment of interests between members of the Board
of Directors (the "Board") of Three Five Systems, Inc. (the "Company") and the
Company's stockholders through the increased ownership by non-employee members
of the Board ("Participants") of shares of the Company's common stock ("Common
Stock"). This will be accomplished by requiring Participants to receive a
portion of their fees for services as a Director in shares of Common Stock.
SECTION 2. Administration
The Plan shall be administered by the Board. Subject to the provisions of the
Plan, the Board shall have sole and complete authority to construe and interpret
the Plan; to establish, amend and rescind appropriate rules and regulations
relating to the Plan; to administer the Plan; and to take all such steps and
make all such determinations in connection with the Plan as it may deem
necessary or advisable to carry out the provisions and intent of the Plan. All
determinations of the Board shall be by a majority of its members, and its
determinations shall be final and conclusive for all purposes and upon all
persons, including, but without limitation, the Company, the Participants and
their respective successors in interest.
SECTION 3. Eligibility and Participation
Participation in the Plan shall be limited to Participants. On the date
specified in Section 5, each Participant shall receive shares of Common Stock
equal in value (the "Specified Stock Value") to two-thirds of that Participant's
annual retainer fees. The Common Stock received pursuant to this Plan shall be
received in lieu of the equivalent value of annual retainer fees paid in cash.
SECTION 4. Common Stock Subject to the Plan
The total number of shares of Common Stock initially reserved and available for
distribution under the Plan shall be 20,000, subject to adjustment as herein
provided ("Total Available Shares"). If the number of treasury shares is less
than the Total Available Shares, the Total Available Shares shall be reduced to
the number of treasury shares. All shares distributed under the Plan (a) shall
reduce the Total Available Shares and (b) must be shares previously held by the
Company as treasury shares.
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In the event of any merger, reorganization, consolidation, recapitalization,
Common Stock dividend, Common Stock split or other change in corporate structure
affecting the Common Stock, the Board, in its sole discretion, shall make such
modifications, substitutions or adjustments as it deems necessary to reflect
such change so as to prevent the dilution or enlargement of rights, including,
but not limited to, modifications, substitutions or adjustments in the aggregate
number of shares reserved for issuance under the Plan.
SECTION 5. Issuance of Shares
Shares of Common Stock shall be issued annually under the Plan on the date of
the annual meeting of the shareholders of the Company. The number of shares of
Common Stock to be received by a Participant under the Plan shall be equal to
the Specified Stock Value divided by the closing price of the Common Stock as
reported in the Wall Street Journal (or in such other source as the Board deems
reliable) for the last market trading day prior to the annual meeting of the
Shareholders of the Company.
All shares issued under the Plan, including fractional shares, shall be held in
a book-entry account with the Company's transfer agent unless the Board
designates another person to act in that capacity. Participants may in the
alternative elect to receive a stock certificate representing the number of
whole shares acquired by notifying the Corporate Secretary of the Company in
writing. The Company will make a cash payment to the Participants for any
fractional share in lieu of issuing a stock certificate.
Common Stock acquired under this Plan shall be subject to such other conditions
and restrictions, if any, as the Board may determine.
SECTION 6. Additional Provisions
The Board may, at any time, amend, alter or discontinue the Plan, but no
amendment, alteration or discontinuance shall be made which would impair the
rights of a Participant with respect to shares of Common Stock previously,
distributed to such Participant under the Plan, without the Participant consent,
or which, would cause the Plan not to comply with Rule 16b-3.
With respect to persons subject to Section 16 of the Act, transactions under
this Plan are intended to comply with all applicable conditions of Rule 16b-3
regardless of whether such conditions are set forth in the Plan. To the extent
any provision of the Plan or action by the Board fails to so comply, it shall be
deemed null and void, to the extent permitted by law and deemed advisable by the
Board.
Every recipient of shares pursuant to this Plan shall be bound by the terms and
provisions of this Plan, and the acceptance of any transfer of shares pursuant
to this Plan shall constitute a binding agreement between the recipient and the
Company.
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SECTION 7. Duration of the Plan
The Plan was approved unanimously by the Board on January 29, 1998 and shall
become effective immediately.
THREE-FIVE SYSTEMS, INC.
---------------------------------
Jeffrey D. Buchanan
Secretary
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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 20, 1998
included in Three-Five Systems, Inc.'s Form 10-K/A for the year ended December
31, 1997, and to all references to our firm included in this Registration
Statement.
/s/ ARTHUR ANDERSEN LLP
Phoenix, Arizona,
April 20, 1998
