THREE FIVE SYSTEMS, INC.
AMENDED AND RESTATED DIRECTORS' STOCK PLAN
(AMENDED AS OF JANUARY 27, 2000)
SECTION 1. ADOPTION AND PURPOSE
(a) ADOPTION. On January 29, 1998, the Board of Directors (the "Board") of
Three-Five Systems, Inc., a Delaware corporation (the Company"), adopted the
Director's Stock Plan (the "Original Plan"). The Original Plan did not require
stockholder approval because it used the Company's available treasury shares of
Common Stock. On January 27, 2000, the Board adopted certain amendments to the
Original Plan because the Company's treasury shares were issued in the equity
offering in September 1999 and, consequently, no shares remained in the Original
Plan. The amended and restated Plan must be approved by the stockholders of the
Company within one year of the date of its adoption by the Board. The amended
and restated Plan shall be known as the Three-Five Systems, Inc. Amended and
Restated Directors' Stock Plan (the "Plan").
(b) PURPOSE. The purpose of the Three Five Systems, Inc. Directors' Stock
Plan is to further strengthen the alignment of interests between members of the
Board of Three Five Systems, Inc. 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 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 Board may from time to time determine. 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").
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.
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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.
SECTION 7. DURATION OF THE PLAN
The Original Plan was approved unanimously by the Board on January 29, 1998. The
Amended and Restated Plan was approved unanimously by the Board on January 27,
2000.
THREE-FIVE SYSTEMS, INC.
/s/ Jeffrey D. Buchanan
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Jeffrey D. Buchanan, Secretary
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