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.

                                     1 of 2
<PAGE>
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
                                   ------------------------------
                                   Jeffrey D. Buchanan, Secretary

                                     2 of 2