ADDENDUM NO. 2 TO
   TECHNOLOGY ELECTRONIC ASSEMBLY AND MANAGEMENT (T.E.A.M) PACIFIC CORPORATION
                                       AND
                            THREE-FIVE SYSTEMS, INC.
      AGREEMENT FOR THE ASSEMBLY OF OPTOELECTRIC AND OTHER RELATED PRODUCTS



THIS ADDENDUM NO. 2 TO THE AGREEMENT FOR THE ASSEMBLY OF OPTOELECTRIC  AND OTHER
RELATED  PRODUCTS  ("Addendum  No.  2") is  entered  into  as of the  1st day of
January,  1998, by and between  TECHNOLOGY  ELECTRONIC  ASSEMBLY and  MANAGEMENT
(T.E.A.M.) PACIFIC CORPORATION, a Philippine Corporation, with principle offices
located at FTI Complex, Taguig Metro Manila,  Philippines  (hereinafter referred
to as "TEAM") and THREE-FIVE SYSTEMS, INC., a Delaware, U.S.A. corporation, with
its  principle  place of business  located at 1600 North  Desert  Drive,  Tempe,
Arizona 85281 (hereinafter referred to as "TFS").

                                    RECITALS

         A. On February  1995,  TEAM and TFS  entered  into an  agreement  ("the
"Original  Agreement")  for the  manufacture of  optoelectric  and other related
products(  hereinafter  referred  to as  "Products").  On March  12,  1997,  the
Original Agreement was amended (the "Addendum No. 1").

         B.  TEAM  and TFS now  wish to add a second  addendum  to the  Original
Agreement.

         In  consideration  of  the  foregoing  recitals  and  mutual  covenants
hereinafter set forth, the parties hereto hereby agree as follows:

                                    AGREEMENT

Section 1 Definitions.

The following terms are used in this Addendum No. 2:

         1.1  Contract  Exchange  Rate:  Shall be defined as the  exchange  rate
identified in Section V of the Original  Agreement  (US$1.00 = 27.00  Philippine
Pesos).

         1.2 Spot Exchange  Rate:  Shall be defined as the actual  exchange rate
reported  in the  Western  Edition of the Wall  Street  Journal on date prior to
invoice payment date.

         1.3  Contract  Amount:  Shall  be  in  accordance  with  Section  V (B)
calculations of the Original Agreement as modified by Addendum No. 1.

         1.4  Contract  Period:  Shall  commence as of February 22, 1995 and run
through any applicable payment date.

         1.5 Lease Amount:  Shall be the US$21,384  amount that TFS pays to Team
monthly for rent pursuant to the Lease Agreement between the parties.

         1.6 Contract  Amount Gain:  Shall be defined as the excess (or deficit,
as the case  may be)  amount  of  money  accrued  by TFS on the  payment  of the
Contract Amount as the result of the payment of such Contract Amount being fixed
in Pesos at the Contract Exchange Rate and the Spot Exchange Rate of Pesos to US
dollars  being higher or lower than the Contract  Exchange  Rate.  To illustrate
this situation,  
<PAGE>
shown  below is a  sample  computation  assuming  that the  invoiced  amount  is
US$500,000  and that the Spot Exchange Rate at the time of invoicing was US$1.00
= 30.00 Philippine Pesos.

           Invoice amount                       US    $      500,000.00
           Multiply by Contract Exchange Rate   X                 27.00
                                                -----------------------
           Invoice Amount in Pesos              PHP       13,500,000.00
           Divide by Spot Exchange Rate         /                 30.00
                                                -----------------------
           Contract Amount to be paid in USD    US    $      450,000.00

           Contract Amount Gain                 US    $       50,000.00
                                                =======================

         1.7 Lease  Amount  Gain  (Loss):  Shall be  defined  as the  excess (or
deficit,  as the case may be) amount of money  accrued by Team on the receipt of
the Lease  Amount as the result of the payment of such Lease  Amount being fixed
in dollars and the Spot  Exchange  Rate of Pesos to US dollars  being  higher or
lower than the Contract Exchange Rate. To illustrate this situation, shown below
is a sample  computation  assuming  that the Spot  Exchange  Rate at the time of
invoicing  was US$1.00 = 30.00  Philippine  Pesos as compared  with the Contract
Exchange Rate of US$1.00 = 27.00:

             Lease Amount                         US    $    21,384.00
             Multiply by Contract Exchange Rate   X              27.00
                                                  --------------------
             Lease Amount in Peso                 PHP       577,368.00
             Divided By Spot Exchange Rate        /              30.00
                                                  --------------------
             Lease Amount In Dollars              US    $    19,241.00

             Lease Amount Gain                    US    $     2,138.00
                                                  ====================

         1.8 Net Exchange  Rate Gain (Loss):  Shall be defined as the sum of the
Contract Amount Gain (Loss) and the Lease Amount Gain (Loss).

Section 2 Responsibility and Payment for Net Exchange Rate Gain and Loss

         2.1 Contract  Amount Gain. TFS will retain 100% of all Contract  Amount
Gains up to the date until all prior Contract Amount Losses incurred by TFS have
been offset against all such Contract Amount Gains.  Upon the occurrence of this
offset event, TFS will thereafter pay TEAM an amount equal to (a) 30% of the Net
Exchange  Rate Gain existing for any given  invoicing  period less (b) the Lease
Amount Gain for that same period.  As of the date of this Agreement,  the offset
date occurred as described in Attachment A.

         2.2 Net Exchange Rate Loss.  From and after the date of this Agreement,
upon the  occurrence of a Contract  Amount Loss,  TEAM will pay to TFS an amount
equal to (a) 30 percent of the Net  Exchange  Rate Loss  existing  for any given
invoicing  period less (b) the Lease Amount Loss for the same period.  Team will
only be required to make payments  under this Section 2.2 until the amounts paid
by TEAM pursuant to this Section 2.2 equal the amounts received by TEAM pursuant
to Section 2.1.  Thereafter,  TFS will bear 100 percent of the  Contract  Amount
Loss.

         2.3 Catch Up. The  calculation of the payments due under this Agreement
as of February 4, 1998 is set forth on  Attachment A of this  Addendum No. 2 and
shall be paid immediately upon the signing of this Addendum No. 2.
                                       2
<PAGE>
Section 3 Integration

         To the extent  that this  Addendum  No. 2 conflicts  with the  Original
Agreement or Addendum No. 1, this Addendum No. 2 shall control.  Otherwise,  the
Original Agreement, Addendum No. 1 and this Addendum No. 2 will be considered as
one document.


         The parties  hereto have  executed this Addendum as of the day and year
first above written.




          THREE-FIVE SYSTEMS, INC                     TEAM PACIFIC CORPORATION

          By:                                         By:   
                --------------------                        --------------------
          Name:                                       Name: 
                --------------------                        --------------------
          Its:                                        Its:  
                --------------------                        --------------------
                                       3