Document:

<PAGE>   1
                                                                 EXHIBIT 10.5(b)

                            THREE-FIVE SYSTEMS, INC.
                   NOTICE AND ACCEPTANCE OF STOCK OPTION GRANT

         The undersigned ("Optionholder") is an employee of Three-Five Systems,
Inc. (the "Company"), and the Company considers it desirable and in its best
interest that Optionholder be given an inducement to acquire a proprietary
interest in the Company and added incentive to advance the interest of the
Company by possessing an option to purchase the Company's Stock, all in
accordance with the Three-Five Systems, Inc. 1997 Employee Stock Option Plan
(the "Plan") adopted by the Board of Directors of the Company and attached
hereto as Exhibit B. The terms of the grant are as follows:

         1. Grant of Option. As of the grant date (the "Grant Date") specified
in the attached Exhibit A, the Company hereby grants to Optionholder an option
(the "Option") to purchase shares of Stock as set forth on the attached Exhibit
A (the "Optioned Shares"), subject in all respects to the terms, conditions and
provisions of the Plan, which is attached hereto as Exhibit B and incorporated
by reference. Optionholder acknowledges having received and carefully reviewed a
copy of the Plan.

         2. Option Price. The option price (the "Option Price") as determined by
the Plan Administrator is set forth on the attached Exhibit A, which price has
been determined by the Plan Administrator to be not less than 100 percent of the
fair market value per share of the Stock on the date of grant of the option.

         3. Vesting of Option. The time at which the Optioned Shares vest and
Optionholder may exercise the option with respect to such Optioned Shares is set
forth on Exhibit A. Optioned Shares that have vested may be acquired at any
time, and from time to time, in whole or in part, until the Option expires as
provided in Section 4 hereof.

         4. Termination of Option. The Option, to the extent not previously
exercised, shall terminate upon the first to occur of the tenth anniversary of
the Grant Date or as otherwise set forth in the Plan.

         5. No Privilege of Stock Ownership. Optionholder shall not have any of
the rights of a stockholder with respect to the Optioned Shares until
Optionholder shall have exercised the Option, paid the Option Price, and
received a stock certificate for the purchased shares of Stock.

         6. Compliance with Laws and Regulations. The exercise of the Option and
the issuance of the Stock upon such exercise are subject to compliance by the
Company and Optionholder with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange in which the
shares of the Stock may be listed at the time of such exercise and issuance. In
connection with the exercise of the Option, Optionholder may be required to
deliver to the Company such representations in writing as may be needed by the
Company in order for it to comply with applicable requirements of federal and
state securities laws.

         7. No Employment or Service Contract. Nothing in this Notice or in the
Plan shall confer upon Optionholder any right to continue in the service of the
Company (or any parent or subsidiary corporation of the Company employing or
retaining Optionholder) for any period of time or to interfere with or otherwise
restrict in any way the rights of the Company (or any parent or subsidiary
corporation of the Company employing or retaining Optionholder) or Optionholder,
which rights are hereby expressly reserved by each, to terminate the service of
Optionholder at any time for any reason whatsoever, with or without cause.

         8. Notices. Any notice required to be given or delivered to the Company
under the terms of this Notice should be in writing and addressed to the Company
in care of the Corporate Secretary at its principal corporate offices. Any
notice required to be given or delivered to Optionholder will be given at the
resident address indicated in the Company's records.

         THE UNDERSIGNED OPTIONHOLDER HEREBY ACCEPTS THE STOCK OPTION GRANT
DESCRIBED IN THIS NOTICE.

Witnessed:

----------------------------------------   -------------------------------------
                                           Optionholder
<PAGE>   2
                                    EXHIBIT A

              Optionholder:

              Address of Optionholder:

              Grant Date:

              Optioned Shares:

              Option Price:        $

              Vesting Schedule:

              VESTING SCHEDULE "A"

              This option is granted hereunder shall vest such that
              20% of the Optioned Shares shall vest on the first
              anniversary date of the Grant Date; 30% of the
              Optioned Shares shall vest on the second anniversary
              date of the Grant Date; and 50% of the Optioned
              Shares shall vest on the third anniversary date of
              the Grant Date.

              VESTING SCHEDULE "B"

              This option is granted hereunder shall vest such that
              0% of the Optioned Shares shall vest on the first
              anniversary date of the Grant Date; 20% of the
              Optioned Shares shall vest on the second anniversary
              date of the Grant Date; 30% of the Optioned Shares
              shall vest on the third anniversary date of the Grant
              Date; and 50% of the Optioned Shares shall vest on
              the fourth anniversary date of the Grant Date.
<PAGE>   3
                          ACTION OF PLAN ADMINISTRATOR
           OF THREE-FIVE SYSTEMS, INC. 1997 EMPLOYEE STOCK OPTION PLAN

                             Dated: ________________

         The undersigned, having been authorized to act as the Plan
Administrator of the 1997 Employee Stock Option Plan of Three-Five Systems,
Inc., a Delaware corporation (the "Corporation"), pursuant to the unanimous
consent of its Board of Directors, does hereby adopt and approve the following
actions:

         RESOLVED, that the Corporation is authorized, directed and empowered to
         grant stock options to purchase the common stock of Three-Five Systems
         at an option price equal to the fair market value on the date hereof
         (which is $________) to the person and in the amount as listed below:

         OPTIONEE:               NO. OPTIONS:                 VESTING SCHEDULE:

         RESOLVED, that the vesting schedule for each option which has an "A"
         designation shall be 20% on the first anniversary of this date, 30% on
         the second anniversary, and 50% on the third anniversary;

         RESOLVED, that the vesting schedule for each option which has an "B"
         designation shall be 0% on the first anniversary of this date, 20% on
         the second anniversary, and 30% on the third anniversary, and 50% on
         the fourth anniversary;

         RESOLVED, that each of the officers of the Corporation is authorized,
         directed and empowered, for and on behalf of the corporation, to
         execute all documents and do all acts and things deemed necessary or
         appropriate to effect and carry out the foregoing resolutions.

                                          _____________________________________
                                          Jack L. Saltich

                                          _____________________________________
                                          Jeffrey D. Buchanan<PAGE>   1
                                                                    EXHIBIT 10.y

                            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 available 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").
<PAGE>   2
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.

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

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00016-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00016-of-00352.parquet"}]]