Document:

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                                                                   Exhibit 10(a)

                       EMPLOYMENT AND SEPARATION AGREEMENT

     This EMPLOYMENT AND SEPARATION AGREEMENT ("Agreement") is entered into as
of this 8th day of April, 2003, by and between Cleveland-Cliffs Inc (the
"Company") and Thomas J. O'Neil (the "Executive").

     WHEREAS, the Company and the Executive have arrived at a satisfactory
agreement regarding the basis upon which the employment of the Executive with
the Company will continue until his retirement; and

     WHEREAS, the Company and the Executive desire to set forth in a written
agreement the terms and provisions of the continued employment and retirement of
the Executive and certain benefits to be provided to the Executive under certain
circumstances;

     NOW THEREFORE, in consideration of the foregoing, the mutual covenants and
agreements set forth in this Agreement and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
Company and the Executive agree as follows:

SECTION 1. CONTINUED EMPLOYMENT.

     1.1 EMPLOYMENT AT WILL. The Company and the Executive agree that the
employment of the Executive has been and will continue to be "at will" such that
the Executive can quit at any time without prior notice to the Company and the
Company can terminate the employment of the Executive at any time without prior
notice to the Executive.

     1.2 EMPLOYMENT UNTIL JULY 1, 2003. Subject to the provisions of Section 1.1
hereof, the Company and the Executive agree that it is intended that the
Executive will continue in his current position of President and Chief Operating
Officer of the Company until July 1, 2003 at

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the same level of compensation and benefits which currently apply to the
Executive, except that the Board of Directors may, in its discretion, grant an
increase in base salary to the Executive at any time, and except that all
compensation programs and benefits programs applicable to the Executive can be
amended or terminated by the Company at any time.

     1.3 EMPLOYMENT ON AND AFTER JULY 1, 2003. The Company and the Executive
agree that it is intended that the Executive will cease to be the President and
Chief Operating Officer of the Company on July 1, 2003 but will continue to be a
full-time employee of the Company until June 30, 2004. Subject to the provisions
of Section 1.1 hereof, commencing on July 1, 2003 and continuing until June 30,
2004, the Executive shall be employed as President of Cliffs International
Division, which position is not an elected officer position. It is intended that
the Executive will be based in Arizona during this period and will be entitled
to the following salary, bonus, and incentive compensation for such period:

     (a)  the Executive will be paid his annual base rate of salary of $350,000
          for the period July 1, 2003 to June 30, 2004:

     (b)  the Executive will participate in the Company's annual bonus program,
          the Management Performance Incentive Plan, for 2003 on the basis of
          his performance through June 30, 2003 on a pro-rata basis;

     (c)  the Executive will not participate in such Management Performance
          Incentive Plan with respect to his service after June 30, 2003 or
          during 2004;

     (d)  the Executive has not received and will not receive any grants of
          performance shares under the Company's Performance Share Plan for
          calendar year 2003 and 2004; and

     (e)  if the Executive remains in the employ of Cleveland-Cliffs Inc until
          June 30, 2004, all performance shares held by the Executive under the
          Company's Performance Share Plan which have not previously vested will
          become fully vested on June 30, 2004 and will be valued and paid as
          otherwise provided in the Plan.

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Notwithstanding the terms and provisions of the letter to the Executive dated
February 9, 2001 under the Company's Special Executive Retention Program, the
Executive will not receive the second retention payment which would be payable
on or after March 31, 2004 and the Executive hereby waives his right to receive
such second retention payment.

     Except as provided above and subject to the provisions of Section 1.1
hereof, the Executive shall continue to participate in all compensation and
employee benefit programs of the Company recognizing however that all such
compensation programs and benefits programs applicable to the Executive can be
amended or terminated by the Company at any time.

SECTION 2. RETIREMENT, TERMINATION OF EMPLOYMENT, OR DEATH.

     2.1 RETIREMENT DATE. The Company and the Executive agree that the
Executive's employment with the Company will terminate as of June 30, 2004 (the
"Retirement Date").

     2.2 TERMINATION ON THE RETIREMENT DATE. In the event the Executive
terminates employment with the Company on the Retirement Date and executes the
Release of All Claims described in Section 5.2 hereof, the Executive will be
entitled to receive the Special Benefits set forth in Section 3 hereof.

     2.3 TERMINATION BY THE COMPANY WITHOUT CAUSE PRIOR TO THE RETIREMENT DATE.
In the event the Company terminates the employment of the Executive without
Cause prior to the Retirement Date and the Executive executes the Release of All
Claims described in Section 5.2 hereof, the Executive will be entitled to
receive the compensation and benefits described in Sections 1.2 and 1.3 hereof
and the Special Benefits set forth in Section 3 hereof. For purposes of this
Agreement "Cause" shall mean only (i) Executive's willful failure to perform his
duties under this Agreement within a reasonable period of time after receipt of
written notice from the Company setting forth in reasonable detail the duties
which Executive has failed to perform and

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the corrective actions expected of him; (ii) a breach of Executive's duty of
loyalty to the Company, including but not limited to a breach of Executive's
obligations under Section 6 below; (iii) indictment for, conviction of, or
written confession to a crime against the Company or a crime which otherwise
materially adversely affects Executive's ability to perform his obligations
under this Agreement, any business relationships which the Company maintains or
the general reputation and good will of the Company.

     2.4 TERMINATION BY THE COMPANY WITH CAUSE OR BY THE EXECUTIVE FOR ANY
REASON PRIOR TO THE RETIREMENT DATE. In the event the Company terminates the
employment of the Executive with Cause, as defined in Section 2.3 hereof, prior
to the Retirement Date, the Executive will not be entitled to receive the
Special Benefits set forth in Section 3 hereof. In the event the Executive
terminates his employment with the Company for any reason other than death prior
to the Retirement Date, the Executive will also not be entitled to receive the
Special Benefits set forth in Section 3 hereof.

     2.5 DEATH PRIOR TO THE RETIREMENT DATE. In the event the Executive does not
otherwise terminate employment and dies prior to the Retirement Date, his
spouse, if she is same spouse as the Executive is married to on the date of this
Agreement, shall be entitled to the Medical Benefit described in Section 4.2
hereof.

     2.6 DEATH AFTER THE RETIREMENT DATE. In the event the Executive terminates
employment with the Company on the Retirement Date and dies thereafter, his
spouse, if she is same spouse as the Executive is married to on the date of this
Agreement, shall be entitled to receive the Medical Benefits described in
Section 4.2 hereof.

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SECTION 3. SPECIAL BENEFITS.

     3.1 SPECIAL RETIREMENT BENEFITS. If the Executive retires pursuant to
Section 2.2 hereof or is terminated by the Company pursuant to Section 2.3
hereof and the Executive executes the release described in Section 5.2 hereof,
the Company will pay the Executive a supplemental retirement benefit commencing
on the first day of the month next following his date of retirement or
termination of employment a monthly amount equal to the monthly amount of his
unreduced accrued retirement benefit under The Pension Plan For Employees Of
Cleveland-Cliffs Inc And Its Associated Employers ("Qualified Pension Plan").
Such monthly benefit shall be paid until the month before the month in which the
Executive is first eligible to receive an unreduced retirement benefit under the
Qualified Pension Plan at which time the payments under this Agreement shall
cease. At the election of the Company such amount may be paid under the
Cleveland-Cliffs Inc Supplemental Retirement Benefit Plan or may be paid
separately by the Company.

     3.2 CONTINUATION OF ARRANGEMENT WITH AYCO. The Company hereby agrees that,
unless this Agreement is terminated pursuant to Section 2.4 hereof, the
Executive will continue to be provided with personal financial planning services
by AYCO until December 31, 2005 and shall be provided with personal tax return
preparation services by AYCO for the Executive's taxable years ending in 2003,
2004, and 2005.

     3.3 EXPENSES AS 2003 PRESIDENT OF SOCIETY FOR MINING, METALLURGY AND
EXPLORATION. The Company agrees that, unless this Agreement is terminated
pursuant to Section 2.4 hereof, the Company shall pay all reasonable travel
expenses which the Executive shall incur as the President of the Society for
Mining, Metallurgy and Exploration during his term of office as 2003 President
of the Society.

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SECTION 4. RETIREE MEDICAL BENEFITS

     4.1 RETIREE MEDICAL BENEFITS FOR THE EXECUTIVE. The Company will, in
accordance with a letter dated May 20, 1997 from Mr. M. Thomas Moore, Chairman
and Chief Executive Officer of Cleveland-Cliffs Inc to the Executive, provide
retiree medical coverage to the Executive and his spouse and dependents, if any,
on the same terms and conditions as retiree medical benefits are being provided
to retired salaried employees of the Company subject to the right of the Company
to amend or terminate retiree medical benefits at any time and subject to all
conditions specified in such May 20, 1997 letter. In order to be covered by such
retiree medical benefits, the Executive must make such contribution to the cost
of such coverage as is being paid by other retired salaried employees of the
Company. In the event that the Executive shall fail to timely make such required
contributions, the retiree medical coverage under this Agreement shall cease.
The Executive may elect to have the payments under Section 3.1 hereof and the
payments under the Qualified Plan reduced by the amount of such contributions.

     In the event that the Company shall establish different retiree medical
programs for different groups of retired salaried employees or provide for
different contribution levels for different groups of salaried employees, the
Executive shall be covered by the retiree medical program and the contribution
level which applies to retired salaried employees whose dates of hire and
service most closely resemble the date of hire and service of the Executive.
Executive may, however, be allowed to choose alternative levels of retiree
medical coverage and contribution levels, if such alternative levels are made
available by the Company to others under its salaried retiree medical plan.

     4.2 SPOUSAL MEDICAL BENEFITS. In the event that the Executive dies under
the circumstances described in Section 2.5 hereof, the Company shall, in
accordance with a letter

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dated May 20, 1997 from Mr. M. Thomas Moore, Chairman and Chief Executive
Officer of Cleveland-Cliffs Inc to the Executive, provide retiree medical
coverage to the spouse of the Executive at the time of his death, if she is the
same person who was his spouse on the date of execution of this Agreement on the
same terms and conditions as retiree medical benefits are being provided to
surviving spouses of deceased salaried employees of the Company subject to the
right of the Company to amend or terminate retiree medical benefits at any time.
In the event that the Executive dies under the circumstances described in
Section 2.6 hereof at a time when the Executive is covered by retiree medical
benefits for himself and his dependents, the Company shall provide retiree
medical coverage to the spouse of the Executive at the time of his death, if she
is the same person who was his spouse on the date of execution of this Agreement
on the same terms and conditions as retiree medical benefits are being provided
to surviving spouses of deceased retired salaried employees of the Company
subject to the right of the Company to amend or terminate retiree medical
benefits at any time. In order to be covered by such spousal retiree medical
benefits, the spouse must make such contribution to the cost of such coverage as
is being paid by other surviving spouses of deceased retired salaried employees
of the Company. In the event that the spouse of the Executive shall fail to
timely make such required contributions, the spousal retiree medical coverage
under this Agreement shall cease. The surviving spouse of the Executive may
elect to have the payments to her under the Qualified Plan, if any, reduced by
the amount of such contributions.

SECTION 5. RELEASE OF ALL CLAIMS.

     5.1 RELEASE AS OF DATE OF THIS AGREEMENT. By executing this Agreement, the
Executive hereby fully releases and forever discharges the Company, its
Affiliates and Successors, and their officers, directors, shareholders, agents,
representatives, and employees,

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from any and all claims, debts, liabilities, demands and obligations, known and
unknown (hereinafter collectively referred to as "claims") of any kind,
character and nature which the Executive has or arguably may have now or in the
future against the Company and any of the entities or persons identified above,
especially, but not limited to, those matters which may arise out of or in any
way relate to the Executive's employment with the Company and which occurred
from the beginning of time until the date of the execution of this Agreement.
This release is intended to be broadly construed to encompass all possible legal
and equitable claims, and is intended to include, but not to be limited to,
claims brought under the Age Discrimination in Employment Act of 1967, which
prohibits age discrimination in employment; Title VII of the Civil Rights Act of
1964 as amended by the Civil Rights Act of 1991, which prohibits discrimination
in employment based on race, color, national origin, religion, sex; the
Americans with Disabilities Act, which prohibits discrimination against
individuals with disabilities; Fair Labor Standards Act of 1938, as amended; the
Family and Medical Leave Act of 1993, the Civil Rights Attorney's Fees Awards
Act of 1976; or any other federal, state or local laws or regulations
prohibiting employment discrimination or restricting an employer's right to
terminate employees. This Release also includes any state or federal claims for
wrongful discharge, breach of contract, breach of promise, breach of public
policy, or any claim of wrongful doing arising out of Executive's employment or
the termination of the Executive's employment. The Executive warrants and
represents that he understands and acknowledges the significance and
consequences of this release and waiver, that the Executive has been advised of
his right to consult with an attorney for information and advice concerning such
release and waiver, and that such release and waiver is freely and voluntarily
given. This Release is intentionally broad but is not intended to release any
claims the Executive may have for vested accrued benefits under any

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compensation program or employee benefit program of the Company provided that
such claims for benefits have not been denied prior to the date of execution of
this Agreement.

     The Executive further warrants and acknowledges that he has been given a
reasonable period of time of at least twenty-one (21) days within which to
consider the terms of this Agreement and that the Executive has carefully read,
understood and agreed to each and every provision contained in this Agreement.

     5.2 RELEASE ON JUNE 30, 2004. The Company agrees to provide and Executive
agrees to execute and deliver to the Company an additional release in form and
substance similar to Section 5.1 hereof on June 30, 2004.

     5.3 RIGHT TO REVOKE RELEASES. The Executive shall have seven (7) days from
the date of his execution of this Agreement within which to revoke the
Agreement. Said revocation shall be in writing and delivered to the Company. If
the Executive revokes the Agreement, all provisions of the Agreement will be
null and void.

     The Executive shall have seven days from the date that he delivers the
release described in Section 5.2 hereof to revoke such Release. Failure to
deliver such Release or revocation of such Release will terminate the obligation
of the Company to provide any of the Special Benefits to the Executive described
in Section 3 hereof.

     5.4 RELEASE DOES NOT APPLY TO CLAIMS FOR INDEMNIFICATION OR INSURANCE
AGAINST THIRD PARTY CLAIMS AGAINST THE EXECUTIVE. The Release contained in
Section 5.1 hereof and the Release described in Section 5.2 hereof shall not
release claims which the Executive may have against the Company or against any
insurance contract purchased by the Company for indemnification against claims
against the Executive by a third party arising out of his service as an officer
or employee of the Company or his service at the request of the Company as a

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director, trustee, officer, employee or agent of another corporation, domestic
or foreign, nonprofit or for profit, partnership, joint venture, trust or other
enterprise.

SECTION 6. COVENANTS.

     6.1 DISCLOSURE OR USE OF INFORMATION. The Executive will at all times
during and after the term of his employment by the Company keep and maintain the
confidentiality of all Confidential Information and will not at any time either
directly or indirectly use such information for his own benefit or otherwise
divulge, disclose or communicate such information, except as required by law, to
any person or entity in any manner whatsoever other than employees or agents of
the Company or its Affiliates who have a need to know such information and then
only to the extent necessary to perform their responsibilities on behalf of the
Company or its Affiliates. As used herein, "Confidential Information" will mean
any and all information (EXCLUDING INFORMATION IN THE PUBLIC DOMAIN) which
relates to the business of the Company and its Affiliates including without
limitation all patents and patent applications, copyrights applied for, issued
to or owned by the Company or any of its Affiliates, inventions, trade secrets,
computer programs, proprietary engineering and technical data, drawings or
designs, proprietary manufacturing techniques, information concerning pricing
and pricing policies, marketing techniques, suppliers, proprietary methods and
manner of operations, and information relating to the identity and/or location
of all past, present and prospective customers of the Company and its
Affiliates.

     6.2 CO-OPERATION. During the term of his employment by the Company after
the date this Agreement is executed and for a period of twenty-four (24) months
following the Retirement Date, the Executive will not attempt to induce any
employee of the Company or an Affiliate to terminate his or her employment with
the Company or an Affiliate nor will he take any action

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with respect to any of the suppliers or customers of the Company and its
Affiliates which would have or might be likely to have an adverse effect upon
the business of the Company and its Affiliates. Executive hereby agrees not to
make any statement or take any action, directly or indirectly, except as
required by law, that will disparage or discredit the Company and its
Affiliates, their Officers, Directors of the Company, their employees or any of
their products, or in any way damage their reputation or ability to do business
or conduct their affairs. Executive agrees that subsequent to the Retirement
Date he will, in conjunction with a Company request, reasonably co-operate with
the Company in connection with transition matters, disputes and litigation
matters upon reasonable notice, at reasonable times, and will be paid or
reimbursed for reasonable expenses incurred by the Executive relating to such
matters.

     6.3 NON-COMPETITION. The Executive hereby agrees that the Executive will
not, for a period of two (2) years after June 30, 2004, directly or indirectly,
for himself or for others, in any state of the United States or in any foreign
country where the Company or any of its Affiliates (as defined below) is then
conducting business:

          (1)  engage, as an employee, partner, or sole proprietor, in any
               business segment of any person or entity which competes, directly
               or indirectly, with the product lines of the Company or its
               Affiliates; or

          (2)  in connection with any product lines of the Company or its
               Affiliates, render advice, consultation, or services to or
               otherwise assist any other person or entity which competes,
               directly or indirectly, with the Company or any of its Affiliates
               with respect to such product lines.

     The Executive understands that the foregoing restrictions may limit his
ability to engage in certain business pursuits during the period provided for
above, but acknowledges that he will receive sufficiently higher Special
Benefits from the Company than he would otherwise receive to justify such
restriction. The Executive acknowledges that he understands the effect of

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the provisions of this Agreement, that he has had reasonable time to consider
the effect of these provisions, and that he was encouraged to and had an
opportunity to consult an attorney with respect to these provisions. The Company
and the Executive consider the restrictions contained in this Agreement to be
reasonable and necessary. Nevertheless, if any aspect of these restrictions is
found to be unreasonable or otherwise unenforceable by a Court of competent
jurisdiction, the parties intend for such restrictions to be modified by such
Court so as to be reasonable and enforceable and, as so modified by the Court,
to be fully enforced.

     6.4 INJUNCTIVE RELIEF. In the event of a breach of any of the provisions of
this Section 6 by the Executive, the Company will be entitled to preliminary and
permanent injunctive relief, without bond or security, sufficient to enforce the
provisions thereof and the Company will be entitled to pursue such other
remedies at law or in equity as it deems appropriate.

SECTION 7. MISCELLANEOUS.

     7.1 DEFINITIONS.

          a.   The term "Affiliate" shall mean any entity controlling,
               controlled by or under common control with the Company,
               including, but not limited to, divisions and subsidiaries of the
               Company.

          b.   The term "Successor" will include any person, firm, corporation
               or business entity which acquires all or substantially all of the
               assets or succeeds to the business of the Company.

     7.2 TAX WITHHOLDING. The Company may withhold from any benefits payable
under this Agreement all federal, state, city, or other taxes as may be required
pursuant to any law or governmental regulation or ruling.

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     7.3 GOVERNING LAW. To the extent not preempted by federal law, the
provisions of this Agreement will be construed and enforced in accordance with
the laws of the State of Ohio.

     7.4 SUCCESSORS. This Agreement is personal to the Executive and will not be
assignable by him without the prior written consent of the Company except that
he can assign any payments under this Agreement (but not any of his obligations
under this Agreement) to his spouse or to his estate. This Agreement may be
assigned or transferred to and will be binding upon and inure to the benefit of
any Successor of the Company.

     7.5 ENTIRE AGREEMENT. As of the execution date of this Agreement, the
Company and the Executive agree that this Agreement shall become effective as of
July 1, 2003 and shall replace the Management Agreement dated August 17, 1998
between the Company and the Executive as of the Retirement Date if and only if
the Executive terminates employment with the Company on the Retirement Date. If
and when this Agreement has become effective, it shall supersede any other prior
agreements or understandings, oral or written, between the Executive and the
Company with respect to the subject matter hereof and shall constitute the
entire agreement of the parties with respect thereto.

     7.6 MODIFICATION. This Agreement will not be varied, altered, modified,
canceled, changed, or in any way amended except by mutual agreement in a written
instrument executed by the Company and the Executive or their legal
representatives.

     7.7 EXECUTION OF AGREEMENT. In executing this Agreement, the parties
acknowledge that they do so freely and voluntarily after having had ample time
to fully consider and reflect upon their decision to enter into this Agreement,
and not as a result of any duress, fraud or undue influence exerted by either
party upon the other. In addition, the Executive acknowledges that he has read
this Agreement carefully, that he has been advised by the Company to consult an

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attorney or other independent advisor of his own choosing, and that he has
determined that it is in his best interest to enter into this Agreement.

     7.8 PERIODS FOR CONSIDERATION AND REVOCATION. The Executive acknowledges
that he has been given the right to a period of at least twenty-one (21) days,
if he so desires, within which to consider entering into this Agreement and that
he further has seven (7) days following execution of this Agreement to revoke
it. This Agreement shall not become effective or enforceable until the date the
revocation period has expired.

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     IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement as of the day and year first above written.

CLEVELAND-CLIFFS INC

By: /s/John S. Brinzo
    -----------------------------------

And:___________________________________

    /s/ Thomas J. O'Neil
  __________________________
     THOMAS J. O'NEIL<PAGE>
                                                                    EXHIBIT 10.6

                            THREE-FIVE SYSTEMS, INC.
                              AMENDED AND RESTATED
                         1997 EMPLOYEE STOCK OPTION PLAN
               (AS AMENDED AND RESTATED THROUGH NOVEMBER 27, 2002)
                                (as corrected)

SECTION  1. ADOPTION AND PURPOSE OF PLAN

         (a) ADOPTION. On May 12, 1997, the Board of Directors (the "Board") of
Three-Five Systems, Inc., a Delaware corporation (the Company"), adopted the
1997 Employee Stock Option Plan (the "Original Plan"). The Original Plan did not
require stockholder approval. Under the Original Plan, there were 100,000 shares
of stock issuable. In December 1999, a stock dividend increased the shares
issuable under the Original Plan to 133,333. On January 27, 2000, the Board
adopted an amendment to the Original Plan to (i) increase the available options
to be issued thereunder by an additional 100,000 shares and (ii) impose, for
purposes of Internal Revenue Code Section 162(m), and annual grant limitation
under this Plan of 100,000 shares. In April 2000, a stock dividend increased the
shares issuable under the amended Original Plan to 350,000. On August 3, 2000,
the Board unanimously approved an amendment to the Original Plan to increase the
available options to be issued thereunder by an additional 300,000 shares. On
February 12, 2001, the Board unanimously approved an amendment to the Original
Plan to increase the available options to be issued thereunder by an additional
500,000 shares and to give the Plan Administrator the power to extend the period
of an option's exercisability upon the cessation of Service of an Optionee. On
August 2, 2002, the Board unanimously approved an amendment to the Original Plan
to increase the available options to be issued thereunder by an additional
200,000 shares. On November 27, 2002, the Board unanimously approved an
amendment to the Original Plan to increase the available options to be issued
thereunder by an additional 750,000 shares. Those amendments did not require
stockholder approval and were effective immediately. As a result, the total
number of shares issuable under the Plan is 2,100,000. The amended and restated
Plan shall be known as the Three-Five Systems, Inc. Amended and Restated 1997
Employee Stock Option Plan (the "Plan").

         (b) GENERAL PURPOSE. The purpose of the Plan is to further the
interests of Three-Five Systems, Inc., a Delaware corporation (the "Company"),
and its stockholders by encouraging employees associated with the Company (or
parent or subsidiary corporations of the Company) to acquire shares of the
Company's common stock, thereby acquiring a proprietary interest in its business
and an increased personal interest in its continued success and progress. Such
purpose shall be accomplished by providing for the granting of options to
acquire the Company's common stock ("Options"). A "parent corporation" for
purposes of this Plan is any corporation in the unbroken chain of corporations
ending with the employer corporation, where, at each link of the chain, the
corporation and the link above owns at least 50 percent of the combined total
voting power of all classes of the stock in the corporation in the link below. A
"subsidiary corporation" for purposes of this Plan is any corporation in the
unbroken chain of corporations starting with the employer corporation, where, at
each link of the chain, the corporation and the link above owns at least 50
percent of the combined voting power of all classes of stock in the corporation
below.

                  (i) Options. All Options granted under this Plan will be
         nonqualified options and shall not be "incentive stock options" as
         defined in section 422 of the Code.

                  (ii) Duration of Plan. The term of the Plan is 10 years
         commencing on the date of adoption of the Plan by the Board. No Option
         shall be granted under the Plan unless granted within 10 years of the
         adoption of the Plan by the Board, but Options outstanding on that date
         shall not be terminated or otherwise affected by virtue of the Plan's
         expiration.

SECTION  2. STOCK AND MAXIMUM NUMBER OF SHARES SUBJECT TO PLAN

         (a) Description of Stock and Maximum Shares Allocated. The stock
subject to the provisions of the Plan and issuable upon the grant of Options
granted under the Plan is shares of the Company's common stock, $.01 par value
per share (the "Stock"), which may be either unissued or treasury shares, as the
Board may from time to time determine. Subject to adjustment as provided in
Section 7 hereof, the aggregate number of shares of Stock covered by the Plan
and issuable thereunder as of November 27, 2002 shall be 2,100,000 shares of
Stock. The

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aggregate number of shares of Stock that may be covered by options granted to
any one individual in any year shall not exceed 100,000.

         (b) Calculation of Available Shares. For purposes of calculating the
maximum number of shares of Stock that may be issued under the Plan, the shares
issued (including the shares, if any, withheld for tax withholding requirements)
upon exercise of an Option shall be counted.

         (c) Restoration of Unpurchased Shares. If an Option expires or
terminates for any reason prior to its exercise in full and before the term of
the Plan expires, the shares of Stock subject to, but not issued under, such
Option shall, without further action or by or on behalf of the Company, again be
available under the Plan. If shares of Stock are used to pay for the exercise
price, those shares shall be added to the shares available under the Plan.

SECTION  3. ADMINISTRATION; APPROVAL; AMENDMENTS

         (a) General Administration. The power to administer the Plan with
respect to Eligible Persons shall be vested exclusively with the Board.

         (b) Plan Administrator. The Board shall be referred to herein as the
"Plan Administrator." The Board may, at any time, appoint a committee of one or
more persons who are members of the Board and delegate to that committee the
power to administer the Plan. Members of such committee shall serve for such
period of time as the Board may determine and shall be subject to removal by the
Board at any time. The Board may, at any time, terminate the functions of any
such committee and reassume all powers and authority previously delegated to
that committee. The Plan Administrator shall have the authority and discretion
to select which Eligible Persons shall participate in the Plan, to grant Options
under the Plan, to establish such rules and regulations as they may deem
appropriate with the proper administration of the Plan and to make such
determinations under, and issue such interpretations of, the Plan and any
outstanding Option as they may deem necessary or advisable. Decisions of the
Plan Administrator shall be final and binding on all parties who have an
interest in the Plan or any outstanding Option.

         (c) Approval of Plan. This Plan shall not require the approval of the
stockholders of the Company and shall be effective as of the date adopted by the
Board.

         (d) Amendments to Plan. The Board may, without action on the part of
the Company's stockholders, make such amendments to, changes in and additions to
the Plan as it may, from time to time, deem necessary or appropriate and in the
best interests of the Company; provided, the Board may not, without the consent
of the Optionholder, take any action which adversely affects or impairs the
rights of the Optionholder of any Option outstanding under the Plan.

SECTION  4. PARTICIPANTS

         (a) Eligibility and Participation. Options may be granted only to
persons ("Eligible Persons") who at the time of grant are employees of or
consultants to the Company or parent or subsidiaries of the Company; provided,
however, that any person that is an Affiliate shall not be an Eligible Person
under this Plan. The Plan Administrator shall have full authority to determine
which Eligible Persons in its administered group are to receive Option grants
under the Plan, the number of shares to be covered by each such grant, the time
or times at which each such Option is to become exercisable, and the maximum
term for which the Option is to be outstanding.

         (b) Guidelines for Participation. In designating and selecting Eligible
Persons for participation in the Plan, the Plan Administrator shall consult with
and give consideration to the recommendations and criticisms submitted by
appropriate managerial and executive officers of the Company. The Plan
Administrator also shall take into account the duties and responsibilities of
the Eligible Persons, their past, present and potential contributions to the
success of the Company and such other factors as the Plan Administrator shall
deem relevant in connection with accomplishing the purpose of the Plan.

                                       2
<PAGE>

SECTION  5. TERMS AND CONDITIONS OF OPTIONS

         (a) Allotment of Shares. The Plan Administrator shall determine the
number of shares of Stock to be optioned from time to time and the number of
shares to be optioned to any Eligible Person (the "Optioned Shares"). The grant
of an Option to a person shall neither entitle such person to, nor disqualify
such person from, participation in any other grant of Options under this Plan or
any other stock option plan of the Company.

         (b) Exercise Price. Upon the grant of any Option, the Plan
Administrator shall specify the option price per share. In no event may the
option price per share specified by the Plan Administrator be less than 100
percent of the fair market value per share of the Stock on the date the Option
is granted.

         (c) Calculation of Fair Market Value of Stock. The fair market value of
a share of Stock on any relevant date shall be the closing selling price per
share of Stock on the date in question on the stock exchange determined by the
Board to be the primary market for the Stock, as such price is officially quoted
in the composite tape of transactions on such exchange. If there is no reported
sale of Stock on such exchange on the date in question, then the fair market
value shall be the closing selling price on the exchange on the last preceding
date for which such quotation exists.

         (d) 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, including the terms and
conditions of this Section 5. As determined by a Plan Administrator, each option
agreement shall state (i) the total number of shares to which it pertains, (ii)
the exercise price for the shares covered by the Option, (iii) the time at which
the Options vest and become exercisable and (iv) the Option's scheduled
expiration date. The option agreements may contain such other provisions or
conditions as the Plan Administrator deems necessary or appropriate to
effectuate the sense and purpose of the Plan, including covenants by the
Optionholder not-to-compete and remedies to the Company in the event of the
breach of any such covenant.

         (e) Option Period. No Option granted under the Plan shall be
exercisable for a period in excess of 10 years from the date of its grant
subject to earlier termination in the event of termination of employment,
retirement or death of the Optionholder. An Option may be exercised in full or
in part at any time or from time to time during the term of the Option or
provide for its exercise in stated installments at stated times during the
Option's term.

         (f) Vesting; Limitations. The time at which the Optioned Shares vest
with respect to a participant shall be in the discretion of the Plan
Administrator.

         (g) No Fractional Shares. Options shall be exercisable only for whole
shares; no fractional shares will be issuable upon exercise of any Option
granted under the Plan.

         (h) Method of Exercising Options; Full Payment. Options shall be
exercised by written notice to the Company, addressed to the Company at its
principal place of business. Such notice shall state the election to exercise
the Option and the number of shares with respect to which it is being exercised,
and shall be signed by the person exercising the Option. Such notice shall be
accompanied by payment in full of the exercise price for the number of shares
being purchased. Payment may be made in cash or by check as prescribed by the
applicable Plan Administrator or by tendering duly endorsed certificates
representing shares of Stock then owned by the Optionholder and held for the
requisite period necessary to avoid a charge to the Company's earnings and
valued at fair market value on the date of exercise (as determined in accordance
with Section 5(c) hereof). Upon the exercise of any Option, the Company shall
deliver, or cause to be delivered, to the Optionholder a certificate or
certificates representing the shares of Stock purchased upon such exercise as
soon as practicable after payment for those shares has been received by the
Company. If an Option is exercised pursuant to Section 5(j) hereof by any person
other than the Optionholder, such notice shall be accompanied by appropriate
proof of the right of such person to exercise the Option. All shares that are
purchased and paid for in full upon the exercise of an Option shall be fully
paid and non-assessable.

                                       3
<PAGE>

         (i) Rights of a Stockholder. An Optionholder shall have no rights as a
stockholder with respect to shares covered by his Option until such Optionholder
shall have exercised the Option and paid the full exercise price for the
Optioned Shares. No adjustment will be made for dividends or other rights with
respect to any Optioned Shares for which the record date is prior to the date on
which the Optionholder exercises the Option for such shares.

         (j) Exercise of Options After Cessation of Service; Termination of
Employment. If any Optionholder ceases to be in Service to the Company for a
reason other than death, such Optionholder may, within one month after the date
of termination of such Service, but in no event after the Option's stated
expiration date, exercise some or all of the Options that the Optionholder was
entitled to exercise on the date the Optionholder's Service terminated;
provided, that (i) if the Optionholder's Service is terminated by the Company in
its good faith judgment, for (A) commission of a crime by the Optionholder or
for reasons involving moral turpitude; (B) an act by the Optionholder which
tends to bring the Company into disrepute; or (C) negligent, fraudulent or
willful misconduct by the Optionholder, or (ii) if after the Service of the
Optionholder is terminated, the Optionholder commits acts detrimental to the
Company's interests, then the Option shall thereafter be void for all purposes.
Notwithstanding the foregoing, if any Optionholder who is an employee of the
Company ceases to be in Service to the Company by reason of permanent disability
within the meaning of section 22(e)(3) of the Internal Revenue Code (as
determined by the applicable Plan Administrator), the Optionholder shall have 12
months after the date of termination of Service, but in no event after
Optionholder's Option's stated expiration date, to exercise Options that the
Optionholder was entitled to exercise on the date the Optionholder's Service
terminated as a result of disability. Notwithstanding anything to the contrary
in this Section 5(j), the Plan Administrator shall have the discretion and
authority at any time to extend the period of exercisability of any Option.

         (k) Death of Optionholder. If an Optionholder dies while in the
Company's Service, the Optionholder's vested Options on the date of death shall
be exercisable within three months of such death or until the stated expiration
date of the Optionholder's Option, whichever occurs first, by the person or
persons ("successors") to whom the Optionholder's rights pass under a will or by
the laws of descent and distribution. Notwithstanding anything to the contrary
in this Section 5(k), the Plan Administrator shall have the discretion and
authority at any time to extend the period of exercisability of any Option. An
Option may be exercised and payment of the option price made in full by the
successors only after written notice to the Company specifying the number of
shares to be purchased. Such notice shall state that the Option price is being
paid in full in the manner specified in Section 5(h) hereof. As soon as
practicable after receipt by the Company of such notice and of payment in full
of the Option price, a certificate or certificates representing such shares
shall be registered in the name or names specified by the successors in the
written notice of exercise and shall be delivered to the successors.

         (l) Other Plan Provisions Still Applicable. If an Option is exercised
upon the termination of Service or death of an Optionholder under this Section
5, the other provisions of the Plan shall still be applicable to such exercise.

         (m) Definition of "Service." For purposes of this Plan, unless it is
evidenced otherwise in the option agreement with the Optionholder, the
Optionholder shall be deemed to be in "Service" to the Company so long as such
individual renders services on a periodic basis to the Company (or to any parent
or subsidiary corporation) in the capacity of an employee or a consultant or
independent contractor. The Optionholder shall be considered to be an employee
for so long as such individual remains in the employ of the Company or one or
more of its parent or subsidiary corporations.

         (n) Nonassignability. Except as specifically allowed by the Plan
Administrator at the time of grant and as set forth in the documents evidencing
an Option, no Option granted under the Plan or any of the rights and privileges
conferred thereby shall be assignable or transferable by an 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.

SECTION  6. CERTAIN ADJUSTMENTS.

         (a) Capital Adjustments. The aggregate number of shares of Stock
subject to the Plan (and the number of shares covered by outstanding Options and
the price per share stated in such Options) shall be proportionately adjusted
for any increase or decrease in the number of outstanding shares of Stock of the
Company resulting from a subdivision

                                       4
<PAGE>

or consolidation of shares or any other capital adjustment or the payment of a
stock dividend or any other increase or decrease in the number of such shares
effected without the Company's receipt of consideration therefor in money,
services or property.

         (b) 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 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 hereunder to terminate. A merger or consolidation in which
the Company is not the surviving corporation shall also cause every Option
outstanding hereunder to terminate.

         (c) Change in Control. With respect to any Change in Control, the Plan
Administrator shall have the discretion and authority, exercisable at any time,
whether before or after the Change in Control, to provide for the automatic
acceleration of one or more outstanding Options granted by it under the Plan
upon the occurrence of such Change in Control. The Plan Administrator may also
impose limitations upon the automatic acceleration of such Options to the extent
it deems appropriate. Any Options accelerated upon a Change in Control will
remain fully exercisable until the expiration or sooner termination of the
Option term.

SECTION  7. MISCELLANEOUS

         (a) Use of Proceeds. The proceeds received by the Company from the sale
of Stock pursuant to the exercise of Options hereunder, if any, shall be used
for general corporate purposes.

         (b) Cancellation of Options. The Plan Administrator shall have the
authority to effect, at any time and from time to time, with the consent of the
affected Optionholders, the cancellation of any or all outstanding Options
granted under the Plan by the Plan Administrator and to grant in substitution
therefore new Options under the Plan covering the same or different numbers of
shares of Stock as long as such new Options have an exercise price per share of
Stock no less than the minimum exercise price as set forth in Section 5(b)
hereof on the new grant date.

         (c) Regulatory Approvals. The implementation of the Plan, the granting
of any Option hereunder, and the issuance of Stock upon the exercise of any such
Option shall be subject to the procurement by the Company of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan,
the Options granted under it and the Stock issued pursuant to it.

         (d) Indemnification. In addition to such other rights of
indemnification as they may have, the members of the Plan Administrator shall be
indemnified and held harmless by the Company, to the extent permitted under
applicable law, for, from and against all costs and expenses reasonably incurred
by them in connection with any action, legal proceeding to which any member
thereof may be a party by reason of any action taken, failure to act under or in
connection with the Plan or any rights granted thereunder and against all
amounts paid by them in settlement thereof or paid by them in satisfaction of a
judgment of any such action, suit or proceeding, except a judgment based upon a
finding of bad faith.

         (e) Plan Not Exclusive. This Plan is not intended to be the exclusive
means by which the Company may issue options or warrants to acquire its Stock,
stock awards or any other type of award. To the extent permitted by applicable
law, any such other option, warrants or awards may be issued by the Company
other than pursuant to this Plan without stockholder approval.

         (f) Governing Law. The Plan shall be governed by, and all questions
arising hereunder shall be determined in accordance with, the laws of the State
of Arizona.

         (g) Withholding Taxes. Whenever the Company issues Stock under the Plan
pursuant to an Option, the Company shall have the right to require the grantee
to remit to the Company an amount sufficient to satisfy any federal, state
and/or local withholding or employment tax requirements prior to the delivery of
any certificate or certificates for such shares. Alternatively, the Company may
issue or transfer such shares of Stock net of the number of shares

                                       5
<PAGE>

sufficient to satisfy the withholding or employment tax requirements. For such
purposes, the shares of Stock shall be valued on the date the withholding or
employment tax obligation is incurred.

SECTION  8. SECURITIES RESTRICTIONS

         (a) Legend on Certificates. All certificates representing shares of
Stock issued upon exercise of Options granted under the Plan shall be endorsed
with a legend reading as follows:

         The shares of Common Stock evidenced by this certificate have been
         issued to the registered owner in reliance upon written representations
         that these shares have been purchased solely for investment. These
         shares may not be sold, transferred or assigned unless in the opinion
         of the Company and its legal counsel such sale, transfer or assignment
         will not be in violation of the Securities Act of 1933, as amended, and
         the rules and regulations thereunder.

         (b) Private Offering for Investment Only. The Options are, and shall
be, made available only to a limited number of present and future employees of
the Company, and their permitted transferees, who have knowledge of the
Company's financial condition, management and its affairs. The Plan is not
intended to provide additional capital for the Company, but to encourage
ownership of Stock among the Company's employees. By the act of accepting an
Option, each grantee or such permitted transferee agrees (i) that, any shares of
Stock acquired will be solely for investment and not with any intention to
resell or redistribute those shares and (ii) such intention will be confirmed by
an appropriate certificate at the time the Stock is acquired if requested by the
Company. The neglect or failure to execute such a certificate, however, shall
not limit or negate the foregoing agreement.

         (c) Registration Statement. If a Registration Statement covering the
shares of Stock issuable upon exercise of options granted under the Plan is
filed under the Securities Exchange Act of 1933, as amended, and is declared
effective by the Securities Exchange Commission, the provisions of Sections 8(a)
and (b) shall terminate during the period of time that such Registration
Statement, as periodically amended, remains effective.

SECTION  9. DEFINITIONS

         The following capitalized terms used in this Plan shall have the
meaning described below:

         "Affiliates" shall mean all "executive officers" (as that term is
defined in Rule 16a-1(f) promulgated under the Securities Exchange Act of 1934)
and directors of the Company and all persons who own 10 percent or more of the
Company's issued and outstanding Stock.

         "Board" shall mean the Board of Directors of the Company.

         "Change in Control" shall mean (i) a person or related group of
persons, other than the Company or a person that directly or indirectly
controls, is controlled by, or under common control with the Company, acquires
ownership of 40 percent or more of the Company's outstanding common stock
pursuant to a tender or exchange offer which the Board of Directors recommends
that the Company's stockholders not accept, or (ii) the change in the
composition of the Board occurs such that those individuals who were elected to
the Board at the last stockholders' meeting at which there was not a contested
election for Board membership subsequently ceased to comprise a majority of the
Board by reason of a contested election.

         "Code" shall mean the Internal Revenue Code of 1986, as amended.

         "Company" shall mean Three-Five Systems, Inc., a Delaware corporation.

         "Eligible Persons" shall mean those persons who, at the time that the
Option is granted, are employees of the Company, who provide valuable services
to the Company or parent or subsidiaries of the Company.

                                       6
<PAGE>

         "Optionholder" shall mean an Eligible Person to whom Options have been
granted.

         "Optioned Shares" shall be those shares of Stock to be optioned from
time to time to any Eligible Person.

         "Options" shall mean options to acquire Stock granted under the Plan.

         "Plan" shall mean this stock option plan for Three-Five Systems, Inc.

         "Plan Administrator" shall mean the Board of Directors or a committee
thereof.

         "Service" shall have the meaning set forth in Section 5(m) hereof.

         "Stock" shall mean shares of the Company's common stock, $.01 par value
per share, which may be unissued or treasury shares, as the Board may from time
to time determine.

         This Amended and Restated Plan is hereby executed this 27th day of
November, 2002.

                                         THREE-FIVE SYSTEMS, INC.

                                         By:      /s/ Jeffrey D. Buchanan
                                                  ------------------------------
                                         Name:    Jeffrey D. Buchanan
                                         Its:     Secretary

                                       7

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