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Proxy Statement Pursuant to Section 14(a) of

Filed by the Registrant 

Filed by a Party other than the Registrant 

Check the appropriate box:

Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Under Rule 14a-12

ON SEMICONDUCTOR CORPORATION

Payment of Filing Fee (Check the appropriate box):

	No fee required.

  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	Fee paid previously with preliminary materials.
	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

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Steven P. Hanson

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To the Stockholders:

The Annual Meeting of Stockholders of ON Semiconductor Corporation (the “Company”) will be held at the Wyndham Buttes Resort, 2000 Westcourt Way, Tempe, AZ 85282 on Wednesday, May 23, 2001 at 9:30 A.M., local time, for the following purposes:

The Board of Directors has fixed the close of business on March 28, 2001, as the record date for determination of stockholders entitled to notice of and to vote at the Annual Meeting or any adjournment or postponement thereof. For 10 days prior to the Annual Meeting, a list of stockholders entitled to vote at the Annual Meeting will be available for inspection in the offices of ON Semiconductor Corporation, Visitor Reception Desk, 5005 E. McDowell Road, Phoenix, AZ 85008 between the hours of 8:00 A.M. and 4:30 P.M., local time, each weekday. Such list will also be available at the Annual Meeting.

Your vote is important to us. Please vote as soon as possible by signing, dating and returning the proxy card in the enclosed postage-paid envelope.

Sincerely yours,

April 16, 2001

IMPORTANT NOTICE

PLEASE VOTE YOUR SHARES PROMPTLY

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ON SEMICONDUCTOR CORPORATION

       This statement and the accompanying notice and proxy card are furnished in connection with the solicitation by the Board of Directors (the “Board”) of ON Semiconductor Corporation (the “Company”) of proxies to be used at the Company’s Annual Meeting of Stockholders to be held on Wednesday, May 23, 2001 at 9:30 A.M., local time at the Wyndham Buttes Resort, 2000 Westcourt Way, Tempe, AZ 85282 and at any adjournment or postponement thereof (the “Annual Meeting”). This statement and the accompanying notice and proxy card are first being mailed to stockholders on or about April 16, 2001.

      Whether or not you plan to attend the Annual Meeting, the Board encourages you to vote your shares via mail as more fully described in the proxy card. You may revoke your proxy at any time before it is exercised by submitting to the Secretary of the Company a written notice of revocation, or a properly executed proxy of a later date or by attending the Annual Meeting and voting in person. All shares represented by valid proxies will be voted as specified. If no specification is made, the proxies will be voted in favor of:

      If other matters properly come before the Annual Meeting, all shares validly represented by proxies will be voted in accordance with the recommendations of the Board.

      The Board has fixed the close of business on March 28, 2001, as the record date for determination of stockholders entitled to notice of and to vote at the Annual Meeting.

      As of the record date of March 28, 2001, there were 172,820,966 outstanding shares of the Company’s Common Stock entitled to vote at the Annual Meeting. Each share of Common Stock is entitled to one vote.

      In order to constitute a quorum, shares of Common Stock representing a majority of the total voting power of such shares must be present in person or represented by proxy at the Annual Meeting. In accordance with Delaware law, the Company intends to count shares present in person but not voting and shares for which it has received proxies, but with respect to which holders thereof have withheld voting or abstained as present for purposes of determining the presence or absence of a quorum. Furthermore, shares represented by proxies returned by a broker holding such shares in nominee or “street” name will be counted as present for purposes

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      Directors will be elected by a plurality of the votes cast. Withheld votes and Broker Non-Votes, if any, are not treated as votes cast and, therefore, will have no effect on the proposal to elect directors. Approval of each of the other proposals requires the affirmative vote of a majority of the votes represented by the shares of Common Stock voted with respect to each such matter. Abstentions from voting, as well as Broker Non-Votes, if any, are not treated as votes cast and, therefore, will have no effect on the adoption of any such proposal.

MANAGEMENT PROPOSALS

      The Board is currently divided into three classes of directors. Directors hold office for staggered terms of three years and until their successors are elected and qualified, or until their sooner resignation, removal or disqualification. One of the three classes is elected each year to succeed the directors whose terms are expiring. Class II Directors will be elected at the Annual Meeting to serve for a term expiring at the annual meeting in the year 2004. Due to other commitments, David Stanton, a director since August 1999, resigned effective March 28, 2001, and will not stand for re-election. The Board has determined not to fill his vacancy at this time. The Class I Directors’ terms will expire in 2003. The Class III Directors’ terms will expire in 2002.

      Proxies will be voted FOR the election of the nominees, unless you withhold your vote on your proxy card. The Board has no reason to believe that any of these nominees will be unable to serve. However, if any one of them should become unavailable, the Board may reduce the size of the Board or designate a substitute nominee. If the Board designates a substitute, shares represented by proxies will be voted for the substitute nominee.

Class II — Nominees for Terms Expiring in 2004

      The Board recommends that you vote FOR each of the following Class II nominees for election as a Director:

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      The individuals listed below are presently serving as Directors.

Class III — Terms Expiring in 2002

Class I — Terms Expiring in 2003

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The Board of Directors recommends a vote “for” approval of Proposal 1.

PROPOSAL 2

AMENDMENT OF 2000 STOCK INCENTIVE PLAN

      The Company’s 2000 Stock Incentive Plan (“2000 SIP”) links the personal interests of members of the Board, employees, officers, executives, and consultants to those of the Company’s stockholders. The 2000 SIP rewards individuals for outstanding performance that generates superior returns to stockholders of the Company.

      In February 2000, the Board and stockholders adopted the 2000 SIP and authorized the issuance of 3,000,000 shares thereunder. The Board and stockholders amended the 2000 SIP in April 2000 increasing the aggregate number of shares reserved for issuance under the 2000 SIP from 3,000,000 to 10,000,000.

      The Board has determined that, in order to continue to reward individuals for outstanding performance resulting in greater returns to stockholders, the number of shares issuable under the 2000 SIP should be increased. Therefore, the Board proposes to increase the number of shares under the 2000 SIP by: (i) 3,000,000 shares of Common Stock (for an aggregate of 13,000,000 shares), effective as of the date of stockholder approval; (ii) an additional 3.5% of the total number of outstanding shares of Common Stock as of January 1, 2002; and (iii) an additional 4% of the total number of outstanding shares of Common Stock as of January 1, 2003. These computations will be made on a non-diluted basis, i.e., excluding all shares previously reserved for issuance under the 2000 SIP and any other equity incentive plan of the Company. The total number of shares available for grant under the 2000 SIP as Incentive Stock Options will continue to be 10,000,000. The 2000 SIP, as currently in effect, is set forth as Appendix A to this Proxy Statement.

SUMMARY OF PLAN

      The following general description of the material features of the 2000 SIP is qualified in its entirety by reference to the 2000 SIP, which is attached as Appendix A.

Purpose

      The purpose of the 2000 SIP is to promote the success and enhance the value of the Company. This purpose is accomplished by linking the personal interest of its Board members, employees, officers, executives and consultants to the interests of the Company’s stockholders. The 2000 SIP provides individuals with an incentive for outstanding performance in order to generate superior returns to stockholders of the Company.

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Administration, Amendment and Termination

      The Board has delegated the authority to administer the 2000 SIP to the Compensation Committee of the Board (the “Committee”). The members of the Committee serve at the pleasure of the Board.

      Subject to the terms of the 2000 SIP, the Committee has the exclusive power, authority and discretion to, among other things, designate individuals to receive awards, determine the type, amount and number of each award granted, determine the terms and conditions of any award, amend, modify or terminate any outstanding award in accordance with the terms of the 2000 SIP, prescribe the form of the award agreement, and make all other decisions and determinations that may be required under the 2000 SIP or as the Committee deems necessary or advisable to administer the 2000 SIP.

      With Board approval, the Committee may amend, modify or terminate the 2000 SIP, provided appropriate stockholder approval is obtained when necessary and desirable to comply with any applicable law, regulation or stock exchange rule.

Eligibility

      All members of the Board, employees, officers, and executives of, and consultants to, the Company or its subsidiaries who are employed in the U.S. and foreign countries are eligible to participate as determined by the Board or the Committee. The Committee intends the 2000 SIP to be a broad based employee plan and as part of its first year incentive program, on April 28, 2000, an option to purchase 50 shares was granted to every employee of the Company where permitted by local law. As of December 31, 2000, there were approximately 14,900 employees and directors eligible to participate, subject to limitations of local law, tax policy and custom in such foreign countries.

Number of Shares of Common Stock Available Under the 2000 SIP

      A maximum of 10,000,000 shares is available for issuance under the 2000 SIP. If this amendment is adopted, the shares would increase by (i) an additional 3,000,000 shares of Common Stock (for an aggregate of 13,000,000 shares), effective as of the date of stockholder approval; (ii) an additional 3.5% of the total number of outstanding shares of Common Stock effective as of January 1, 2002; and (iii) an additional 4% of the total number of outstanding shares of Common Stock effective as of January 1, 2003.

Plan Benefits

      The following table sets forth the option awards that have been granted under the SIP as of March 15, 2001. The Board may grant additional options during the remainder of 2001.

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Incentive Award Distribution

      Under the terms of the 2000 SIP, the Committee may reward individuals in a variety of ways including: (i) stock options (including non-qualified stock options and incentive stock options); (ii) performance-based awards; (iii) stock appreciation rights; (iv) performance shares; (v) restricted stock awards; and (vi) Take Ownership Grants (a one-time award of options underlying 50 shares of Common Stock to all employees granted at the time of the Company’s initial public offering).

Change in Control

      If a “change in control” (as defined in the 2000 SIP) occurs, all outstanding awards will become fully exercisable and all restrictions on outstanding awards will lapse. Upon, or in anticipation of, such an event, the Committee may cause every outstanding award to terminate at a specific time in the future and will give each participant the right to exercise awards during a period of time determined by the Committee.

Tax Aspects

      The following is a summary of the general federal income tax consequences to U.S. taxpayers and the Company of awards granted under the 2000 SIP. Tax consequences for any particular individual may be different.

      Non-Qualified Stock Options and Stock Appreciation Rights. No taxable income is reportable when a non-qualified stock option or a stock appreciation right is granted. Upon exercise, the recipient will have ordinary income equal to the fair market value of the shares on the exercise date minus the exercise price. Any gain or loss upon the disposition of the stock will be capital gain or loss.

      Incentive Stock Options. No taxable income is reportable when an incentive stock option is granted or exercised (except for purposes of the alternative minimum tax, in which case taxation is the same as for non-qualified stock options). If the recipient exercises the option and then sells the shares more than two years after the grant date and more than one year after the exercise date, the difference between the sale price and the exercise price will be taxed as capital gain or loss. If the recipient exercises the option and sells the shares before the end of the two- or one-year holding periods, he or she generally will have ordinary income at the time of the sale equal to the fair market value of the shares on the exercise date (or the sale price, if less) minus the exercise price of the option.

      Restricted Stock, Performance Units and Performance Shares. A recipient of restricted stock, performance units or performance shares will not have taxable income upon grant unless he or she elects to be taxed at that time. Instead, he or she will have ordinary income at the time of vesting equal to the fair market value on the vesting date of the shares (or cash) received minus any amount paid for the shares.

      Tax Effect for the Company. The Company generally will receive a tax deduction for any ordinary income recognized by a participant from an award under the 2000 SIP (for example, the exercise of a non-qualified stock option). Please note, in the case of incentive stock options that meet the requirements described above, the employee will not recognize ordinary income and the Company, therefore, will not receive a deduction. Special rules limit the deductibility of compensation paid to our Chief Executive Officer and to each of our four most highly compensated executive officers. Under Section 162(m) of the Internal

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The Board of Directors recommends a vote “for” approval of Proposal 2.

PROPOSAL 3

AMENDMENT OF 2000 EMPLOYEE STOCK PURCHASE PLAN

      The Company’s 2000 Employee Stock Purchase Plan (the “2000 ESPP”) provides eligible employees of the Company and its participating subsidiaries with the opportunity to purchase shares of Common Stock of the Company through convenient payroll deductions, except where prohibited by law.

      In February 2000, the Board and stockholders adopted the 2000 ESPP that authorized issuance of 1,500,000 shares thereunder.

      The Board has determined, in order to give the Company the ability to continue to attract and retain the talented employees necessary for the Company’s continued growth and success, to amend the 2000 ESPP (i) to increase the number of shares of Common Stock reserved for issuance under the 2000 ESPP from 1,500,000 to 5,500,000 shares of Common Stock effective as of the date of stockholder approval, and (ii) to limit the number of shares of Common Stock available for purchase by any participant for any offering period under the 2000 ESPP to the lesser of (a) 500 shares of Common Stock or (b) the number derived by dividing $6,250 by 100% of the fair market value of one share of Common Stock on the first day of the offering period. The amendment would be effective for the offering period beginning on or about July 1, 2001. The 2000 ESPP, as currently in effect, is set forth as Appendix B to this Proxy Statement.

SUMMARY OF PLAN

      The following general description of the material features of the 2000 ESPP is qualified in its entirety by reference to the 2000 ESPP, which is attached as Appendix B.

Purpose

      The purpose of the 2000 ESPP is to encourage ownership of Common Stock of the Company by all eligible employees and to provide incentives for them to exert maximum efforts for the success of the Company and its affiliates. The 2000 ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended.

Eligibility to Participate

      Most employees of the Company and its participating subsidiaries are eligible to elect to participate in the 2000 ESPP. However, an employee is not eligible if he or she owns or has the right to acquire five percent or more of the voting stock of the Company or of any subsidiary of the Company. Also, an employee is not eligible if he or she normally is scheduled to work less than or equal to twenty hours per week or five months per calendar year or if the employee has been employed by the Company for less than 90 days. The Committee intends the 2000 ESPP to be a broad based employee stock purchase plan. As of December 31, 2000, there were approximately 14,900 employees eligible to participate, subject to limitations of local law, tax policy and custom in such foreign countries.

Administration, Amendment and Termination

      The Board has delegated the authority to administer the 2000 ESPP to the Committee. The members of the Committee serve at the pleasure of the Board.

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      Subject to the terms of the 2000 ESPP, the Committee has the authority to amend the rules and regulations as it deems necessary or advisable to administer the 2000 ESPP, to correct any defect or supply any omission or reconcile any inconsistency in the 2000 ESPP and to construe and interpret the 2000 ESPP and rules and regulations thereunder. The Committee may also make any other decision and determination under the 2000 ESPP, including determinations relating to eligibility.

      The Company’s Board of Directors may amend or terminate the 2000 ESPP at any time for any reason unless stockholder approval is required by federal or state law or regulation or the rules of the automated quotation system or stock exchange on which the Company’s stock is quoted or listed. In a case where stockholder approval is required, such approval must be obtained within one year of Board action. No amendment or termination may materially and adversely affect the rights of a participant without such participant’s consent.

Number of Shares of Common Stock Available Under the ESPP

      Currently 1,500,000 shares of Common Stock are available for issuance pursuant to the 2000 ESPP. If this Amendment is adopted, the number of shares available for issuance will be increased to 5,500,000. Shares sold under the 2000 ESPP may be newly issued shares, treasury shares or shares purchased on the open market. In the event of any stock split or other change in the capital structure of the Company, appropriate adjustments will be made in the number and kind of shares available for purchase under the 2000 ESPP.

Enrollment and Contributions

      Eligible employees voluntarily elect whether or not to enroll in the 2000 ESPP. Employees join for a period of three months. Employees who have joined the 2000 ESPP are automatically re-enrolled for additional rolling three-month periods, provided that the employee remains eligible under the rules of the 2000 ESPP. However, an employee may cancel his or her enrollment at any time, subject to 2000 ESPP provisions.

      Employees may contribute to the 2000 ESPP through payroll deductions. Participating employees generally may contribute up to 10% of their eligible compensation through after-tax payroll deductions. From time to time, the Committee may establish a lower or higher maximum permitted contribution percentage. An employee may change the payroll contribution amount for a future offering period by filing a new enrollment form at least two weeks prior to the beginning of the offering period. An employee may discontinue payroll contributions during an offering period by filing a new enrollment form, and the change will be effective for the next payroll after the enrollment form is received.

Purchase of Shares

      At the end of each offering period, each participating employee’s payroll deductions are used to purchase shares of Common Stock for the employee. The price of the shares purchased will be 85% of the lower of (1) the stock’s fair market value on the first day of the three-month offering period, or (2) the stock’s fair market value on the last day of the offering period. Currently during any single offering period, no employee may purchase more than the number of shares derived by dividing $6,250 by 100% of the fair market value of one share of Common Stock on the first day of the offering period. If the proposed amendment is adopted, the number of shares available for purchase by any participant will be limited to the lesser of: (1) 500 shares of Common Stock, or (2) the number of shares derived by dividing $6,250 by 100% of the fair market value of one share of Common Stock on the first day of the offering period. In the event that an employee’s payroll contribution is greater than the amount the employee is able to purchase, the excess amount will be returned to the employee as soon as practical.

Termination of Participation

      Participation in the 2000 ESPP terminates when a participating employee’s employment with the Company ceases for any reason, the employee withdraws from the 2000 ESPP, the employee becomes ineligible to participate under the rules of the 2000 ESPP, or the 2000 ESPP is terminated or amended such that the employee no longer is eligible to participate.

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Number of Shares Purchased by Certain Individuals and Groups

      The following table sets forth the purchases made in the previous fiscal year under the 2000 ESPP for the individuals and groups of individuals specified. The actual number of shares that may be purchased by these individuals and groups during the current year will not be determinable until the fiscal year end.

Tax Aspects

      Generally, the U.S. tax consequences of the purchase of shares of Common Stock under the 2000 ESPP are as follows, however, tax consequences for any particular individual may be different:

      An employee will not have taxable income when the shares of Common Stock are purchased, but the employee generally will have taxable income when the employee sells or otherwise disposes of stock purchased through the 2000 ESPP.

      For shares that are disposed of more than 24 months after the first day of the offering period under which the shares were purchased (the “24-Month Holding Period”), gain up to the amount of the discount (if any) from the market price of the stock on the first day of the three-month offering period is taxed as ordinary income. Any additional gain above that amount is taxed at long-term capital gain rates. If, after the 24-Month Holding Period, the employee sells the stock for less than the purchase price, the difference is a long-term capital loss. If a participant disposes of shares during the 24-Month Holding Period, the participant must recognize ordinary income on the difference between the purchase price and the stock’s fair market value on the actual purchase date regardless of whether there is any gain upon such disposition. Any additional gain (or loss) is taxed to the stockholder as long-term or short-term capital gain (or loss). The purchase date begins the holding period for determining whether the gain (or loss) is short-term or long-term.

      The Company will receive a deduction for federal income tax purposes for the ordinary income an employee must recognize when he or she disposes of stock purchased under the 2000 ESPP within the 24-Month Holding Period. The Company will not receive such a deduction for shares disposed of after the 24-Month Holding Period.

The Board of Directors recommends a vote “for” approval of Proposal 3.

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PROPOSAL 4

RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS

      The Board of Directors, on the recommendation of the Audit Committee, has appointed PricewaterhouseCoopers LLP as the firm of independent accountants to audit the consolidated financial statements of the Company and its subsidiaries for the year ending December 31, 2001, subject to ratification by the stockholders.

      A representative of PricewaterhouseCoopers LLP is expected to be present at the Annual Meeting, will have an opportunity to make a statement if such representative desires to do so, and will be available to respond to appropriate questions by stockholders.

      Stockholder ratification of the selection of PricewaterhouseCoopers LLP as the Company’s independent accountants is not required by the Company’s Bylaws or otherwise. However, the Board is submitting the selection of PricewaterhouseCoopers LLP to the stockholders for ratification as a matter of good corporate practice.

      If the stockholders fail to ratify the election, the Audit Committee and the Board of Directors will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee and the Board of Directors in their discretion may direct the appointment of different independent accountants at any time during the year if they determine that such an appointment would be in the best interest of the Company and its stockholders.

The Board of Directors recommends a vote “for” approval of Proposal 4.

THE BOARD OF DIRECTORS

      The Board of Directors met five times last year and committees of the Board held ten committee meetings. On average, the directors attended 85% of the total Board and committee meetings held in 2000. Messrs. Bonderman, Chang and Stanton each attended less than 75% of the aggregate number of meetings of the Board and the committees on which he served in 2000. Board and committee meetings held prior to the Company’s initial public offering are not included.

Committees of the Board

      Audit Committee: This committee meets with management to review the adequacy of the Company’s financial, accounting, and reporting control processes as well as the scope, timing and results of audits performed by the Company’s independent accountants and internal auditors. It operates under a formal written charter, a copy of which is attached as Appendix C to this Proxy Statement. The committee reviews financial statements and the Company’s annual Form 10-K report and quarterly Form 10-Q reports. It also reviews the independent accountants’ ultimate accountability to the Company and its stockholders. The committee reviews fees of the Company’s independent accountants to determine whether the provision of non-audit services is compatible with maintaining such accountant’s independence, and recommends the appointment of the Company’s independent accountants to the Board. The Audit Committee met four times in the year 2000.

      Compensation Committee: This committee reviews and approves the Company’s compensation philosophy and programs covering executive officers and key management employees as well as the competitiveness of the Company’s total executive officer compensation practices. The committee also reviews the performance levels of the Company’s executive officers, determines base salaries, equity and incentive awards for the Company’s executive officers, makes recommendations to the Board concerning the directors’ compensation, reviews the Company’s executive compensation plans, reviews management’s proposals to make significant organizational changes or significant changes to existing executive officer compensation plans, and oversees the Company’s plans for management succession. The Compensation Committee met twice in the year 2000.

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      Executive Committee: This committee has the authority to exercise all powers of the full Board of Directors when the Board is not in session, except that it does not have the power, among other things, to declare dividends, issue stock, amend the Bylaws, recommend to the stockholders any action that requires stockholder approval, or approve any merger or share exchange which requires stockholder approval. This committee also reviews Board governance procedures, reviews the Company’s ethics and compliance program, reviews the composition of the Board of Directors and the qualifications of persons identified as prospective directors, recommends the candidates to be nominated for election as directors, and, in the event of a vacancy on the Board, recommends any successors. The Executive Committee met four times in the year 2000.

Board Committee Membership

Compensation of Directors

      Directors who are officers of the Company do not receive any additional compensation for their services as a Director. The Chairman of the Board receives quarterly payments of $25,000, and, prior to May 12, 2000, other non-employee Directors who are unrelated to the Company’s major stockholder, the Texas Pacific Group, received a quarterly cash retainer of $5,000 and a meeting fee of $2,500 for each Board meeting and committee meeting attended on a single day. Since May 12, 2000, all Directors receive a quarterly cash retainer of $5,000 and a meeting fee of $1,500. Members of the Audit Committee receive an additional quarterly payment of $2,500. All Directors are reimbursed for reasonable expenses incurred to attend Board and committee meetings.

      Non-employee Directors participate in the 2000 Stock Incentive Plan. During 2000, each non-employee Director received non-qualified options having an aggregate exercise price of $150,000. These options vest over a three-year period, subject to the Director’s continued service on the Board. The exercise price for the options is 100% of the fair market value of the shares on the grant date.

      Under the Director Deferred Compensation Plan adopted in March 2000, non-employee Directors may defer up to 100% of their annual retainer and meeting fees on substantially the same terms and conditions as the Executive Deferred Compensation Plan described below. For further information, see “Relationships and Related Transactions” and the “Compensation Committee Report.”

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COMPENSATION OF EXECUTIVE OFFICERS

      The following tables set forth information concerning compensation earned by or paid to the Company’s Chief Executive Officer and the four most highly paid executive officers (the “Named Executive Officers”) for services in all capacities to the Company and its subsidiaries for the periods indicated.

SUMMARY COMPENSATION TABLE

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OPTION GRANTS IN LAST FISCAL YEAR

      The following table sets forth information regarding grants of options to purchase our Common Stock to the Named Executive Officers in 2000.

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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND

      The following table sets forth, on an aggregate basis, certain information with respect to the value of unexercised options held by the Named Executive Officers at the end of 2000.

      Retirement Plan. The Retirement Plan covers eligible employees within the United States, including the Named Executive Officers. The Retirement Plan provides for monthly pension benefits pursuant to a formula based on an employee’s years of service, compensation level (calculated as final average earnings for the five years of highest pay during the last ten years of employment) and the Social Security retirement benefit payable at age 65. The earliest date on which eligible employees may receive pension benefits for retirement is after age 55 with at least five years of service or at age 60 with at least one year of service. Normal retirement under the Retirement Plan is after age 65. Benefits are reduced if pension payments begin before age 65.

      The following table shows the estimated annual benefits payable under the current Retirement Plan for employees who are eligible under the criteria stated above assuming a life annuity benefit:

      As of December 31, 2000, Mr. Hanson, Mr. Thorburn, Mr. George, Mr. Sacomani and Mr. Rohleder had approximately 29 years, 1 year and 2 months, 32 years, 20 years, and 1 year and 4 months of service, respectively, and the annual compensation covered by the Retirement Plan for each of these officers is $170,000.

      The Company proposes to terminate the Retirement Plan, effective April 15, 2001. The Retirement Plan termination is subject to the approval of the Pension Benefit Guaranty Corporation, the government agency that regulates plan terminations. The Company also anticipates seeking the approval of the Internal Revenue

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EMPLOYMENT AGREEMENTS/ CHANGE IN CONTROL AGREEMENTS

      The Company entered into employment agreements with each of the Named Executive Officers.

      The agreements with Messrs. Hanson, George and Sacomani each provide for an employment term of three years ending on August 4, 2002. The agreements provide an annual base salary of $375,000, $300,000 and $250,000, respectively, and an annual bonus up to 100% of the base salary based on achievement of annual performance objectives. The agreement with Mr. Rohleder provides for an employment term of three years ending on September 1, 2002, and for an annual base salary of $350,000. Mr. Rohleder is eligible to receive an annual bonus of up to 200% of his base salary based on achievement of annual performance objectives, provided that, during the first year of his employment term, Mr. Rohleder is guaranteed to receive an annual bonus at least equal to 100% of his base salary, regardless of whether any performance objectives are achieved. The terms of Mr. Thorburn’s employment are discussed below. The Company adopted certain annual bonus plans in order to implement the annual bonus arrangements described in this paragraph. For a summary of these bonus arrangements, see “Compensation Committee Report — Compensation Programs and Process — Annual Incentive Awards.”

      Under the terms of each of their respective agreements, if the executive’s employment is terminated without cause (as defined in the applicable employment agreement), such executive will be entitled to a lump sum payment equal to the product of: (A) either (i) three, if the date of termination of employment is on or before September 1, 2001, or (ii) two, if the date of termination of employment is after September 1, 2001 and prior to the expiration of the employment term; and (B) the sum of (i) the highest rate of the executive’s annualized base salary in effect at any time up to and including the date of termination, and (ii) the annual bonus earned by such executive in the year immediately preceding his date of termination. In addition, if the executive’s employment is terminated without cause within two years after a change in control (as defined in the applicable employment agreement), he will be entitled to continuation of medical benefits provided generally to other of the Company’s executives for the greater of two years from the date of termination or the expiration of the term of employment under the agreement. Under the agreements with Messrs. Hanson, George and Sacomani, the executives will be entitled to the foregoing severance payments and, in the event of a change of control, continuation of medical coverage, if they resign for good reason (as defined in their respective employment agreements). Each executive is also subject to customary non-solicitation of employees and confidentiality provisions.

      On March 9, 2001, the Company provided Mr. Rohleder with a loan of $1,000,000 to refinance his home. The loan accrues interest at the rate of 5.07% per annum and is due and payable at the earlier of the fifth anniversary of the loan date or ninety days after his termination of employment. All or a portion of the loan and interest may be forgiven, at the discretion of the Board, at the end of the five year period if certain performance targets have been met. The loan is secured by Mr. Rohleder’s personal residence.

      On March 10, 2001, Mr. Thorburn separated from the Company. On July 21, 2000, the Company provided Mr. Thorburn with a loan of $1.469 million to purchase a home. The loan accrues interest at the rate of 6.62% per annum. In connection with his separation from the Company, the Company paid Mr. Thorburn a payment of $1,898,679. In addition, the Company agreed to accelerate the exercisability of the remaining

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COMPENSATION COMMITTEE REPORT

      The Compensation Committee (the “Committee”) consists entirely of non-employee Directors. The Committee sets the compensation of the Chief Executive Officer, reviews, administers and makes decisions each year regarding the effectiveness of compensation programs and policies for other key executives, and approves stock option grants and other programs and arrangements for all executive officers.

Compensation Philosophy and Guiding Principles

      The Company’s executive compensation programs are designed to attract, motivate, and retain highly talented executives. The Company has adopted a compensation philosophy based on a performance based culture in which total compensation (short and long term incentives) should vary with company and individual performance. The Committee’s goal is to provide competitive base salaries and incentive plans that are competitive with the industry and which align management’s financial interests and ownership with those of the stockholders by providing highly competitive stock option grants as long term incentives.

Compensation Programs and Process

      The Committee relies, in part, on third party compensation experts in establishing and reviewing its compensation programs and processes for its executive officers. The Committee also uses compensation survey data from a number of independent sources. Total compensation of executives and other employees of the Company is compared to external sources to ensure that the Company’s programs are competitive. Competitive peer companies and compensation survey data are used for comparison in the executive categories and industry-specific and related surveys are used for other positions in the Company.

      The Company’s executive officers receive certain perquisites. They are also eligible to participate in benefit programs designed for all of the Company’s full time employees. These programs include medical, disability and life insurance programs. The three major components of the Company’s executive officer compensation are base salary, annual incentive awards and long term incentives. The Committee uses subjective judgment in determining executive officers’ compensation levels for all these components and takes into account both qualitative and quantitative factors. No specific weights are assigned to these factors.

      Base Salary. Salaries set for all officers are reviewed to be comparable with peer companies. The Company also consults with compensation experts and reviews available data, including published salary surveys and other compensation data for semiconductor and high technology companies.

      Annual Incentive Awards. The Committee sets the annual bonus component of executive incentive compensation under the Key Contributor Incentive Plan (the “KCIP Plan”). The KCIP Plan is administered

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      If the EBITDA “threshold” goal is not met, no bonus is paid under the KCIP Plan. If the EBITDA “threshold” goal is met, the participating employee receives 50% of their target bonus amount. If the EBITDA “target” goal is met, the employee’s target bonus amount is unchanged. If the EBITDA “stretch” goal is met, the employee receives 200% of their target bonus amount. The Committee will adjust the employee’s percentage amount on a pro rata basis if the company’s EBITDA falls in between the “threshold”, “target” or “stretch” goals. For 2000, former employees of Cherry Semiconductor operated under a different EBITDA goal level than other Company employees.

      In the event that an employee has a change of employment within the Company and either becomes newly eligible for the KCIP Plan, newly ineligible for the KCIP Plan, or moves into a new position that is also eligible for the KCIP Plan, the Committee will adjust the award to the employee on a prorated basis. If the employee retires from the Company, the award is also prorated. If the employee terminates employment with the Company for any reason either (i) prior to year end, or (ii) prior to the date the bonus is paid, the employee is not entitled to receive the bonus; provided however if the employee takes a Company-approved leave of absence, becomes disabled, or dies before payment of the award but after December 31, the employee will be entitled to payment under the KCIP Plan.

      Certain eligible employees can opt to have all or a percentage of their bonus amount deferred into the ON Semiconductor Executive Deferred Compensation Plan for tax purposes if the employees qualifies as a “select group of management or highly compensated employees.” (See “Compensation Committee Report — 401(k) Plan and Executive Deferred Compensation” below).

      In 2000, the KCIP Bonus was based seventy-five percent on Company performance and twenty-five percent on individual performance.

      In addition, under the Executive Council Bonus Incentive Plan (the “ECBIP”) the President and Chief Executive Officer, the Senior Vice Presidents and others identified by the Chief Executive Officer may earn up to an additional twenty-five percent of his or her KCIP Bonus if the Company’s revenue, from organic growth, (“Revenue”) reaches certain target levels during the year and the average profit margin for Revenue meets certain criteria. If Revenue does not reach the “target” goal, no bonus is awarded. If Revenue in the calendar year is above the “target” goal but less than the “stretch” goal, the participant may earn an amount equal to two and one-half percent of his or her KCIP Bonus for each additional one percent growth in Revenue above the “target” goal but below the “stretch” goal. If Revenue is equal to or above the “stretch” goal, the participant may earn an amount equal to twenty-five percent of the KCIP Bonus. The maximum bonus under the ECBIP is twenty-five percent of the KCIP Bonus. However, a bonus under the ECBIP will only be paid if the average profit margin for Revenue generated for business above the “target” goal is equal to or greater than the profit margin for Revenue generated on business below the “target” goal. No bonuses were paid under the ECBIP in 2000.

      Long Term Incentives. The Company grants stock options to provide long term incentives for executive officers and other key employees in an effort to align the individual’s interests with those of the stockholders and to provide each individual with a significant incentive to manage the Company from the perspective of an owner. Annual grants of options are made at an exercise price equal to the fair market value of a share on the day of the grant, and expire ten years from the date of the grant. Options granted may be based on comparison to competitive survey data and may also be adjusted based on individual performance, retention, and other special factors. Options are granted to key contributors under the 2000 Stock Incentive Plan which normally

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      2000 Employee Stock Purchase Plan. In addition to encouraging stock ownership by granting stock options, the Company further encourages all eligible employees worldwide to own the Company’s Common Stock through the ON Semiconductor 2000 Employee Stock Purchase Plan. The stock is purchased at a price equal to 85% of the fair market value of such shares as determined under the plan through this tax-qualified employee stock purchase plan. Participants can contribute up to ten percent of their salary toward the purchase of the Company’s Common Stock. The Employee Stock Purchase Plan allows employees to profit when the value of the Company’s stock increases over time.

      401(k) Plan and Executive Deferred Compensation. The Company has both tax-qualified and non-qualified capital Accumulation/ Retirement plans. The tax-qualified plan, the 401(k) Plan, is available to eligible employees in the U.S., and there may be similar plans for non-U.S. operations where available by law.

      The non-qualified plan, Executive Deferred Compensation Plan, was adopted in December 1999 and allows key employees to defer up to 25% of their base salary and up to 100% of their annual incentive compensation up to a maximum of $250,000 per year. Participants generally receive their deferred amounts, plus any earnings or less any losses thereon, at the earliest to occur of death, disability, retirement, termination of employment, a “change of control” event, as defined in the plan, or a designated date which must be at least four calendar years after the date of deferral. The Company does not contribute to the Executive Deferred Compensation Plan.

The Chief Executive Officer’s Compensation

      Steven P. Hanson has served as President of the Company since August 1999 and as Chief Executive Officer since January 2000. In determining his compensation for 2000, the Committee included both cash-based and equity-based elements and made an overall assessment of his leadership in achieving the Company’s near term and long term strategic, operational and business goals. Mr. Hanson’s total compensation package reflects consideration of competitive forces, his individual performance, and the Company’s performance. No specific weights have been assigned to these categories.

      Pursuant to his employment agreement, in 2000, Mr. Hanson received a base salary of $411,538 and a bonus of $383,318 (earned in 2000, but paid in 2001). Under his agreement, he received a one-time bonus of $150,000 in 2000 on the first anniversary of his employment with the Company. In 2000, Mr. Hanson received an option for 50 shares under the 2000 Stock Incentive Plan and in 1999 an option under the Founders Plan with an exercise price of $1.50 per share for 800,000 shares of Common Stock exercisable over a period of four years.

      The Committee believes that Mr. Hanson’s 2000 compensation is reasonable in relation to the compensation paid to chief executive officers of comparable publicly held semiconductor companies. As the members of the Committee, we approved the compensation of Mr. Hanson and the Company’s other executive officers for 2000, following the principles and procedures outlined in this report.

Compliance with Internal Revenue Code Section 162(m)

      The Committee adopted the following policy in order to qualify certain compensation paid to the Company’s Named Executive Officers as performance-based compensation, and to ensure that to the extent possible the compensation is deductible for federal income tax purposes under Section 162(m) of the Internal Revenue Code:

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      Messrs. Hugo-Martinez and Gregoire meet the independence requirement of Section 162(m). The other members of the Committee recuse themselves from voting on compensation matters that are intended to comply with Section 162(m) or otherwise cause any appearance of a conflict.

      This report is submitted by the Compensation Committee.¹

COMPENSATION COMMITTEE INTERLOCKS AND

INSIDER PARTICIPATION

      During 2000, none of the Company’s executive officers served on the board of directors of any entities whose directors or officers serve on the Compensation Committee. No current or past executive officers of the Company serve on the Compensation Committee. Relevant to insider participation, see “Relationships and Related Transactions” below.

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PERFORMANCE GRAPH

STOCK PRICE PERFORMANCE

      The following graph shows a comparison of cumulative total stockholder returns for the Company’s Common Stock, the Nasdaq Stock Market Index for U.S. Companies, and the Philadelphia Semiconductor Index. The graph assumes the investment of $100 on April 28, 2000. The relevant performance period for the graph is April 28, 2000 through December 31, 2000. Although the Company’s initial public offering was completed on May 3, 2000, the Common Stock began trading on an as-issued basis on April 28, 2000, on the Nasdaq National Market. The data regarding the Company assumes an investment at the initial public offering price of $16.00 per share of the Company’s Common Stock. The performance shown is not necessarily indicative of future performance.

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AUDIT COMMITTEE REPORT

      The Audit Committee, operating under its written charter, has (i) reviewed and discussed the audited financial statements with management of the Company, (ii) discussed with the Company’s independent accountants the matters required to be discussed by Statement of Auditing Standards (SAS) No. 61, Communications with Audit Committees, and SAS No. 90, Audit Committee Communications; (iii) received and reviewed the written disclosures and the letter from its independent accountants required by Independence Standards Board No. 1, Independence Discussion with Audit Committees; and (iv) discussed with its independent accountants the independent accountants’ independence. Based on its review and discussions listed above, the Audit Committee recommended to the Board of Directors that the audited financial statements be incorporated by reference into the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000, for filing with the Securities and Exchange Commission. Mr. Hugo-Martinez and Mr. Gregoire of the Audit Committee each meet the requirements of independence and expertise established by companies with securities quoted on Nasdaq National Market. Although Mr. Franke does not meet the independence requirements defined in the Nasdaq’s Marketplace Rule 4200 because he is the beneficial owner of a minority equity interest in TPG Semiconductor Holdings, LLC, the majority stockholder of the Company, the Board has determined that his membership on the Audit Committee is in the best interest of the Company and its stockholders due to his experience in finance and accounting as well as in his position as a chief financial officer and chief executive officer.

      This report is submitted by the Audit Committee.

Albert Hugo-Martinez, Chairman

AUDIT AND RELATED FEES

      Audit Fees. PricewaterhouseCoopers LLP’s fees for the audit of the Company’s consolidated financial statements for 2000 as well as reviews of the consolidated financial information included in the Company’s quarterly reports on Form 10-Q for 2000 are $467,000, of which an aggregate amount of $367,000 had been billed through December 31, 2000.

      Financial Information Systems Design and Implementation Fees. The Company did not engage PricewaterhouseCoopers LLP to provide services with respect to the design or implementation of financial information systems during 2000.

      All Other Fees. The aggregate amount of fees billed to the Company for all other services rendered by PricewaterhouseCoopers LLP for 2000 were $6,706,000. Such other services included: audits of the statutory financial statements of certain of the Company’s foreign subsidiaries and joint ventures; tax planning and advice; preparation of income tax returns; assistance with securities registrations; acquisition assistance; internal audit assistance; audits of the financial statements of certain of the Company’s employee benefit plans; and, accounting advice and assistance.

      The Audit Committee has determined that the provision of services, if any, described above for (a) financial information systems design and implementation fees, and (b) all other fees, is compatible with maintaining PricewaterhouseCoopers LLP’s independence.

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PRINCIPAL STOCKHOLDERS

      To the best of the Company’s knowledge, the following are beneficial owners of more than 5% of the Company’s Common Stock. In preparing the table below, the Company has relied without further investigation, on information filed by the following reporting persons with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. The Company makes no representations as to the current accuracy or completeness of the information reported.

RELATIONSHIPS AND RELATED TRANSACTIONS

      Immediately prior to the Company’s August 4, 1999 recapitalization (the “Recapitalization”), the Company was a wholly-owned subsidiary of Motorola, Inc. (“Motorola”). The Company held and continues to hold, through direct and indirect subsidiaries, substantially all of the assets and operations of the Semiconductor Components Group of Motorola’s Semiconductor Products Sector. As part of the Recapitalization, an affiliate of the Texas Pacific Group (“TPG”) purchased a portion of the Company’s Common Stock from Motorola. As a result, immediately subsequent to the Recapitalization, TPG’s affiliate owned approximately 91%, and Motorola owned approximately 9%, of the Common Stock. As of December 31, 2000, TPG is a 72.79% stockholder of the Company and Motorola is a 6.8% stockholder. As a result of the Recapitalization, the Company agreed to pay TPG annually a management fee of not more than $2 million. In connection with our April 2000 acquisition of Cherry Semiconductor Corporation, the Company agreed to pay TPG an advisory fee of $2 million in lieu of any management fee otherwise payable in 2000. Four of the Company’s directors, David Bonderman, Richard Boyce, Justin Chang, and John Marren are also TPG partners. David M. Stanton was, until 1999, a partner of TPG.

      In connection with the Recapitalization, Motorola (i) assigned, licensed and sublicensed certain intellectual property in connection with the products the Company offers, (ii) agreed to continue providing information technology, human resources, supply management, logistics and finance services for agreed periods of time, (iii) agreed to continue providing manufacturing and assembly services to the Company and to continue using similar services the Company provides to them for agreed periods of time, (iv) agreed to continue selling depreciated equipment to the Company to support capacity expansion, and (v) leased real estate to the Company. Motorola still provides some of these services on more favorable terms than the Company would expect to obtain from independent sources.

      For transactions between the Company and its executive officers, see “Employment Agreements/ Change in Control Agreements”.

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SHARE OWNERSHIP OF DIRECTORS AND OFFICERS

      The following table sets forth, as of March 10, 2001, certain information regarding beneficial ownership of the Company’s Common Stock by each director, the Company’s Named Executive Officers, and the directors and executive officers of the Company as a group. Beneficial ownership includes sole or shared voting power or investment power and also any shares that the individual has the right to acquire as of May 8, 2001, through the exercise of any stock option.

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SECTION 16(a) REPORTING COMPLIANCE

      The Company believes that during the year 2000 its directors, executive officers and 10% stockholders complied with all Section 16(a) filing requirements under the Securities Exchange Act of 1934, as amended, except as summarized below. Due to administrative oversight, William George, Albert Hugo-Martinez, Collette Hunt, Henry Leung and James Thorburn each failed to file one Form 4 on a timely basis to report a transaction. Each transaction was reported promptly upon discovery of the oversight. Additionally, each of the following executive officers of the Company received options for 50 shares of Company Common Stock in connection with the Company’s initial public offering: Steven Hanson, James Thorburn, William George, Dario Sacomani, Michael Rohleder, George H. Cave, Collette Hunt, Ralph Quinsey, Samuel Anderson, Alistair Banham, Henry Leung, James Stoeckmann and Chandramohan Subramaniam. Those grants were not timely included in the Section 16(a) reports filed for each executive officer, however, a Form 5 or Amended Form 5 was filed promptly for each, upon discovery of the oversight. In making the statements under this paragraph, the Company has relied on the written representations of its directors and executive officers.

MISCELLANEOUS INFORMATION

Solicitation of Proxies

      The entire cost of soliciting proxies will be borne by the Company. In addition to the solicitation of proxies by mail, the Company will request banks, brokers and other record holders to send proxies and proxy materials to the beneficial owners of the stock and secure their voting instructions, if necessary. The Company will reimburse such record holders for their reasonable expenses in so doing. The Company may also use several of its regular employees, who will not be specially compensated, to solicit proxies, either personally or by telephone, telegram, facsimile or special delivery letter.

Annual Report/ Form 10-K

      The Company’s 2000 Annual Report to Stockholders, which includes financial statements, is being mailed concurrently to all stockholders of record as of March 28, 2001. The Company’s Annual Report on Form 10-K (without exhibits) for the fiscal year ended December 31, 2000, is available without charge to each stockholder. Exhibits to the Form 10-K are available for the cost of photocopying. To receive a copy, please write to Investor Relations Specialist, Investor Relations, ON Semiconductor Corporation, 5005 E. McDowell Road, Phoenix, AZ 85008.

Other Business

      Other than the election of directors and proposals to approve the amendment to the 2000 Stock Incentive Plan, the amendment to the 2000 Employee Stock Purchase Plan, and the ratification of PricewaterhouseCoopers LLP as independent accountants, our Board of Directors does not intend to bring any other matters to be voted on at the meeting. Our Board is not currently aware of any other matters that will be presented by others for action at the meeting. However, if other matters are properly presented at the meeting and you have signed and returned your proxy card, the proxies will have discretion to vote your shares on such matters to the extent authorized under the Securities Exchange Act of 1934.

Stockholder Nominations and Proposals

      Subject to certain requirements contained in the Company’s Bylaws, a stockholder of record may propose the nomination of someone for director by written notice to the Secretary of the Company. Such notice must contain certain information concerning the nominee and the stockholder making the nomination and must be timely given, as described in the Company’s Bylaws. A nomination that does not comply with the above procedure will be disregarded. Stockholder proposals for the 2002 Annual Meeting must be received at the principal executive offices of the Company, 5005 E. McDowell Road, Phoenix Arizona 85008, not later than December 17, 2001, to be considered for inclusion in the 2001 Proxy Statement. Proposals to be presented at the Annual Meeting that are not intended for inclusion in the Proxy Statement must be submitted in

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      Stockholders are urged to mark, sign, date, and mail the proxy in the enclosed envelope, postage for which has been provided for mailing in the United States. Your prompt response is appreciated.

GEORGE H. CAVE

Dated: April 16, 2001

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Appendix A

ON SEMICONDUCTOR CORPORATION

2000 STOCK INCENTIVE PLAN

ARTICLE 1

PURPOSE

      1.1  General. The purpose of the SCG Holding Corporation 2000 Stock Incentive Plan (the “Plan”) is to promote the success and enhance the value of SCG Holding Corporation (the “Company”) by linking the personal interests of its members of the Board, employees, officers, and executives of, and consultants and advisors to, the Company to those of Company stockholders and by providing such individuals with an incentive for outstanding performance in order to generate superior returns to shareholders of the Company. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of members of the Board, employees, officers, and executives of, and consultants and advisors to, the Company upon whose judgment, interest, and special effort the successful conduct of the Company’s operation is largely dependent.

ARTICLE 2

EFFECTIVE DATE

      2.1  Effective Date. The Plan is effective as of the date the Plan is approved by the Board (the “Effective Date”). Within 12 months of the Effective Date, the Plan must be approved by the Company’s shareholders. The Plan will be deemed to be approved by the shareholders if it receives the affirmative vote of the holders of a majority of the shares of stock of the Company present or represented and entitled to vote at a meeting duly held in accordance with the applicable provisions of the Company’s Bylaws or by written consent of a majority of the Company’s shareholders in lieu of a meeting. Any awards granted under the Plan prior to shareholder approval are effective when made (unless the Committee specifies otherwise at the time of grant), but no Award may be exercised or settled and no restrictions relating to any Award may lapse before the Plan is approved by the shareholders as provided above. If the shareholders fail to approve the Plan, any Award previously made shall be automatically canceled without any further act.

ARTICLE 3

DEFINITIONS AND CONSTRUCTION

      3.1  Definitions. When a word or phrase appears in this Plan with the initial letter capitalized, and the word or phrase does not commence a sentence, the word or phrase shall generally be given the meaning ascribed to it in this Section or in Sections 1.1 or 2.1 unless a clearly different meaning is required by the context. The following words and phrases shall have the following meanings:

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ARTICLE 4

ADMINISTRATION

      4.1  Committee. The Plan shall be administered by the Board or a Committee appointed by, and which serves at the discretion of, the Board. If the Board appoints a Committee, the Committee shall consist of at least two individuals, each of whom qualifies as (i) a Non-Employee Director, and (ii) an “outside director” under Code Section 162(m) and the regulations issued thereunder. Reference to the Committee shall refer to the Board if the Board does not appoint a Committee.

      4.2  Action by the Committee. A majority of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by a majority of the Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer or other employee of the Company or any Subsidiary, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan.

      4.3  Authority of Committee. Subject to any specific designation in the Plan, the Committee has the exclusive power, authority and discretion to:

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      4.4  Decisions Binding. The Committee’s interpretation of the Plan, any Awards granted under the Plan, any Award Agreement and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties.

ARTICLE 5

SHARES SUBJECT TO THE PLAN

      5.1  Number of Shares. Subject to adjustment provided in Section 14.1, the aggregate number of shares of Stock reserved and available for grant under the Plan shall be 10,000,000.

      5.2  Lapsed Awards. To the extent that an Award terminates, expires, or lapses for any reason, any shares of Stock subject to the Award will again be available for the grant of an Award under the Plan.

      5.3  Stock Distributed. Any Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Stock, treasury Stock or Stock purchased on the open market.

      5.4  Limitation on Number of Shares Subject to Awards. Notwithstanding any provision in the Plan to the contrary, and subject to the adjustment in Section 14.1, the maximum number of shares of Stock with respect to one or more Awards that may be granted to any one Participant during the Company’s fiscal year shall be 1,000,000.

ARTICLE 6

ELIGIBILITY AND PARTICIPATION

      6.1  Eligibility.

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      6.2  Actual Participation. Subject to the provisions of the Plan, the Committee may, from time to time, select from among all eligible individuals, those to whom Awards shall be granted and shall determine the nature and amount of each Award. No individual shall have any right to be granted an Award under this Plan.

ARTICLE 7

STOCK OPTIONS

      7.1  General. The Committee is authorized to grant Options to Participants on the following terms and conditions:

      7.2  Incentive Stock Options. Incentive Stock Options shall be granted only to employees and the terms of any Incentive Stock Options granted under the Plan must comply with the following additional rules:

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ARTICLE 8

STOCK APPRECIATION RIGHTS

      8.1  Grant of SARs. The Committee is authorized to grant SARs to Participants on the following terms and conditions:

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ARTICLE 9

PERFORMANCE SHARES

      9.1  Grant of Performance Shares. The Committee is authorized to grant Performance Shares to Participants on such terms and conditions as may be selected by the Committee. The Committee shall have the complete discretion to determine the number of Performance Shares granted to each Participant. All Awards of Performance Shares shall be evidenced by an Award Agreement.

      9.2  Right to Payment. A grant of Performance Shares gives the Participant rights, valued as determined by the Committee, and payable to, or exercisable by, the Participant to whom the Performance Shares are granted, in whole or in part, as the Committee shall establish at grant or thereafter. Subject to the terms of the Plan, the Committee shall set performance goals and other terms or conditions to payment of the Performance Shares in its discretion which, depending on the extent to which they are met, will determine the number and value of Performance Shares that will be paid to the Participant.

      9.3  Other Terms. Performance Shares may be payable in cash, Stock, or other property, and have such other terms and conditions as determined by the Committee and reflected in the Award Agreement.

ARTICLE 10

RESTRICTED STOCK AWARDS

      10.1  Grant of Restricted Stock. The Committee is authorized to make Awards of Restricted Stock to Participants in such amounts and subject to such terms and conditions as determined by the Committee. All Awards of Restricted Stock shall be evidenced by a Restricted Stock Award Agreement.

      10.2  Issuance and Restrictions. Restricted Stock shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, without limitation, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, or otherwise, as the Committee determines at the time of the grant of the Award or thereafter.

      10.3  Forfeiture. Except as otherwise determined by the Committee at the time of the grant of the Award or thereafter, upon termination of employment during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited, provided, however, that the Committee may provide in any Restricted Stock Award Agreement that restrictions or forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part restrictions or forfeiture conditions relating to Restricted Stock.

      10.4  Certificates for Restricted Stock. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing shares of Restricted Stock are registered in the name of the Participant, certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company may, at its discretion, retain physical possession of the certificate until such time as all applicable restrictions lapse.

ARTICLE 11

PERFORMANCE-BASED AWARDS

      11.1  Purpose. The purpose of this Article 11 is to provide the Committee the ability to qualify the Performance Share Awards under Article 9 and the Restricted Stock Awards under Article 10 as “performance-based compensation” under Section 162(m) of the Code. If the Committee, in its discretion, decides to grant a Performance-Based Award to a Covered Employee, the provisions of this Article 11 shall control over any contrary provision contained in Articles 9 or 10.

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      11.2  Applicability. This Article 11 shall apply only to those Covered Employees selected by the Committee to receive Performance-Based Awards. The Committee may, in its discretion, grant Restricted Stock Awards or Performance Share Awards to Covered Employees that do not satisfy the requirements of this Article 11. The designation of a Covered Employee as a Participant for a Performance Period shall not in any manner entitle the Participant to receive an Award for the period. Moreover, designation of a Covered Employee as a Participant for a particular Performance Period shall not require designation of such Covered Employee as a Participant in any subsequent Performance Period and designation of one Covered Employee as a Participant shall not require designation of any other Covered Employees as a Participant in such period or in any other period.

      11.3  Discretion of Committee with Respect to Performance Awards. With regard to a particular Performance Period, the Committee shall have full discretion to select the length of such Performance Period, the type of Performance-Based Awards to be issued, the kind and/or level of the Performance Goal, and whether the Performance Goal is to apply to the Company, a Subsidiary or any division or business unit thereof.

      11.4  Payment of Performance Awards. Unless otherwise provided in the relevant Award Agreement, a Participant must be employed by the Company or a Subsidiary on the last day of the Performance Period to be eligible for a Performance Award for such Performance Period. Furthermore, a Participant shall be eligible to receive payment under a Performance-Based Award for a Performance Period only if the Performance Goals for such period are achieved. In determining the actual size of an individual Performance-Based Award, the Committee may reduce or eliminate the amount of the Performance-Based Award earned for the Performance Period, if in its sole and absolute discretion, such reduction or elimination is appropriate.

      11.5  Maximum Award Payable. The maximum Performance-Based Award payable to any one Participant under the Plan for a Performance Period is 1,000,000 shares of Stock, or in the event the Performance-Based Award is paid in cash, such maximum Performance-Based Award shall be determined by multiplying 1,000,000 by the Fair Market Value of one share of Stock as of the date of grant of the Performance-Based Award.

ARTICLE 12

TAKE OWNERSHIP GRANTS

      12.1  Take Ownership Grants. The Take Ownership Grants shall be awarded to Participants selected by the Committee and shall be subject to the following terms and conditions:

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ARTICLE 13

PROVISIONS APPLICABLE TO AWARDS

      13.1  Stand-Alone and Tandem Awards. Awards granted under the Plan may, in the discretion of the Committee, be granted either alone, in addition to, or in tandem with, any other Award granted under the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.

      13.2  Exchange Provisions. The Committee may at any time offer to exchange or buy out any previously granted Award for a payment in cash, Stock, or another Award, based on the terms and conditions the Committee determines and communicates to the Participant at the time the offer is made.

      13.3  Term of Award. The term of each Award shall be for the period as determined by the Committee, provided that in no event shall the term of any Incentive Stock Option or a Stock Appreciation Right granted in tandem with the Incentive Stock Option exceed a period of ten years from the date of its grant.

      13.4  Form of Payment for Awards. Subject to the terms of the Plan and any applicable law or Award Agreement, payments or transfers to be made by the Company or a Subsidiary on the grant or exercise of an Award may be made in such forms as the Committee determines at or after the time of grant, including without limitation, cash, promissory note, Stock, other Awards, or other property, or any combination, and may be made in a single payment or transfer, in installments, or on a deferred basis, in each case determined in accordance with rules adopted by, and at the discretion of, the Committee.

      13.5  Limits on Transfer. No right or interest of a Participant in any Award may be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Company or a Subsidiary. Except as otherwise provided by the Committee, no Award shall be assignable or transferable by a Participant other than by will or the laws of descent and distribution.

      13.6  Beneficiaries. Notwithstanding Section 13.5, a Participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights under the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If the Participant is married, a designation of a person other than the Participant’s spouse as his beneficiary with respect to more than 50% of the Participant’s interest in the Award shall not be effective without the written consent of the Participant’s spouse. If no beneficiary has been designated or survives the Participant, payment

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      13.7  Stock Certificates. Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates evidencing shares of Stock pursuant to the exercise of any Awards, unless and until the Board has determined, with advice of counsel, that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the shares of Stock are listed or traded. All Stock certificates delivered under the Plan are subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with Federal, state, or foreign jurisdiction, securities or other laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted, or traded. The Committee may place legends on any Stock certificate to reference restrictions applicable to the Stock. In addition to the terms and conditions provided herein, the Board may require that a Participant make such reasonable covenants, agreements, and representations as the Board, in its discretion, deems advisable in order to comply with any such laws, regulations, or requirements.

      13.8  Acceleration Upon a Change of Control. If a Change of Control occurs, all outstanding Options, Stock Appreciation Rights, and other Awards shall become fully exercisable and all restrictions on outstanding Awards shall lapse. To the extent that this provision causes Incentive Stock Options to exceed the dollar limitation set forth in Section 7.2(d), the excess Options shall be deemed to be Non-Qualified Stock Options. Upon, or in anticipation of, such an event, the Committee may cause every Award outstanding hereunder to terminate at a specific time in the future and shall give each Participant the right to exercise Awards during a period of time as the Committee, in its sole and absolute discretion, shall determine.

ARTICLE 14

CHANGES IN CAPITAL STRUCTURE

14.1  General.

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