Table of Contents

SECURITIES AND EXCHANGE COMMISSION

---

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

For the quarterly period ended June 29, 2001

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

For the transition period from                to                .

Commission File Number 000-30419

ON SEMICONDUCTOR CORPORATION

Delaware		36-3840979
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

5005 E. McDowell Road

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x  Yes  o  No

      The number of shares outstanding of each of the issuer’s classes of common stock as of the close of business on August 6, 2001:

Class		Number of Shares
Common Stock; $.01 par value			173,917,558

---

---

PART I: FINANCIAL INFORMATION
	Item 1. Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II: OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 2. Changes in Securities and Use of Proceeds
	Item 3. Defaults Upon Senior Securities
	Item 4. Submission of Matters to a Vote of Security Holders.
	Item 5. Other Information
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBIT INDEX
EX-10.1
EX-10.2
EX-10.3
EX-10.4
EX-10.5
EX-10.6

---

Table of Contents

INDEX

			Page
Part I
	Financial Information
	Item 1 Financial Statements			3
	Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
	Item 3 Quantitative and Qualitative Disclosures About Market Risk			32
Part II
	Other Information
	Item 1 Legal Proceedings			33
	Item 2 Changes in Securities and Use of Proceeds			33
	Item 3 Defaults Upon Senior Securities			33
	Item 4 Submission of Matters to a Vote of Security Holders			34
	Item 5 Other Information			34
	Item 6 Exhibits and Reports on Form 8-K			34
Signatures				36
Exhibits

2

---

Table of Contents

PART I:  FINANCIAL INFORMATION

Item 1.  Financial Statements

ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

			June 29,				December 31,
			2001				2000
			(unaudited)
Assets
Cash and cash equivalents			$	175.7			$	188.9
Receivables, net (including $14.0 and $14.9 due from Motorola)				158.2				271.2
Inventories				258.0				258.1
Other current assets				46.5				39.6
Deferred income taxes				100.3				40.7
	Total current assets			738.7				798.5
Property, plant and equipment, net				614.0				648.2
Deferred income taxes				294.1				286.8
Investments in joint ventures				30.2				45.3
Goodwill and other intangibles, net				129.4				140.8
Other assets				103.4				103.4
	Total assets		$	1,909.8			$	2,023.0
Liabilities, Minority Interests, and Stockholders’ Equity
Accounts payable (including $6.5 and $7.3 payable to Motorola)			$	142.0			$	175.0
Accrued expenses (including $9.4 and $8.3 payable to Motorola)				146.0				184.3
Income taxes payable				9.7				22.3
Accrued interest				24.2				17.9
Deferred income on sales to distributors (See Note 2)				136.1				—
Current portion of long-term debt				13.6				5.6
	Total current liabilities			471.6				405.1
Long-term debt (including $109.6 and $104.5 payable to Motorola)				1,375.4				1,252.7
Other long-term liabilities				32.5				20.8
	Total liabilities			1,879.5				1,678.6
Commitments and contingencies				—				—
Minority interests in consolidated subsidiaries				5.7				6.7
Common stock ($0.01 par value, 300,000,000 shares authorized, 173,905,973 and 172,746,435 shares issued and outstanding)				1.7				1.7
Additional paid-in capital				738.3				730.4
Accumulated other comprehensive income (loss)				(10.1	)			(0.7	)
Accumulated deficit				(705.3	)			(393.7	)
	Total stockholders’ equity			24.6				337.7
	Total liabilities, minority interests, and stockholders’ equity		$	1,909.8			$	2,023.0

See accompanying notes to consolidated financial statements.

3

---

Table of Contents

ON SEMICONDUCTOR AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

				Quarter Ended								Six Months Ended
				June 29,				July 1,				June 29,				July 1,
				2001				2000				2001				2000
				(unaudited)								(unaudited)
Revenues:
	Net product revenues (including $23.2, $34.9, $44.4 and $72.1 from Motorola)			$	307.3			$	531.0			$	664.3			$	982.5
	Foundry revenues from Motorola				3.4				19.5				6.9				54.8
		Total revenues			310.7				550.5				671.2				1,037.3
Cost of sales					255.6				357.7				529.5				681.1
Gross profit					55.1				192.8				141.7				356.2
Operating expenses:
	Research and development				22.9				17.1				45.8				28.3
	Selling and marketing				20.8				26.2				44.6				45.8
	General and administrative				34.0				59.6				70.8				110.6
	Amortization of goodwill and other intangibles				5.6				5.5				11.4				5.5
	Write-off of acquired in-process research and development				—				26.9				—				26.9
	Restructuring and other charges				95.8				—				133.8				4.8
		Total operating expenses			179.1				135.3				306.4				221.9
Operating income (loss)					(124.0	)			57.5				(164.7	)			134.3
Other income (expenses), net:
	Interest expense				(29.7	)			(33.8	)			(58.9	)			(68.5	)
	Equity in earnings of joint ventures				1.5				2.4				2.1				2.2
	Gain on sale of investment in joint venture				—				—				3.1				—
		Other income (expenses), net			(28.2	)			(31.4	)			(53.7	)			(66.3	)
Income (loss) before income taxes, minority interests, extraordinary loss and cumulative effect of accounting change					(152.2	)			26.1				(218.4	)			68.0
Income tax (provision) benefit					—				(10.1	)			22.7				(25.8	)
Minority interests					—				(0.5	)			0.5				(1.2	)
Net income (loss) before extraordinary loss and cumulative effect of accounting change					(152.2	)			15.5				(195.2	)			41.0
Extraordinary loss on debt prepayment (net of income taxes of $11.7) (See Note 1)					—				(17.5	)			—				(17.5	)
Cumulative effect of accounting change (net of income taxes of $38.8) (See Note 2)					—				—				(116.4	)			—
Net income (loss)					(152.2	)			(2.0	)			(311.6	)			23.5
Less: Redeemable preferred stock dividends					—				(2.2	)			—				(8.8	)
Net income (loss) available for common stock				$	(152.2	)		$	(4.2	)		$	(311.6	)		$	14.7

4

---

Table of Contents

CONSOLIDATED STATEMENTS OF OPERATIONS

					Quarter Ended								Six Months Ended
					June 29,				July 1,				June 29,				July 1,
					2001				2000				2001				2000
					(unaudited)								(unaudited)
Comprehensive income (loss):
	Net income (loss)				$	(152.2	)		$	(2.0	)		$	(311.6	)		$	23.5
	Foreign currency translation adjustments					(0.8	)			—				(3.3	)			(0.3	)
	Additional minimum pension liability					—				—				(0.4	)			—
	Cash flow hedges:
		Cumulative effect of accounting change (See Note 11)				—				—				(3.4	)			—
		Net gains (losses) on derivative instruments				0.5				—				(2.6	)			—
		Reclassification adjustments				0.2				—				0.3				—
			Comprehensive income (loss)		$	(152.3	)		$	(2.0	)		$	(321.0	)		$	23.2
Earnings (loss) per common share:
	Basic:
		Net income (loss) before extraordinary loss and cumulative effect of accounting change			$	(0.88	)		$	0.08			$	(1.13	)		$	0.22
		Extraordinary loss on debt prepayment				—				(0.11	)			—				(0.12	)
		Cumulative effect of accounting change				—				—				(0.67	)			—
		Net income (loss)			$	(0.88	)		$	(0.03	)		$	(1.80	)		$	0.10
	Diluted:
		Net income (loss) before extraordinary loss and cumulative effect of accounting change			$	(0.88	)		$	0.08			$	(1.13	)		$	0.21
		Extraordinary loss on debt prepayment				—				(0.11	)			—				(0.11	)
		Cumulative effect of accounting change				—				—				(0.67	)			—
		Net income (loss)			$	(0.88	)		$	(0.03	)		$	(1.80	)		$	0.10
Weighted average common shares outstanding:
	Basic					173.5				160.0				172.8				148.3
	Diluted					173.5				165.9				172.8				154.1

See accompanying notes to consolidated financial statements.

5

---

Table of Contents

ON SEMICONDUCTOR AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

					Six Months				Six Months
					Ended				Ended
					June 29, 2001				July 1, 2000
					(unaudited)				(unaudited)
Cash flows from operating activities:
	Net income (loss)				$	(311.6	)		$	23.5
	Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
		Depreciation and amortization				85.4				75.9
		Write-off of acquired in-process research and development				—				26.9
		Extraordinary loss on debt prepayment				—				29.2
		Cumulative effect of accounting change				116.4				—
		Amortization of debt issuance costs				2.7				3.1
		Provision for doubtful accounts				(0.4	)			0.6
		Net (gain) loss on disposals of property, plant and equipment				1.0				(1.6	)
		Non-cash impairment write-down of property, plant and equipment				45.1				—
		Non-cash interest on junior subordinated note payable to Motorola				5.3				4.6
		Minority interests in earnings (losses) of consolidated subsidiaries				(0.5	)			1.2
		Undistributed earnings of unconsolidated joint ventures				(2.1	)			(2.2	)
		Tax benefits of stock options exercised				0.6				2.6
		Gain on sale of investment in unconsolidated joint venture				(3.1	)			—
		Deferred income taxes				(24.2	)			(16.7	)
		Non-cash foreign exchange gains				—				(0.7	)
		Non-cash stock compensation charges				3.4				—
	Changes in assets and liabilities:
		Receivables				113.6				(27.1	)
		Inventories				(0.5	)			1.7
		Other assets				(13.1	)			(12.1	)
		Accounts payable				(32.4	)			25.4
		Accrued expenses				(7.8	)			10.5
		Income taxes payable				(12.9	)			(14.4	)
		Accrued interest				6.3				(11.3	)
		Deferred income on sales to distributors				(46.1	)			—
		Other long-term liabilities				3.8				2.5
			Net cash provided by (used in) operating activities			(71.1	)			121.6
Cash flows from investing activities:
	Purchases of property, plant and equipment					(88.0	)			(70.8	)
	Acquisition of business, net of cash acquired					—				(253.2	)
	Acquisition of minority interest in consolidated subsidiaries					(0.1	)			—
	Investments in unconsolidated companies and joint ventures					(0.5	)			(2.5	)
	Loans to unconsolidated joint venture					(5.0	)			(11.0	)
	Proceeds from sale of investment in unconsolidated joint venture					20.4				—
	Proceeds from sales of property, plant and equipment					2.1				17.7
			Net cash used in investing activities			(71.1	)			(319.8	)
Cash flows from financing activities:
	Proceeds from initial public offering, net of offering expenses					—				514.8
	Proceeds from senior credit facilities and other borrowings					125.0				200.0
	Payments on capital lease obligation					(0.6	)			—
	Payment of debt issuance costs					—				(3.2	)
	Repayment of senior credit facilities, including prepayment penalty					—				(131.5	)
	Repayment of senior subordinated notes, including prepayment penalty					—				(156.8	)
	Redemption of preferred stock, including accrued dividends					—				(228.4	)
	Proceeds from issuance of stock under the employee stock purchase plan					3.4				—
	Proceeds from exercise of stock options					0.5				0.8
			Net cash provided by financing activities			128.3				195.7
Effect of exchange rates on cash and cash equivalents						0.7				0.1
Net decrease in cash and cash equivalents						(13.2	)			(2.4	)
Cash and cash equivalents, beginning of period						188.9				126.8
Cash and cash equivalents, end of period					$	175.7			$	124.4

6

---

Table of Contents

ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1:  Background and Basis of Presentation

      The accompanying consolidated financial statements as of and for the quarter and six months ended June 29, 2001 include the accounts of ON Semiconductor Corporation, its wholly-owned subsidiaries, and the majority-owned subsidiaries that it controls (collectively, the “Company”). An investment in a majority-owned joint venture that the Company does not control is accounted for on the equity method. Investments in companies that represent less than 20% of the related voting stock are accounted for on the cost basis. All material intercompany accounts and transactions have been eliminated.

      The accompanying unaudited financial information reflects all adjustments, consisting only of normal recurring adjustments, that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Such financial information should be read in conjunction with the consolidated financial statements and related notes thereto included in our Form 10-K for the year ended December 31, 2000 and filed with the Securities and Exchange Commission (“SEC”) on March 30, 2001.

      The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from these estimates.

      On August 4, 1999, the Company was recapitalized and certain related transactions were effected (the “Recapitalization”) pursuant to an agreement among ON Semiconductor Corporation, its primary domestic operating subsidiary, Semiconductor Components Industries, LLC (“SCI LLC”), Motorola and affiliates of Texas Pacific Group. As a result of the Recapitalization, affiliates of Texas Pacific Group owned approximately 91% and Motorola owned approximately 9% of the outstanding common stock of the Company. In addition, as part of these transactions, Texas Pacific Group received 1,500 shares and Motorola received 590 shares of the Company’s mandatorily redeemable preferred stock with a liquidation value of $209 million plus accrued and unpaid dividends. Motorola also received a $91 million junior subordinated note issued by SCI LLC. Cash payments to Motorola in connection with the Recapitalization were financed through equity investments by affiliates of Texas Pacific Group totaling $337.5 million, borrowings totaling $740.5 million under the Company’s $875 million senior bank facilities and the issuance of $400 million of 12% senior subordinated notes due August 2009. Because Texas Pacific Group’s affiliates did not acquire substantially all of the Company’s common stock, the basis of the Company’s assets and liabilities for financial reporting purposes was not impacted by the Recapitalization.

      On May 3, 2000, the Company completed the initial public offering (“IPO”) of its common stock, selling 34.5 million shares with an issue price of $16 per share. Net proceeds from the IPO (after deducting issuance costs) were approximately $514.8 million. The net proceeds were used to redeem all outstanding preferred stock (including accrued dividends), redeem a portion of the senior subordinated notes and prepay a portion of the loans outstanding under the senior bank facilities.

      As described above, the Company utilized a portion of the net proceeds from its IPO to redeem a portion of its senior subordinated notes and prepay a portion of the loans outstanding under its senior bank facilities. In connection therewith, the Company incurred prepayment penalties and redemption premiums of $17.3 million and wrote off $11.9 million of debt issuance costs. These amounts, totaling $29.2 million ($17.5 million or $0.11 per share, net of income taxes), have been classified as an extraordinary loss in the accompanying consolidated statements of operations for the quarter and six months ended July 1, 2000.

7

---

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 2:  Cumulative Effect of Accounting Change

      Effective January 1, 2001, the Company changed its accounting method for recognizing revenue on sales to distributors. Recognition of revenue and related gross profit on sales to distributors is now deferred until the distributor resells the product. Deferred income on sales to distributors was $136.1 million at June 29, 2001.

      Management of the Company believes that this accounting change is to a preferable method because it better aligns reported results with, focuses the Company on, and allows investors to better understand end user demand for the products the Company sells through distribution. This revenue recognition policy is commonly used in the semiconductor industry.

      The cumulative effect of the accounting change for periods prior to January 1, 2001 was a charge of $155.2 million ($116.4 million or $0.67 per share, net of income taxes) and was recorded in the six months ended June 29, 2001. The accounting change resulted in a reduction of the Company’s net loss in the six months ended June 29, 2001 of $26.4 million, or $0.15 per share.

      The estimated pro forma effects of the accounting change are as follows (in millions, except per share amounts):

			Quarter Ended				Quarter Ended				Six Months				Six Months
			June 29,				July 1,				Ended				Ended
			2001				2000				June 29, 2001				July 1, 2000
			(unaudited)				(unaudited)				(unaudited)				(unaudited)
As reported:
	Revenues		$	310.7			$	550.5			$	671.2			$	1,037.3
	Net income (loss)			(152.2	)			(2.0	)			(311.6	)			23.5
	Basic net income (loss) per share		$	(0.88	)		$	(0.03	)		$	(1.80	)		$	0.10
	Diluted net income (loss) per share		$	(0.88	)		$	(0.03	)		$	(1.80	)		$	0.10
Pro forma amounts reflecting the accounting change applied retroactively:
	Revenues		$	310.7			$	516.4			$	671.2			$	964.2
	Net loss			(152.2	)			(12.7	)			(195.2	)			(4.8	)
	Basic net loss per share		$	(0.88	)		$	(0.09	)		$	(1.13	)		$	(0.09	)
	Diluted net loss per share		$	(0.88	)		$	(0.09	)		$	(1.13	)		$	(0.09	)

Note 3:     Acquisition

      On April 3, 2000, the Company acquired all of the outstanding capital stock of Cherry Semiconductor Corporation (“Cherry”) for approximately $250 million in cash, which was financed with cash on hand and borrowings of $220 million under the Company’s senior bank facilities. Cherry, which was renamed Semiconductor Components Industries of Rhode Island, Inc., designs and manufactures analog and mixed signal integrated circuits for the power management and automotive markets, and had revenues for its fiscal year ended February 29, 2000 of $129.1 million.

      The Cherry acquisition was accounted for using the purchase method of accounting and as a result, the purchase price plus related costs was allocated to the estimated fair value of assets acquired and liabilities

8

---

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

assumed at the time of the acquisition based on independent appraisals and management estimates as follows (in millions):

Fair value of tangible net assets		$	71.3
Developed technology			59.3
In-process research and development			26.9
Assembled work force			10.0
Excess of purchase price over net assets acquired (goodwill)			85.7
		$	253.2

      Developed technology and assembled workforce are being amortized on a straight-line basis over estimated useful lives of five years while goodwill is being amortized over an estimated life of ten years.

      The fair value of the acquired in-process research and development was determined using the income approach, which discounts expected future cash flows to present value. Significant assumptions that had to be made in using this approach included revenue and operating margin projections and determination of the applicable discount rate. The fair value of the acquired in-process research and development was based on sales forecasts and cost assumptions projected to be achievable by Cherry on a standalone basis. Operating margins were based on cost of goods sold and selling, general, and administrative expenses as a percentage of revenues. All projected revenue and cost information was based on historical results and trends and do not include any synergies or cost savings that may result from the acquisition. The rate used to discount future projected cash flows resulting from the acquired in-process research and development was 20 percent which was derived from a weighted average cost of capital analysis adjusted upward to reflect additional risks inherent in the development life cycle.

      At the date of acquisition, the in-process research and development had not yet reached technological feasibility and no alternative future uses had been identified. Accordingly, these costs were expensed as of the acquisition date. The expected release dates for the products incorporating the acquired technology vary, but the Company expects that such products will be completed and begin to generate cash flows in 2001. The ultimate development of these technologies remains a significant risk due to the remaining efforts required to achieve technical viability, rapidly changing customer markets, uncertain standards for new products and significant competitive threats from numerous companies. The nature of the efforts to develop the acquired technology into commercially viable products consists principally of design and development, engineering and testing activities necessary to determine that the product can meet market expectations, including functionality and technical requirements. Failure to bring these products to market in a timely manner could result in a loss of market share, or a lost opportunity to capitalize on emerging markets, and could have a material adverse impact on our business and operating results.

      The forecasts used in valuing the acquired in-process research and development were based upon assumptions the Company believes are reasonable; however, such assumptions may be incomplete or inaccurate, and unanticipated events and circumstances are likely to occur. There can be no assurance that the underlying assumptions used to estimate expected project sales or profits, or the events associated with such projects, will transpire as estimated. For these reasons, actual results may vary from the projected results.

      Cherry’s results of operations have been included in the Company’s consolidated results from the date of acquisition. The following pro forma disclosures present the Company’s results of operations for the six

9

---

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

months ended July 1, 2000 as if the Company had acquired Cherry as of January 1, 2000 (in millions, except per share data):

Total revenues		$	1,073.7
Net income before extraordinary loss		$	38.0
Net income		$	20.5
Diluted earnings per share before extraordinary loss		$	0.19
Diluted earnings per share		$	0.08

      These amounts include the results of Cherry for the first quarter of 2000 and are adjusted to reflect interest and amortization charges that would have occurred had the purchase taken place on January 1, 2000. The amounts are based upon certain assumptions and estimates, and do not reflect any benefit from any cost savings which might be achieved from combined operations. The pro forma results are not indicative of the actual results that would have occurred had the acquisition been consummated as of January 1, 2000.

Note 4:  Inventories

      Inventories consist of the following (in millions):

		June 29,				December 31,
		2001				2000
		(unaudited)
Raw materials		$	13.7			$	26.6
Work in process			136.9				123.4
Finished goods			107.4				108.1
		$	258.0			$	258.1

Note 5:  Restructuring and Other Charges

      In June 2001, the Company recorded a $95.8 million charge to cover costs associated with a worldwide restructuring program. This program includes phasing out of manufacturing operations at the Company’s Guadalajara, Mexico facility, transferring certain manufacturing activities performed at the Company’s Aizu, Japan and Seremban, Malaysia facilities to other Company-owned facilities or to third party contractors and consolidation of other operations. The charge includes $43.6 million to cover employee separation costs associated with the termination of approximately 3,200 employees, asset impairments of $42.2 million and $10.0 million of other costs primarily related to facility closures and contract terminations. The asset impairments were charged directly against the related assets. Employee separation costs included $1.1 million of non-cash charges associated with the acceleration of vesting of stock options for terminated employees and $6.1 million for additional pension charges related to terminated employees. As of June 29, 2001, the remaining liability relating to this restructuring was $38.6 million. As of June 29, 2001, 532 employees have been terminated under this restructuring plan.

      In March 2001, the Company recorded a $34.2 million charge to cover costs associated with a worldwide restructuring program involving manufacturing locations as well as selling and administrative functions. The charge included $31.3 million to cover employee separation costs associated with the termination of approximately 1,100 employees and $2.9 million for asset impairments that were charged directly against the related assets. As of June 29, 2001, the remaining liability relating to this restructuring was $3.2 million. As of June 29, 2001, 610 employees have been terminated under this restructuring plan.

      Also in March 2001, the Company recorded a $3.8 million charge to cover costs associated with the separation of one of the Company’s executive officers. In connection with the separation, the Company paid

10

---

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the former executive officer $1.9 million. In addition, the Company agreed to accelerate the vesting of his remaining stock options and to allow such options to remain exercisable for the remainder of their ten-year term. The Company recorded a non-cash charge of $1.9 million related to the modification of these options.

      In March 2000, the Company recorded a $4.8 million charge to cover costs associated with a restructuring program at its manufacturing facility in Guadalajara, Mexico. The charge included $3.2 million to cover employee separation costs associated with the termination of approximately 500 employees and $1.6 million for asset impairments that were charged directly against the related assets. As of June 29, 2001 there was no remaining liability related to the 2000 restructuring program.

      A summary of activity in the Company’s restructuring reserves for the six months ended June 29, 2001 is as follows (in millions):

		Balance as of												Balance as of
		December 31,				Additional				Amounts				June 29,
		2000				Reserves				Used				2001
Facility closure and other exit costs		$	—			$	10.0			$	—			$	10.0
Employee separations			0.7				67.7				(36.6	)			31.8
Total restructuring		$	0.7			$	77.7			$	(36.6	)		$	41.8

Note 6:  Sale of Investment in Joint Venture

      The Company had a 50% interest in Semiconductor Miniatures Products Malaysia Sdn. Bhd. (“SMP”). As a part of the joint venture agreement, the Company’s joint venture partner, Philips Semiconductors International B.V. (“Philips”), had the right to purchase the Company’s interest in SMP between January 2001 and July 2002. On February 1, 2001, Philips exercised its purchase right, acquiring the Company’s 50% interest in SMP. This transaction resulted in proceeds of approximately $20.4 million and a pre-tax gain of approximately $3.1 million.

Note 7:  Earnings per Common Share

      Basic earnings per share are computed by dividing net income (loss) available for common stock (net income (loss) adjusted for dividends accrued on the Company’s redeemable preferred stock) by the weighted average number of common shares outstanding during the period. Diluted earnings per share incorporates the incremental impact of shares issuable upon the assumed exercise of stock options. The number of incremental shares from the assumed exercise of stock options is calculated by applying the treasury stock method. For the

11

---

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

quarter and six months ended June 29, 2001, the effect of stock options is not included as it would be anti-dilutive. Earnings per share calculations are as follows (in millions, except per share data):

				Quarter				Quarter				Six Months				Six Months
				Ended				Ended				Ended				Ended
				June 29, 2001				July 1, 2000				June 29, 2001				July 1, 2000
Net income (loss) before extraordinary loss and cumulative effect of accounting change				$	(152.2	)		$	15.5			$	(195.2	)		$	41.0
Less: Redeemable preferred stock dividends					—				(2.2	)			—				(8.8	)
Net income (loss) available for common stock					(152.2	)			13.3				(195.2	)			32.2
Extraordinary loss on debt prepayment					—				(17.5	)			—				(17.5	)
Cumulative effect of accounting change					—				—				(116.4	)			—
Net income (loss)				$	(152.2	)		$	(4.2	)		$	(311.6	)		$	14.7
Basic weighted average common shares outstanding					173.5				160.0				172.8				148.3
Add: Dilutive effect of stock options					—				5.9				—				5.8
Diluted weighted average common shares outstanding					173.5				165.9				172.8				154.1
Earnings per share:
	Basic:
		Net income (loss) before extraordinary loss and cumulative effect of accounting change available for common stock		$	(0.88	)		$	0.08			$	(1.13	)		$	0.22
		Extraordinary loss on debt prepayment			—				(0.11	)			—				(0.12	)
		Cumulative effect of accounting change			—				—				(0.67	)			—
		Net income (loss) available for common stock		$	(0.88	)		$	(0.03	)		$	(1.80	)		$	0.10
	Diluted:
		Net income (loss) before extraordinary loss and cumulative effect of accounting change available for common stock		$	(0.88	)		$	0.08			$	(1.13	)		$	0.21
		Extraordinary loss on debt prepayment			—				(0.11	)			—				(0.11	)
		Cumulative effect of accounting change			—				—				(0.67	)			—
		Net income (loss) available for common stock		$	(0.88	)		$	(0.03	)		$	(1.80	)		$	0.10

Note 8:  Long-Term Debt

      At June 29, 2001, the Company had $994.3 million outstanding under its senior bank facilities. The senior bank facilities require the Company to maintain compliance with certain covenants and restrictions. At June 29, 2001, the Company was not in compliance with covenants requiring the maintenance of minimum interest expense and leverage coverage ratios. The Company has received a waiver in respect of such noncompliance at June 29, 2001 (and in respect of any future noncompliance with such covenants through December 31, 2002). In connection with such waiver, the Company has amended its senior bank facilities. The key terms of this amendment are as follows:

	•	Minimum interest expense coverage ratio and leverage coverage ratio requirements for periods between January 31, 2003 through December 31, 2005 have been reduced, maximum capital expenditure limits have been reduced and covenants requiring the maintenance of a minimum cash and cash equivalent

12

---

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

		balance until certain financial ratios are achieved and minimum EBITDA levels through December 31, 2002 have been added;
	•	The Company is required to obtain $100 million through an equity investment from its principal shareholder, an affiliate of Texas Pacific Group, by September 7, 2001;
	•	The interest rate spread on outstanding borrowings will increase to 3.0% with respect to alternate base rate loans and 4.0% with respect to Eurodollar loans. Payment of such interest will be required on a monthly basis. Additionally, a supplemental interest charge of 2.0% will accrue through September 30, 2001, increasing to 3.0% for the period October 1, 2001 through March 31, 2003. Fifty percent of such supplemental interest must be paid by March 31, 2003 with the balance due by June 30, 2003. To the extent that the full amount of such supplemental interest is not paid on March 31, 2003, additional supplemental interest for the period of March 31, 2003 through June 30, 2003 will accrue at a rate of 3.0% on a portion of the outstanding borrowings, which portion is equal to the percentage of supplemental interest accrued but unpaid on March  31, 2003. Such additional supplemental interest will be due by June 30, 2002. As a result of these amendments, the Company’s interest expense on an annual basis is expected to increase by approximately $29.5 million; and
	•	Certain mandatory prepayment provisions contained in the original agreement have been revised.

      The Company believes that, pursuant to its current business plans, it will be able to maintain compliance with the revised covenants as outlined above.

      In connection with the Recapitalization, the Company and SCI LLC, (collectively, the “Issuers”), issued $400.0 million senior subordinated notes due 2009. As of June 29, 2001, $260.0 million of the senior subordinated notes were outstanding. The Company’s other domestic subsidiaries (collectively, the “Guarantor Subsidiaries”) have jointly and severally, irrevocably and unconditionally guaranteed the Issuers’ obligations under the senior subordinated notes. The Guarantor Subsidiaries include holding companies whose net assets consist primarily of investments in the Company’s foreign joint ventures in China and the Czech Republic and nominal equity interests in certain of the Company’s foreign subsidiaries as well as Semiconductor Components Industries of Rhode Island, Inc. The foreign joint ventures and the Company’s foreign subsidiaries (collectively, the “Non-Guarantor Subsidiaries”) themselves are not guarantors of the senior subordinated notes.

      The Company does not believe that the separate financial statements and other disclosures concerning the Guarantor Subsidiaries provide any additional information that would be material to investors in making an investment decision. Condensed consolidating financial information for the Issuers, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries follows (in millions):

13

---

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

			Issuers
			ON Semiconductor								Guarantor				Non-Guarantor
			Corporation				SCI LLC				Subsidiaries				Subsidiaries				Eliminations				Total
As of June 29, 2001
Cash and cash equivalents			$	—			$	133.4			$	(0.4	)		$	42.7			$	—			$	175.7
Receivables, net				—				59.9				—				98.3				—				158.2
Inventories				—				44.2				3.4				296.7				(86.3	)			258.0
Other current assets				—				83.2				(0.2	)			45.2				18.6				146.8
	Total current assets			—				320.7				2.8				482.9				(67.7	)			738.7
Property, plant and equipment, net				—				160.8				47.9				409.7				(4.4	)			614.0
Deferred income taxes				—				289.5				15.1				5.3				(15.8	)			294.1
Goodwill and other intangibles, net				—				10.6				119.1				(0.3	)			—				129.4
Investments and other assets				89.4				309.3				59.5				5.9				(330.5	)			133.6
	Total assets		$	89.4			$	1,090.9			$	244.4			$	903.5			$	(418.4	)		$	1,909.8
Accounts payable			$	—			$	35.7			$	2.9			$	103.4			$	—			$	142.0
Accrued expenses and other current liabilities				(3.7	)			107.4				(22.5	)			70.7				41.6				193.5
Deferred income on sales to distributors				—				48.8				—				87.3				—				136.1
	Total current liabilities			(3.7	)			191.9				(19.6	)			261.4				41.6				471.6
Long-term debt(1)				260.0				1,352.7				—				22.7				(260.0	)			1,375.4
Other long-term liabilities				—				15.9				—				16.6				—				32.5
Intercompany(1)				(191.5	)			(713.3	)			201.6				550.1				153.1				—
	Total liabilities			64.8				847.2				182.0				850.8				(65.3	)			1,879.5
Minority interests				—				—				—				—				5.7				5.7
Stockholders’ equity				24.6				243.7				62.4				52.7				(358.8	)			24.6
Liabilities, minority interests and stockholders’ equity			$	89.4			$	1,090.9			$	244.4			$	903.5			$	(418.4	)		$	1,909.8
As of December 31, 2000
Cash and cash equivalents			$	—			$	44.9			$	(1.1	)		$	145.1			$	—			$	188.9
Receivables, net				—				118.2				—				153.0				—				271.2
Inventories				—				48.4				6.6				261.6				(58.5	)			258.1
Other current assets				—				36.8				0.7				34.6				8.2				80.3
	Total current assets			—				248.3				6.2				594.3				(50.3	)			798.5
Property, plant and equipment, net				—				157.5				52.4				438.5				(0.2	)			648.2
Deferred income taxes				—				278.1				14.2				(5.5	)			—				286.8
Goodwill and other intangibles				—				—				140.8				—				—				140.8
Investments and other assets				429.4				340.8				57.8				5.6				(684.9	)			148.7
	Total assets		$	429.4			$	1,024.7			$	271.4			$	1,032.9			$	(735.4	)		$	2,023.0
Accounts payable			$	—			$	62.0			$	7.0			$	106.0			$	—			$	175.0
Accrued expenses and other current liabilities				(3.2	)			124.4				10.4				97.2				1.3				230.1
	Total current liabilities			(3.2	)			186.4				17.4				203.2				1.3				405.1
Long-term debt(1)				260.0				1,228.2				—				24.5				(260.0	)			1,252.7
Other long-term liabilities				—				9.7				—				11.1				—				20.8
Intercompany(1)				(165.1	)			(782.6	)			150.4				537.3				260.0				—
	Total liabilities			91.7				641.7				167.8				776.1				1.3				1,678.6
Minority interests				—				—				—				—				6.7				6.7
Stockholders’ equity				337.7				383.0				103.6				256.8				(743.4	)			337.7
Liabilities, minority interests and stockholders’ equity			$	429.4			$	1,024.7			$	271.4			$	1,032.9			$	(735.4	)		$	2,023.0

14

---

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

				Issuers
				ON Semiconductor								Guarantor				Non-Guarantor
				Corporation				SCI LLC				Subsidiaries				Subsidiaries				Eliminations				Total
For the quarter ended June 29, 2001
Revenues				$	—			$	176.6			$	9.5			$	386.8			$	(262.2	)		$	310.7
Cost of sales					—				145.4				8.1				363.7				(261.6	)			255.6
Gross profit					—				31.2				1.4				23.1				(0.6	)			55.1
Research and development					—				(2.4	)			5.0				20.3				—				22.9
Selling and marketing					—				8.8				1.4				10.6				—				20.8
General and administrative					—				19.7				2.8				11.5				—				34.0
Amortization of goodwill and other intangibles					—				—				5.6				—				—				5.6
Restructuring and other charges					—				21.6				—				74.2				—				95.8
		Total operating expenses			—				47.7				14.8				116.6				—				179.1
Operating income (loss)					—				(16.5	)			(13.4	)			(93.5	)			(0.6	)			(124.0	)
Interest expense, net					—				(11.8	)			(4.7	)			(13.2	)			—				(29.7	)
Equity earnings					(152.2	)			(38.3	)			2.0				—				190.0				1.5
Income (loss) before income taxes					(152.2	)			(66.6	)			(16.1	)			(106.7	)			189.4				(152.2	)
Income tax benefit (provision)					—				44.1				8.9				(0.6	)			(52.4	)			—
Net income (loss)				$	(152.2	)		$	(22.5	)		$	(7.2	)		$	(107.3	)		$	137.0			$	(152.2	)
For the six months ended June  29, 2001
Revenues				$	—			$	385.2			$	25.8			$	821.4			$	(561.2	)		$	671.2
Cost of sales					—				324.0				21.9				744.8				(561.2	)			529.5
Gross profit					—				61.2				3.9				76.6				—				141.7
Research and development					—				1.9				9.1				34.8				—				45.8
Selling and marketing					—				21.0				3.0				20.6				—				44.6
General and administrative					—				45.2				5.1				20.5				—				70.8
Amortization of goodwill and other intangibles					—				—				11.4				—				—				11.4
Restructuring and other charges					—				43.3				1.3				89.2				—				133.8
		Total operating expenses			—				111.4				29.9				165.1				—				306.4
Operating income (loss)					—				(50.2	)			(26.0	)			(88.5	)			—				(164.7	)
Interest expense, net					—				(24.3	)			(9.4	)			(25.2	)			—				(58.9	)
Equity earnings					(311.6	)			(67.4	)			1.6				—				379.5				2.1
Gain on the sale of investment in joint venture					—				—				3.1				—				—				3.1
Income (loss) before income taxes, minority interests and cumulative effect of accounting change, net					(311.6	)			(141.9	)			(30.7	)			(113.7	)			379.5				(218.4	)
Income tax benefit (provision)					—				56.0				16.8				(1.2	)			(48.9	)			22.7
Minority interests					—				—				—				—				0.5				0.5
Cumulative effect of accounting change, net					—				(44.1	)			—				(72.3	)			—				(116.4	)
Net income (loss)				$	(311.6	)		$	(130.0	)		$	(13.9	)		$	(187.2	)		$	331.1			$	(311.6	)
Net cash provided by (used in) operating activities				$	—			$	112.1			$	7.3			$	(190.6	)		$	0.1			$	(71.1	)
Cash flows from investing activities:
	Purchases of property, plant and equipment				—				(27.5	)			(1.1	)			(59.4	)			—				(88.0	)
	Investments in unconsolidated companies and joint ventures				—				—				—				(0.5	)			—				(0.5	)
	Acquisition of minority interests in consolidated subsidiaries				—				—				—				—				(0.1	)			(0.1	)
	Proceeds from sale of investment in unconsolidated joint venture				—				20.4				—				—				—				20.4
	Loans to unconsolidated joint venture				—				(5.0	)			—				—				—				(5.0	)
	Proceeds from sales of property, plant and equipment				—				1.1				—				1.0				—				2.1
		Net cash used in investing activities			—				(11.0	)			(1.1	)			(58.9	)			(0.1	)			(71.1	)
Cash flows from financing activities:
	Intercompany loans				—				(186.6	)			—				186.6				—				—
	Intercompany loan repayments				—				58.0				—				(58.0	)			—				—
	Proceeds from senior credit facilities and other borrowings				—				125.0				—				—				—				125.0
	Payments on capital lease obligation				—				(0.6	)			—				—				—				(0.6	)
	Proceeds from exercise of stock options and issuance of common stock under the employee stock purchase plan				—				3.9				—				—				—				3.9
		Net cash (used in) provided by financing activities			—				(0.3	)			—				128.6				—				128.3
Effect of exchange rate changes on cash and cash equivalents					—				—				—				0.7				—				0.7
Net increase (decrease) in cash and cash equivalents					—				100.8				6.2				(120.2	)			0.0				(13.2	)
Cash and cash equivalents, beginning of period					—				44.9				(1.1	)			145.1				—				188.9
Cash and cash equivalents, end of period				$	—			$	145.7			$	5.1			$	24.9			$	0.0			$	175.7

15

---

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

				Issuers
				ON Semiconductor								Guarantor				Non-Guarantor
				Corporation				SCI LLC				Subsidiaries				Subsidiaries				Eliminations				Total
For the quarter ended July 1, 2000
Revenues				$	—			$	574.7			$	39.6			$	310.5			$	(374.3	)		$	550.5
Cost of sales					—				455.1				26.8				250.1				(374.3	)			357.7
Gross profit					—				119.6				12.8				60.4				—				192.8
Research and development					—				14.2				—				2.9				—				17.1
Selling and marketing					—				17.3				4.9				4.0				—				26.2
General and administrative					—				41.4				1.1				17.1				—				59.6
Amortization of goodwill and other intangibles					—				—				5.5				—				—				5.5
Write-off of acquired in-process research and development					—				—				26.9				—				—				26.9
		Total operating expenses			—				72.9				38.4				24.0				—				135.3
Operating income (loss)					—				46.7				(25.6	)			36.4				—				57.5
Interest expense, net					—				(18.7	)			(4.7	)			(10.4	)			—				(33.8	)
Equity earnings					(2.0	)			(4.8	)			3.1				—				6.1				2.4
Income (loss) before income taxes and minority interests					(2.0	)			23.2				(27.2	)			26.0				6.1				26.1
Income tax benefit (provision)					—				(10.4	)			12.1				(11.4	)			(0.4	)			(10.1	)
Minority interests					—				—				—				—				(0.5	)			(0.5	)
Extraordinary loss					—				(17.5	)			—				—				—				(17.5	)
Net income (loss)				$	(2.0	)		$	(4.7	)		$	(15.1	)		$	14.6			$	5.2			$	(2.0	)
For the six months ended July 1, 2000
Revenues				$	—			$	1,151.0			$	39.6			$	603.0			$	(756.3	)		$	1,037.3
Cost of sales					—				939.8				26.8				470.8				(756.3	)			681.1
Gross profit					—				211.2				12.8				132.2				—				356.2
Research and development					—				20.0				—				8.3				—				28.3
Selling and marketing					—				37.0				4.9				3.9				—				45.8
General and administrative					—				72.3				1.1				37.2				—				110.6
Amortization of goodwill and other intangibles					—				—				5.5				—				—				5.5
Write-off of acquired in-process research and development					—				—				26.9				—				—				26.9
Restructuring and other charges					—				—				—				4.8				—				4.8
		Total operating expenses			—				129.3				38.4				54.2				—				221.9
Operating income (loss)					—				81.9				(25.6	)			78.0				—				134.3
Interest expense, net					—				(42.9	)			(4.7	)			(20.9	)			—				(68.5	)
Equity earnings					23.5				15.8				3.6				0.2				(40.9	)			2.2
Income (loss) before income taxes, minority interests and extraordinary loss, net					23.5				54.8				(26.7	)			57.3				(40.9	)			68.0
Income tax benefit (provision)					—				(22.5	)			12.1				(20.6	)			5.2				(25.8	)
Minority interests					—				—				—				—				(1.2	)			(1.2	)
Extraordinary loss, net					—				(17.5	)			—				—				—				(17.5	)
Net income (loss)				$	23.5			$	14.8			$	(14.6	)		$	36.7			$	(36.9	)		$	23.5
Net cash provided by (used in) operating activities				$	—			$	158.4			$	4.1			$	(41.0	)		$	0.1			$	121.6
Cash flows from investing activities:
	Purchases of property, plant and equipment				—				(20.8	)			(4.8	)			(45.1	)			(0.1	)			(70.8	)
	Investment in business, net of cash acquired				—				(253.2	)			—				—				—				(253.2	)
	Investments in unconsolidated companies and joint ventures				—				—				—				(2.5	)			—				(2.5	)
	Loans to unconsolidated joint venture				—				(11.0	)			—				—				—				(11.0	)
	Proceeds from sales of property, plant and equipment				—				4.4				—				13.3				—				17.7
		Net cash used in investing activities			—				(280.6	)			(4.8	)			(34.3	)			(0.1	)			(319.8	)
Cash flows from financing activities:
	Proceeds from initial public offering, net of offering expenses				—				514.8				—				—				—				514.8
	Proceeds from borrowings				—				200.0				—				—				—				200.0
	Payment of debt issuance costs				—				(3.2	)			—				—				—				(3.2	)
	Repayment of senior credit facilities, including prepayment penalty				—				(131.5	)			—				—				—				(131.5	)
	Repayment of senior subordinated notes, including prepayment penalty				—				(156.8	)			—				—				—				(156.8	)
	Redemption of preferred stock, including accrued dividends				—				(228.4	)			—				—				—				(228.4	)
	Proceeds from exercise of stock options				—				0.8				—				—				—				0.8
	Intercompany loans				—				(49.6	)			—				49.6				—				—
	Intercompany loan repayments				—				6.3				—				(6.3	)			—				—
		Net cash provided by financing activities			—				152.4				—				43.3				—				195.7
Effect of exchange rate changes on cash and cash equivalents					—				—				—				0.1				—				0.1
Net increase (decrease) in cash and cash equivalents					—				30.2				(0.7	)			(31.9	)			(0.0	)			(2.4	)
Cash and cash equivalents, beginning of period					—				14.9				—				111.9				—				126.8
Cash and cash equivalents, end of period				$	—			$	45.1			$	(0.7	)		$	80.0			$	(0.0	)		$	124.4

(1)	For purposes of this presentation, the senior subordinated notes have been reflected in the condensed balance sheets of both the Company and SCI LLC with the appropriate offset reflected in the eliminations column. Interest expense has been allocated to SCI LLC only.

16

---

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 9:  Commitments and Contingencies

      The Company is currently involved in a variety of legal matters that arose in the normal course of business. Based on information currently available, management does not believe that the ultimate resolution of these matters, including the matters described below, will have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

      In July 2001 two purported stockholder class actions (“Shareholder Litigation”) were filed against the Company, certain officers and directors of the Company, and five investment banking firms who acted as underwriters in connection with our IPO in April 2000. The Shareholder Litigation was filed in the United States District Court — Southern District of New York and generally alleges that the IPO offering documents failed to disclose: (1) certain underwriter fees and commissions and (2) underwriter tie-in and other arrangements with certain customers that impacted the price of the Company’s stock in the aftermarket. The Shareholder Litigation is in the initial phases and the Company intends to vigorously defend against the suits.

Note 10:  Related Party Transactions

      Related party activity between the Company and Motorola is as follows (in millions):

		Quarter				Quarter				Six Months				Six Months
		Ended				Ended				Ended				Ended
		June 29,				July 1,				June 29,				July 1,
		2001				2000				2001				2000
Purchases of manufacturing services from Motorola		$	30.0			$	39.9			$	55.5			$	80.4
Cost of other services, rent and equipment purchased from Motorola		$	3.1			$	23.1			$	15.7			$	46.7

Note 11:  Recent Accounting Pronouncements

      Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, which establishes standards for the accounting and reporting for derivative instruments, including derivative instruments embedded in other contracts, and hedging activities became effective for the Company as of January 1, 2001.

      The Company’s interest rate swaps in effect at January 1, 2001 have been designated as cash flow hedges, are measured at fair value and recorded as assets or liabilities in the consolidated balance sheet. Upon the adoption of SFAS 133, the Company recorded an after-tax charge of approximately $3.4 million to accumulated other comprehensive income (loss) as of January 1, 2001. This charge consists of an approximate $2.1 million adjustment necessary to record the Company’s interest rate swaps in the consolidated balance sheet at their estimated fair values as well as the write-off of an approximate $3.5 million deferred charge (included in other assets in the accompanying consolidated balance sheet at December 31, 2000) relating to the payment made in December 2000 for the early termination of an interest rate protection agreement relating to a portion of the amounts outstanding under the Company’s senior bank facilities, both before income taxes of approximately $2.2 million. The Company recorded a $2.6 million after-tax charge to accumulated other comprehensive income during the first six months of 2001 to adjust its cash flow hedge to fair-value at June 29, 2001

      The Company uses forward foreign currency contracts to reduce its overall exposure to the effects of foreign currency fluctuations on its results of operations and cash flows. The fair value of these derivative instruments are recorded as assets or liabilities with gains and losses offsetting the gains and losses on the

17

---

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

underlying assets or liabilities. The adoption of SFAS 133 did not impact the Company’s accounting and reporting for these derivative instruments.

      In June 2001, the Financial Accounting Standards Board issued SFAS No. 142, “Goodwill and Other Intangible Assets”. SFAS No. 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition. Goodwill and indefinite lived intangible assets will no longer be amortized, but are required to be tested for impairment annually or whenever events or circumstances indicate that the related carrying amount exceeds fair value. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001 except for goodwill acquired in a business acquisition occurring after June 30, 2001, which will not be amortized. At June 29, 2001, the Company had unamortized goodwill of $75.0 million related to the Cherry acquisition that will be impacted by this new standard. Annual goodwill amortization approximates $8.6 million, which will be discontinued in 2002 as a result of this standard.

18

---

Table of Contents

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

      You should read the following discussion in conjunction with our consolidated financial statements and related notes thereto as of and for the year ended December 31, 2000 included in our Form 10-K filed with the SEC on March 30, 2001. The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from the results contemplated by these forward-looking statements due to certain factors, including those discussed below and elsewhere in this Form 10-Q.

      ON Semiconductor is a global supplier of high performance broadband and power management integrated circuits and standard semiconductors used in numerous advanced devices ranging from high speed fiber optic networking equipment to the precise power management functions found in today’s advanced portable electronics.

      Recent developments. During the first six months of 2001, we experienced slowing demand and pricing pressures for our products as customers delayed or cancelled bookings in order to manage their inventories in line with incoming business. As we enter the third quarter of 2001, market demand continues to be soft and visibility to our customers’ expected requirements remains poor. We expect revenues in the third quarter of 2001 to be down slightly from the second quarter.

      In the fourth quarter of 2000 we began to implement a phased cost reduction plan (“the Plan”), which includes strict expense controls, reduced capital expenditures, restructuring of our manufacturing operations and reductions in selling and administrative costs. As a result of these efforts, we incurred restructuring and other charges of $95.8 million in the second quarter of 2001 and a total of $133.8 million in the first six months of 2001. The three principal elements of the Plan that were implemented in the second quarter of 2001 were: accelerating a five-year manufacturing restructure plan into a two-year plan; reducing our selling and administrative costs; and aggressively focusing on liquidity. We expect the actions implemented in the second quarter of 2001, the savings from which will not be fully realized until 2002, will ultimately generate annualized savings of approximately $300 million. When combined with the restructure and cost reduction actions taken in the first quarter of 2001 and the fourth quarter of 2000, we expect the Plan to generate total savings of $190 million in 2001, and to ultimately generate annualized savings of approximately $400 million.

      At June 29, 2001, we had $994.3 million outstanding under our senior bank facilities. The senior bank facilities require us to maintain compliance with certain covenants and restrictions. At June 29, 2001, we were not in compliance with covenants requiring the maintenance of minimum interest expense and leverage coverage ratios. We have received a waiver in respect of such noncompliance at June 29, 2001 (and in respect of any future noncompliance with such covenants through December 31, 2002). In connection with such waiver, we have amended our senior bank facilities. The key terms of this amendment are as follows:

•	Minimum interest expense coverage ratio and leverage coverage ratio requirements for periods between January 31, 2003 through December 31, 2005 have been reduced, maximum capital expenditure limits have been reduced and covenants requiring the maintenance of a minimum cash and cash equivalent balance until certain financial ratios are achieved and minimum EBITDA levels through December 31, 2002 have been added;
•	We are required to obtain $100 million through an equity investment from our principal shareholder, an affiliate of Texas Pacific Group, by September 7, 2001;
•	The interest rate spread on outstanding borrowings will increase to 3.0% with respect to alternate base rate loans and 4.0% with respect to Eurodollar loans. Payment of such interest will be required on a monthly basis. Additionally, a supplemental interest charge of 2.0% will accrue through September 30, 2001, increasing to 3.0% for the period October 1, 2001 through March 31, 2003. Fifty percent of such supplemental interest must be paid by March 31, 2003 with the balance due by June  30, 2003. To the extent that the full amount of such supplemental interest is not paid on March 31, 2003, additional supplemental interest for the period of March 31, 2003 through June 30, 2003 will accrue at a rate of 3.0% on a portion of the outstanding borrowings, which portion is equal to the percentage of supplemental interest accrued but unpaid on March 31, 2003. Such additional supplemental interest will be due by June 30, 2002. As a result

19

---

Table of Contents

	of these amendments, our interest expense on an annual basis is expected to increase by approximately $29.5 million; and
•	Certain mandatory prepayment provisions contained in the original agreement have been revised.

      We believe that, pursuant to our current business plans, we will be able to maintain compliance with the revised covenants as outlined above.

      Recapitalization and Initial Public Offering. Immediately prior to our August 4, 1999 recapitalization (the “Recapitalization”), we were a wholly-owned subsidiary of Motorola. We held and continue 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 (“SCG”). As part of our Recapitalization, affiliates of the Texas Pacific Group purchased our common shares from Motorola for $337.5 million, and we redeemed common stock held by Motorola for a total of approximately $952 million. As a result, Texas Pacific Group’s affiliates owned approximately 91% and Motorola owned approximately 9% of our voting common stock. To finance a portion of the Recapitalization, Semiconductor Components Industries, LLC (“SCI LLC”), our primary domestic operating subsidiary, borrowed $740.5 million under senior secured bank facilities, we and SCI LLC issued $400 million of senior subordinated notes and SCI LLC issued a $91 million junior subordinated note to Motorola. We also issued mandatorily redeemable preferred stock with a total liquidation preference of $209 million to Motorola and Texas Pacific Group’s affiliates. Because Texas Pacific Group’s affiliates did not acquire substantially all of SCG’s common stock, the basis of SCG’s assets and liabilities for financial reporting purposes was not impacted by our Recapitalization. At the time of the Recapitalization, Motorola agreed to provide us with transition and manufacturing services in order to facilitate our transition to a stand-alone company independent of Motorola.

      On May 3, 2000, we completed the initial public offering of our common stock (the “IPO”), selling 34.5 million shares with an issue price of $16 per share. Net proceeds from the IPO (after deducting issuance costs) were approximately $514.8 million. The net proceeds were used to redeem all outstanding preferred stock (including accrued dividends), redeem a portion of the senior subordinated notes and prepay a portion of the loans outstanding under the senior bank facilities.

      As described above, we utilized a portion of the net proceeds from our IPO to redeem a portion of our senior subordinated notes and prepay a portion of the loans outstanding under our senior bank facilities. In connection therewith, we incurred prepayment penalties and redemption premiums of $17.3 million and wrote off $11.9 million of debt issuance costs. These amounts, totaling $29.2 million ($17.5 million or $0.11 per share, net of income taxes), have been classified as an extraordinary loss in the accompanying consolidated statements of operations for the quarter and six months ended July 1, 2000.

      Acquisition. On April 3, 2000, we acquired all of the outstanding capital stock of Cherry Semiconductor Corporation (“Cherry”) for approximately $250 million in cash, which was financed with cash on hand and borrowings of $220 million under our senior bank facilities. Cherry, which was renamed Semiconductor Components Industries of Rhode Island, Inc., designs and manufactures analog and mixed signal integrated circuits for the power management and automotive markets, and had revenues for its fiscal year ended February 29, 2000 of $129.1 million.

      The Cherry acquisition was accounted for using the purchase method of accounting and as a result, the purchase price plus related costs was allocated to the estimated fair value of assets acquired and liabilities assumed at the time of the acquisition based on independent appraisals and management estimates as follows (in millions):

Fair value of tangible net assets		$	71.3
Developed technology			59.3
In-process research and development			26.9
Assembled work force			10.0
Excess of purchase price over net assets acquired (goodwill)			85.7
		$	253.2

20

---

Table of Contents

      Developed technology and assembled workforce are being amortized on a straight-line basis over estimated useful lives of five years while goodwill is being amortized over an estimated life of ten years.

      The fair value of the acquired in-process research and development was determined using the income approach, which discounts expected future cash flows to present value. Significant assumptions that had to be made in using this approach included revenue and operating margin projections and determination of the applicable discount rate. The fair value of the acquired in-process research and development was based on sales forecasts and cost assumptions projected to be achievable by Cherry on a standalone basis. Operating margins were based on cost of goods sold and selling, general, and administrative expenses as a percentage of revenues. All projected revenue and cost information was based on historical results and trends and do not include any synergies or cost savings that may result from the acquisition. The rate used to discount future projected cash flows resulting from the acquired in-process research and development was 20 percent which was derived from a weighted average cost of capital analysis adjusted upward to reflect additional risks inherent in the development life cycle.

      At the date of acquisition, the in-process research and development had not yet reached technological feasibility and no alternative future uses had been identified. Accordingly, these costs were expensed as of the acquisition date. The expected release dates for the products incorporating the acquired technology vary, but we expect that such products will be completed and begin to generate cash flows in 2001. The ultimate development of these technologies remains a significant risk due to the remaining efforts required to achieve technical viability, rapidly changing customer markets, uncertain standards for new products and significant competitive threats from numerous companies. The nature of the efforts to develop the acquired technology into commercially viable products consists principally of design and development, engineering and testing activities necessary to determine that the product can meet market expectations, including functionality and technical requirements. Failure to bring these products to market in a timely manner could result in a loss of market share, or a lost opportunity to capitalize on emerging markets, and could have a material adverse impact on our business and operating results.

      The forecasts used in valuing the acquired in-process research and development were based upon assumptions we believe are reasonable; however, such assumptions may be incomplete or inaccurate, and unanticipated events and circumstances are likely to occur. There can be no assurance that the underlying assumptions used to estimate expected project sales or profits, or the events associated with such projects, will transpire as estimated. For these reasons, actual results may vary from the projected results.

      Cherry’s results of operations have been included in our consolidated results from the date of acquisition. The following pro forma disclosures present the Company’s results of operations for the six months ended July 1, 2000 as if we had acquired Cherry as of January 1, 2000 (in millions, except per share data):

Total revenues		$	1,073.7
Net income before extraordinary loss		$	38.0
Net income		$	20.5
Diluted earnings per share before extraordinary loss		$	0.19
Diluted earnings per share		$	0.08

      These amounts include the results of Cherry for the first quarter of 2000 and are adjusted to reflect interest and amortization charges that would have occurred had the purchase taken place on January 1, 2000. The amounts are based upon certain assumptions and estimates, and do not reflect any benefit from any cost savings which might be achieved from combined operations. The pro forma results are not indicative of the actual results that would have occurred had the acquisition been consummated as of January 1, 2000.

Results of Operations

      Cumulative effect of accounting change. Effective January 1, 2001, we changed our accounting method for recognizing revenue on sales to distributors. Recognition of revenue and related gross profit on sales to distributors is now deferred until the distributor resells the product. Deferred income on sales to distributors was $136.1 million at June 29, 2001.

21

---

Table of Contents

      We believe that this accounting change is to a preferable method because it better aligns reported results with, focuses us on, and allows investors to better understand end user demand for the products we sell through distribution. This revenue recognition policy is commonly used in the semiconductor industry.

      The cumulative effect of the accounting change for periods prior to January 1, 2001 was a charge of $155.2 million ($116.4 million or $0.67 per share, net of income taxes) and was recorded in the six months ended June 29, 2001. The accounting change resulted in a reduction of our net loss in the six months ended June 29, 2001 of $26.4 million, or $0.15 per share.

      Earnings per common share. Our diluted earnings per share on an actual and adjusted basis for the quarter and six months ended June 29, 2001, are as follows:

			Quarter Ended								Quarter Ended								Six Months Ended
			June 29,								July 1,								June 29,
			2001								2000								2001
			in millions				per share				in millions				per share				in millions				per share
Net income (loss)			$	(152.2	)						$	(12.7	)						$	(311.6	)
Less: Redeemable preferred stock dividends				—								(2.2	)							—
Net income (loss) available for common stock				(152.2	)		$	(0.88	)			(14.9	)		$	(0.09	)			(311.6	)		$	(1.80	)
Plus (net of tax):
	Write-off of acquired in-process research and development			—				—				16.1				0.10				—				—
	Extraordinary loss			—				—				17.5				0.11				—				—
	Amortization of goodwill and other intangibles			5.6				0.03				3.3				0.02				9.1				0.05
	Restructuring and other charges			84.7				0.49				—				—				111.5				0.65
	Cumulative effect of  accounting change			—				—				—				—				116.4				0.67
Adjusted net income (loss) available for common stock			$	(61.9	)		$	(0.36	)		$	22.0			$	0.13			$	(74.6	)		$	(0.43	)
Weighted average common shares outstanding — diluted				173.5				173.5				165.9				165.9				172.8				172.8

[Additional columns below]

[Continued from above table, first column(s) repeated]

			Six Months Ended
			July 1,
			2000
			in millions				per share
Net income (loss)			$	(4.8	)
Less: Redeemable preferred stock dividends				(8.8	)
Net income (loss) available for common stock				(13.6	)		$	(0.09	)
Plus (net of tax):
	Write-off of acquired in-process research and development			16.1				0.10
	Extraordinary loss			17.5				0.11
	Amortization of goodwill and other intangibles			3.3				0.02
	Restructuring and other charges			3.0				0.02
	Cumulative effect of  accounting change			—				—
Adjusted net income (loss) available for common stock			$	26.3			$	0.17
Weighted average common shares outstanding — diluted				154.1				154.1

  Quarter Ended June 29, 2001 Compared To Quarter Ended July 1, 2000

      Operating results for the quarters ended June 29, 2001 and July 1, 2000 follow. The July 1, 2000 pro forma column reflects the results as if the change in distributor revenue recognition had been applied

22

---

Table of Contents

				Quarter Ended
								July 1, 2000
				June 29,								As
				2001				Pro forma				reported
				(in millions)
Revenues:
	Net product revenues			$	307.3			$	496.9			$	531.0
	Foundry revenues				3.4				19.5				19.5
		Total revenues			310.7				516.4				550.5
Cost of sales					255.6				337.8				357.7
Gross profit					55.1				178.6				192.8
Operating expenses:
	Research and development				22.9				17.1				17.1
	Selling and marketing				20.8				26.2				26.2
	General and administrative				34.0				59.6				59.6
	Amortization of goodwill and other intangibles				5.6				5.5				5.5
	Write-off of acquired in-process research and development				—				26.9				26.9
	Restructuring and other charges				95.8				—				—
		Total operating expenses			179.1				135.3				135.3
Operating income (loss)					(124.0	)			43.3				57.5
Other income (expenses), net:
	Interest expense				(29.7	)			(33.8	)			(33.8	)
	Equity in earnings of joint ventures				1.5				2.4				2.4
		Other income (expenses)			(28.2	)			(31.4	)			(31.4	)
Income (loss) before income taxes, minority interests and extraordinary loss					(152.2	)			11.9				26.1
Provision for income taxes					—				(6.6	)			(10.1	)
Minority interests					—				(0.5	)			(0.5	)
Net income (loss) before extraordinary loss					(152.2	)			4.8				15.5
Extraordinary loss on prepayment of debt (net of tax)					—				(17.5	)			(17.5	)
Net loss					(152.2	)			(12.7	)			(2.0	)
Less: Redeemable preferred stock dividends					—				(2.2	)			(2.2	)
Net loss available for common stock				$	(152.2	)		$	(14.9	)		$	(4.2	)

      Total revenues. Total revenues decreased $205.7 million, or 39.8%, to $310.7 million in the second quarter of 2001 from $516.4 million in the second quarter of 2000, due to reduced demand for our products resulting from the recent economic downturn and actions taken by our customers to manage their inventories in line with incoming business and due to the phasing out of the foundry revenues to Motorola.

      Net product revenues. Net product revenues decreased $189.6 million, or 38.2%, to $307.3 million in the second quarter of 2001 from $496.9 million in the second quarter of 2000. The decrease occurred in all of our major product families. Approximately 63% of this decrease was due to reduced volume with the remainder due to reductions in selling prices, partially offset by increases due to changes in our product mix. Net revenues for standard analog products, which accounted for 28.9% of net product revenues in the second quarter of 2001, decreased 35.2% compared to the second quarter of 2000. Net revenues from broadband products, which accounted for 10.3% of net product revenues in the second quarter of 2001 decreased 61.8%

23

---

Table of Contents

      Approximately 40%, 37% and 23% of our net product revenues in the second quarter of 2001 were derived from the Americas, Asia/ Pacific and Europe (including the Middle East), respectively, compared to 49%, 31% and 20%, respectively, in the second quarter of 2000.

      Foundry revenues. Foundry revenues decreased $16.1 million, or 82.6%, to $3.4 million in the second quarter of 2001 from $19.5 million in the second quarter of 2000. These foundry revenues are a result of agreements made with Motorola during our separation. We expect that these revenues will continue to decline in the future. Motorola continues to be one of our largest original equipment manufacturer (OEM) customers.

      Cost of sales. Cost of sales decreased $82.2 million, or 24.3%, to $255.6 million in the second quarter of 2001 from $337.8 million in the second quarter of 2000, primarily as a result of decreased sales volume.

      Gross profit. Gross profit (computed as total revenues less cost of sales) decreased $123.5 million, or 69.1%, to $55.1 million in the second quarter of 2001 from $178.6 million in the second quarter of 2000. As a percentage of total revenues, gross margin declined to 17.7% (17.8% for product gross margin) in the second quarter of 2001 from 34.6% (35.5% for product gross margin) in the second quarter of 2000. The decline in gross profit was primarily due to lower selling prices, along with lower factory utilization resulting from lower customer demand.

  Operating expenses

      Research and development. Research and development costs increased $5.8 million, or 33.9%, to $22.9 million in the second quarter of 2001 from $17.1 million in the second quarter of 2000, primarily as a result of our efforts to continue to develop our power management and broadband portfolios. As a percentage of net product revenues, research and development costs increased to 7.5% in the second quarter of 2001 from 3.4% in the second quarter of 2000 because of decreased sales demand accompanied with increased spending on new product development. We introduced 87 new products in the second quarter of 2001. The main emphasis of our new product development is in power management and broadband applications with eighty percent of our overall research and development investment targeted in these areas. Our long-term target for research and development costs is 5-6% of revenues.

      Selling and marketing. Selling and marketing expenses decreased by $5.4 million, or 20.6%, to $20.8 million in the second quarter of 2001 from $26.2 million in the second quarter of 2000 as a result of our restructuring actions. As a percentage of net product revenues, these costs increased to 6.8% in the second quarter of 2001 from 5.3% in the second quarter of 2000 as a result of decreased net product revenues offset by cost savings resulting from our restructuring actions.

      General and administrative. General and administrative expenses decreased by $25.6 million, or 43.0% to $34 million in the second quarter of 2001 from $59.6 million in the second quarter of 2000, as a result of cost reduction actions and lower discretionary spending. As a percentage of net product revenues, these costs decreased to 11.1% in the second quarter of 2001 from 12.0% in the second quarter 2000.

      Amortization of goodwill and other intangibles. Amortization of goodwill and other intangibles was $5.6 million in second quarter of 2001 compared to $5.5 million for the second quarter of 2000. The amortization relates to the intangible assets that were acquired with Cherry in the second quarter of 2000, including amounts related to developed technology, assembled workforce and goodwill.

      Restructuring and other charges. In June 2001, we recorded a $95.8 million charge to cover costs associated with a worldwide restructuring program. This program includes phasing out of manufacturing operations at our Guadalajara, Mexico facility, transferring certain manufacturing activities performed at our Aizu, Japan and Seremban, Malaysia facilities to other Company-owned facilities or to third party contractors and consolidation of other operations. The charge includes $43.6 million to cover employee separation costs associated with the termination of approximately 3,200 employees, asset impairments of $42.2 million and

24

---

Table of Contents

      Operating income (loss). Operating income (loss) decreased $167.3 million, to a $124.0 million operating loss in the second quarter of 2001 compared to operating income of $43.3 million in the second quarter of 2000. This decrease was due to decreased net product revenues, reduced gross margins and costs associated with our worldwide restructuring program. We expect that the cost reduction plan that we have implemented will result in savings of approximately $190 million in 2001 and will ultimately generate annualized savings of approximately $400 million. Excluding restructuring and other charges, the operating loss for the quarter ended June 29, 2001 would have been $28.2 million compared to operating income of $43.3 million for the quarter ended July 1, 2000.

      Interest expense. Interest expense decreased $4.1 million, or 12.1% to $29.7 million in the second quarter of 2001 from $33.8 million in the second quarter of 2000. The decrease was due the redemption of a portion of the senior subordinated notes and prepayment of a portion of the loans outstanding under the senior bank facilities with the proceeds from our IPO in 2000, partially offset by interest related to the $125.0 million drawn on our revolving line of credit during second quarter of 2001. As a result of the amendments to our senior bank facilities (See “Recent developments”), our interest expense on an annual basis is expected to increase by approximately $29.5 million.

      Equity in earnings of joint ventures. Equity in earnings of joint ventures decreased $0.9 million to $1.5 million in the second quarter of 2001 from $2.4 million in the second quarter of 2000, due primarily to decreased capacity utilization at manufacturing facilities at our Chinese joint venture resulting from the decrease in semiconductor market demand. The decrease is also attributable to the February 2001 sale of our interest in our SMP joint venture.

      Minority interests. Minority interests represent the portion of net income (loss) of two Czech joint ventures attributable to the minority owners of each joint venture. We consolidate these joint ventures in our financial statements. Minority interests were $0 in the second quarter of 2001 compared to $0.5 million in the second quarter of 2000, as the two Czech joint ventures operated near break even in the second quarter of 2001.

      Income tax (provision) benefit. The income tax (provision) benefit was $0 in the second quarter of 2001 compared with an income tax provision of $10.1 million in the second quarter of 2000. The 2001 amount was attributable to the net effect of deferred tax benefits recognized for operating losses incurred during the quarter outside of the U.S. offset by a valuation allowance established for such losses incurred in the U.S. The valuation allowance resulted from our decision to limit the recognition of such deferred tax benefits to the amount that could be recovered via carry-back. It should be noted that a significant portion of our second quarter 2001 operating loss was incurred in a country with a 0% tax rate and, therefore, no future tax benefits are available.

  Six Months Ended June 29, 2001 Compared To Six Months Ended July 1, 2000

      Operating results for the six months ended June 29, 2001 and July 1, 2000 follow. The July 1, 2000 pro forma column reflects the results as if the change in distributor revenue recognition had been applied retroactively. The pro forma results are used for comparative purposes in the following discussion of our results of operations.

25

---

Table of Contents

				Six Months Ended
								July 1, 2000
				June 29,								As
				2001				Pro forma				reported
				(in millions)
Revenues:
	Net product revenues			$	664.3			$	909.4			$	982.5
	Foundry revenues				6.9				54.8				54.8
		Total revenues			671.2				964.2				1,037.3
Cost of sales					529.5				645.7				681.1
Gross profit					141.7				318.5				356.2
Operating expenses:
	Research and development				45.8				28.3				28.3
	Selling and marketing				44.6				45.8				45.8
	General and administrative				70.8				110.6				110.6
	Amortization of goodwill and other intangibles				11.4				5.5				5.5
	Write-off of acquired in-process research and development				—				26.9				26.9
	Restructuring and other charges				133.8				4.8				4.8
		Total operating expenses			306.4				221.9				221.9
Operating income (loss)					(164.7	)			96.6				134.3
Other income (expenses), net:
	Interest expense				(58.9	)			(68.5	)			(68.5	)
	Equity in earnings of joint ventures				2.1				2.2				2.2
	Gain on sales of investment in joint venture				3.1				—				—
		Other income (expenses)			(53.7	)			(66.3	)			(66.3	)
Income before income taxes, minority interests, extraordinary loss and cumulative effect of accounting change					(218.4	)			30.3				68.0
Income tax benefit (provision)					22.7				(16.4	)			(25.8	)
Minority interests					0.5				(1.2	)			(1.2	)
Net income (loss) before extraordinary loss and cumulative effect of accounting change					(195.2	)			12.7				41.0
Extraordinary loss on prepayment of debt (net of tax)					—				(17.5	)			(17.5	)
Cumulative effect of accounting change (net of tax)					(116.4	)			—				—
Net income (loss)					(311.6	)			(4.8	)			23.5
Less: Redeemable preferred stock dividends					—				(8.8	)			(8.8	)
Net income (loss) available for common stock				$	(311.6	)		$	(13.6	)		$	14.7

      Total revenues. Total revenues decreased $293.0 million, or 30.4%, to $671.2 million in the first six months of 2001 from $964.2 million in the first six months of 2000, due to reduced demand for our products resulting from the recent economic downturn and actions taken by our customers to manage their inventories in line with incoming business and due to the phasing out of foundry revenues to Motorola.

      Net product revenues. Net product revenues decreased $245.1 million, or 27.0%, to $664.3 million in the first six months of 2001 from $909.4 million in the first six months of 2000. The decrease occurred in all of our major product families. Approximately 53% of this decrease was due to reduced volume with the remainder due to reductions in selling prices, partially offset by increases due to changes in our product mix. Net revenues for standard analog products, which accounted for 28.2% of net product revenues in the first six months of 2001, decreased 17.6% compared to the first six months of 2000. Net revenues from broadband products, which accounted for 12.8% of net product revenues in the first six months of 2001 decreased 42.4%

26

---

Table of Contents

      Approximately 42%, 35% and 23% of our net product revenues in the first six months of 2001 were derived from the Americas, Asia/ Pacific and Europe (including the Middle East), respectively, compared to 47%, 32% and 21%, respectively, in the first six months of 2000.

      Foundry revenues. Foundry revenues decreased $47.9 million, or 87.4%, to $6.9 million in the first six months of 2001 from $54.8 million in the first six months of 2000. These foundry revenues are a result of agreements made with Motorola during our separation. We expect that these revenues will continue to decline in the future. Motorola continues to be one of our largest original equipment manufacturer (OEM) customers.

      Cost of sales. Cost of sales decreased $116.2 million, or 18.0%, to $529.5 million in the first six months of 2001 from $645.7 million in the first six months of 2000, primarily as a result of decreased sales volume.

      Gross profit. Gross profit (computed as total revenues less cost of sales) decreased $176.8 million, or 55.5%, to $141.7 million in the first six months of 2001 from $318.5 million in the first six months of 2000. As a percentage of total revenues, gross margin declined to 21.1% (21.0% for product gross margin) in the first six months of 2001 from 33.0% (34.3% for product gross margin) in the first six months of 2000. The decline in gross profit was primarily due to lower selling prices, along with lower factory utilization resulting from lower customer demand.

  Operating expenses

      Research and development. Research and development costs increased $17.5 million, or 61.8%, to $45.8 million in the first six months of 2001 from $28.3 million in the first six months of 2000, primarily as a result of our efforts to continue to develop our power management and broadband portfolios. As a percentage of net product revenues, research and development costs increased to 6.9% in the first six months of 2001 from 3.1% in the first six months of 2000 because of decreased sales demand accompanied with increased spending on new product development. We introduced 176 new products in the first six months of 2001. The main emphasis of our new product development is in power management and broadband applications with eighty percent of our overall research and development investment targeted in these areas. Our long-term target for research and development costs is 5-6% of revenues.

      Selling and marketing. Selling and marketing expenses decreased by $1.2 million, or 2.6%, to $44.6 million in the first six months of 2001 from $45.8 million in the first six months of 2000 as a result of our restructuring actions. As a percentage of net product revenues, these costs increased to 6.7% in the first six months of 2001 from 5.0% in the first six months of 2000 as a result of decreased net product revenues offset by cost savings resulting from our restructuring actions.

      General and administrative. General and administrative expenses decreased by $39.8 million, or 36.0% to $70.8 million in the first six months of 2001 from $110.6 million in the first six months of 2000, as a result of cost reduction actions and lower discretionary spending. As a percentage of net product revenues, these costs decreased to 10.7% in the second quarter of 2001 from 12.2% in the first six months of 2000.

      Amortization of goodwill and other intangibles. Amortization of goodwill and other intangibles was $11.4 million in first six months of 2001 compared to $5.5 million for the first six months of 2000. The amortization relates to the intangible assets that were acquired with Cherry in the second quarter of 2000, including amounts related to developed technology, assembled workforce and goodwill.

      Write-off of acquired in-process research and development. In the first six months of 2000, we incurred a $26.9 million charge for the write-off of acquired in-process research and development resulting from the Cherry acquisition. No such charges were incurred in the first six months of 2001.

      Restructuring and other charges. In June 2001, we recorded a $95.8 million charge to cover costs associated with a worldwide restructuring program. This program includes phasing out of manufacturing operations at our Guadalajara, Mexico facility, transferring certain manufacturing activities performed at our

27

---

Table of Contents

      In March 2001, we recorded a $34.2 million charge to cover costs associated with a worldwide restructuring program involving manufacturing locations as well as selling and administrative functions. The charge included $31.3 million to cover employee separation costs associated with the termination of approximately 1,100 employees and $2.9 million for asset impairments that were charged directly against the related assets. As of June 29, 2001, the remaining liability relating to this restructuring was $3.2 million. As of June 29, 2001, 610 employees have been terminated under this restructuring plan.

      Also in March 2001, we recorded a $3.8 million charge to cover costs associated with the separation of one of our executive officers. In connection with the separation, we paid the former executive officer $1.9 million. In addition, we agreed to accelerate the vesting of his remaining outstanding stock options and to allow such options to remain exercisable for the remainder of their ten-year term. We recorded a non-cash charge of $1.9 million related to the modification of these options.

      In March 2000, we recorded a $4.8 million charge to cover costs associated with a restructuring program at our manufacturing facility in Guadalajara, Mexico. The charge included $3.2 million to cover employee separation costs associated with the termination of approximately 500 employees and $1.6 million for asset impairments that were charged directly against the related assets. As of June 29, 2001 there was no remaining liability related to the 2000 restructuring program.

      A summary of activity in the our restructuring reserves for the six months ended June 30, 2001 is as follows (in millions):

		Balance as of												Balance as of
		December 31,				Additional				Amounts				June 29,
		2000				Reserves				Used				2001
Facility closure and other exit costs		$	—			$	10.0			$	—			$	10.0
Employee separations			0.7				67.7				(36.6	)			31.8
Total restructuring		$	0.7			$	77.7			$	(36.6	)		$	41.8

      Operating income (loss). Operating income (loss) decreased $261.3 million, to a $164.7 million operating loss in the first six months of 2001 compared to operating income of $96.6 million in the first six months of 2000. This decrease was due to decreased net product revenues, reduced product margins, costs associated with our worldwide restructuring program and the amortization of goodwill and other intangibles. We expect that the cost reduction plan that we have implemented will result in savings of approximately $190 million in 2001 and will ultimately generate annualized savings of approximately $400 million. Excluding restructuring and other charges, the operating loss for the six months ended June 29, 2001 would have been $30.9 million compared to operating income of $101.4 million for the six months ended July 1, 2000.

      Interest expense. Interest expense decreased $9.6 million, or 14.0% to $58.9 million in the first six months of 2001 from $68.5 million in the first six months of 2000. The decrease was due the redemption of a portion of the senior subordinated notes and prepayment of a portion of the loans outstanding under the senior bank facilities with the proceeds from our IPO in 2000. The decrease was partially offset by interest related to the $125.0 million drawn on our revolving line of credit in May 2001. As a result of the amendments to our senior bank facilities (See “Recent developments”), our interest expense on an annual basis is expected to increase by approximately $29.5 million.

28

---

Table of Contents

      Equity in earnings of joint ventures. Equity in earnings from joint ventures decreased $0.1 million to $2.1 million in the first six months of 2001 from $2.2 million in the first six months of 2000.

      Gain on sale of investment in joint venture. We had a 50% interest in Semiconductor Miniatures Products Malaysia Sdn. Bhd. (“SMP”). As a part of the joint venture agreement, our joint venture partner, Philips Semiconductors International B.V. (“Philips”), had the right to purchase our interest in SMP between January 2001 and July 2002. On February 1, 2001, Philips exercised its purchase right, acquiring our 50% interest in SMP. This transaction resulted in proceeds of approximately $20.4 million and a pre-tax gain of approximately $3.1 million.

      Minority interests. Minority interests represent the portion of net income (loss) of two Czech joint ventures attributable to the minority owners of each joint venture. We consolidate these joint ventures in our financial statements. Minority interests decreased $1.7 million to ($0.5) million in the first six months of 2001 compared to $1.2 million in the first six months of 2000.

      Income tax (provision) benefit. The income tax (provision) benefit was a $22.7 million benefit in the first six months of 2001 compared with an income tax provision of $25.8 million in the first six months of 2000. The 2001 amount was attributable to the net effect of deferred tax benefits recognized for operating losses incurred during the period outside of the U.S. offset by a valuation allowance established for a portion of such losses incurred in the U.S. The valuation allowance resulted from our decision to limit the recognition of such deferred tax benefits to the amount that could be recovered via carry-back. It should be noted that a significant portion of the operating loss for the first six months of 2001 was incurred in a country with a 0% tax rate and, therefore, no future tax benefits are available.

Liquidity and Capital Resources

      For the first six months of 2001, net cash used in operating activities was $71.1 million compared to $121.6 million net cash provided by operating activities for the corresponding period of 2000. This was due primarily to the net loss of $311.6 million, adjusted for non-cash charges, including depreciation and amortization of $85.4 million, $45.1 million for the impairment of property, plant and equipment and $116.4 million relating to the cumulative effect of accounting change relating to the revenue recognition on sales to distributors, offset by $24.2 million in deferred income taxes. Cash used in operating activities was also affected by changes in assets and liabilities including a decrease in accounts receivable of $113.6 and increases in other long-term liabilities and accrued interest of $3.8 and $6.3 million, respectively. These amounts were offset by an $0.5 million increase in inventories and a $13.1 million increase in other assets as well as decreases of $32.4 million in accounts payable, $7.8 million in accrued expenses, $12.9 million in income taxes payable, and $46.1 million in deferred income on sales to distributors. The decreases in accounts receivable and accounts payable were due to lower levels of sales and purchases, respectively, during the quarter.

      Net cash used in investing activities was $71.1 million for the first six months of 2001 compared to $319.8 million for the first six months of 2000. The net cash outflows consisted of $88.0 million for purchases of property, plant and equipment, $5.0 million for loans to an unconsolidated joint venture, $0.5 for investments in unconsolidated subsidiaries and $0.1 for acquisition of minority interests of our two Czech joint ventures. These outflows were partially offset by proceeds of $20.4 million related to the sale of the Company’s interest in the SMP joint venture and proceeds of $2.1 million related to sales of property, plant and equipment.

      Net cash provided by financing activities was $128.3 million for the first six months of 2001 compared to $195.7 for the first six months of 2000. Cash inflows consisted of proceeds of $125.0 million from our revolving line of credit, $3.4 million from the issuance of common stock under our employee stock purchase plan and $0.5 million from stock option exercises, offset by the payments of $0.6 for our capital lease obligation.

      At June 29, 2001, we had net deferred tax assets of $394.4 million as a result of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Although there can be no assurance, we believe that our net deferred tax assets will be recoverable from future operations. Should business conditions worsen or continue to be depressed for an extended period, we will be required to record a valuation allowance for all or a portion of our net deferred tax assets.

29

---

Table of Contents

      As of June 29 2001, long-term debt (including current maturities) totaled $1,389.0 million and stockholders’ equity was $24.6 million. Long-term debt included $994.3 million under our senior bank facilities (including our revolving line of credit), $260.0 million senior subordinated notes, $109.6 million in respect of our junior subordinated note, a $22.7 million note payable to a Japanese bank, and a capital lease of $2.4 million. We are required to begin making principal payments on our senior bank facilities in the third quarter of 2001.

      As of June 29, 2001, $3.8 million of our $150 million revolving facility was available, reflecting borrowings of $125.0 million and outstanding letters of credit of $21.2 million. Under certain circumstances, the terms of our credit agreements allow us to incur additional indebtedness, although there can be no assurances that we would be able to borrow on terms acceptable to us.

      At June 29, 2001, we had $994.3 million outstanding under our senior bank facilities. The senior bank facilities require us to maintain compliance with certain covenants and restrictions. At June 29, 2001, we were not in compliance with covenants requiring the maintenance of minimum interest expense and leverage coverage ratios. We received a waiver in respect of such noncompliance at June 29, 2001 (and in respect of any future noncompliance with such covenants through December 31, 2002). In connection with such waiver, we have amended our senior bank facilities. The key terms of this amendment are as follows:

	•	Minimum interest expense coverage ratio and leverage coverage ratio requirements for periods between January 31, 2003 through December 31, 2005 have been reduced, maximum capital expenditure limits have been reduced and covenants requiring the maintenance of a minimum cash and cash equivalent balance until certain financial ratios are achieved and minimum EBITDA levels through December 31, 2002 have been added;
	•	We are required to obtain $100 million through an equity investment from our principal shareholder, an affiliate of Texas Pacific Group, by September 7, 2001;
	•	The interest rate spread on outstanding borrowings will increase to 3.0% with respect to alternate base rate loans and 4.0% with respect to Eurodollar loans. Payment of such interest will be required on a monthly basis. Additionally, a supplemental interest charge of 2.0% will accrue through September 30, 2001, increasing to 3.0% for the period October 1, 2001 through March 31, 2003. Fifty percent of such supplemental interest must be paid by March 31, 2003 with the balance due by June 30, 2003. To the extent that the full amount of such supplemental interest is not paid on March 31, 2003, additional supplemental interest for the period of March 31, 2003 through June 30, 2003 will accrue at a rate of 3.0% on a portion of the outstanding borrowings, which portion is equal to the percentage of supplemental interest accrued but unpaid on March  31, 2003. Such additional supplemental interest will be due by June 30, 2002. As a result of these amendments, our interest expense on an annual basis is expected to increase by approximately $29.5 million; and
	•	Certain mandatory prepayment provisions contained in the original agreement have been revised.

      We believe that, pursuant to our current business plans, we will be able to maintain compliance with the revised covenants as outlined above.

      Our ability to make payments on and to refinance our indebtedness, to remain in compliance with the various restrictions and covenants found in our credit agreements and to fund working capital, capital expenditures, research and development efforts and strategic acquisitions will depend on our ability to generate cash in the future, which is subject to, among other things, our future operating performance and to general economic, financial, competitive, legislative, regulatory and other conditions, some of which may be beyond our control.

      Our primary future cash needs, both in the short term and in the long term will focus on debt service and working capital. We have rescheduled our capital purchases with suppliers throughout the year and anticipate significantly reduced capital spending in the second half of 2001. We believe that cash flow from operations will be sufficient to service our indebtedness and fund our other liquidity needs for the remainder of 2001, and

30

---

Table of Contents

      Historically, our revenues have been affected by the seasonal trends of the semiconductor and related industries. As a result of these trends, we typically experienced sales increases in the first two quarters of the year and relatively flat sales levels in the third and fourth quarters. However, over the past three years, various events have disrupted this pattern. In 1998, third quarter revenues declined, primarily as a result of the Asian economic crisis. In 1999, third and fourth quarter revenues increased due to the continuing recovery in the semiconductor market. In the fourth quarter of 2000 and the first two quarters of 2001 revenues declined due to slowing demand in the semiconductor market.

Recent Accounting Pronouncements

      Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended establishes standards for the accounting and reporting for derivative instruments, including derivative instruments embedded in other contracts, and hedging activities became effective for us as of January 1, 2001.

      Our interest rate swaps in effect at January 1, 2001 have been designated as cash flow hedges, are measured at fair value and recorded as assets or liabilities in the consolidated balance sheet. Upon the adoption of SFAS 133 we recorded an after-tax charge of approximately $3.4 million to accumulated other comprehensive income (loss) as of January 1, 2001. This charge consists of an approximate $2.1 million adjustment necessary to record our interest rate swaps in the consolidated balance sheet at their estimated fair values as well as the write-off of an approximate $3.5 million deferred charge (included in other assets in the accompanying consolidated balance sheet at December 31, 2000) relating to the payment made in December 2000 for the early termination of an interest rate protection agreement relating to a portion of the amounts outstanding under our senior bank facilities, both before income taxes of approximately $2.2 million. We recorded a $2.6 million after-tax charge to accumulated other comprehensive income during the first six months of 2001 to adjust our cash flow hedges to fair-value at June 29, 2001.

      We use forward foreign currency contracts to reduce our overall exposure to the effects of foreign currency fluctuations on our results of operations and cash flows. The fair values of these derivative instruments are recorded as assets or liabilities with gains and losses offsetting the gains and losses on the underlying assets or liabilities. The adoption of SFAS 133 did not impact our accounting and reporting for these derivative instruments.

      In June 2001, the Financial Accounting Standards Board issued SFAS No. 142, “Goodwill and Other Intangible Assets”. SFAS No. 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their acquisition. Goodwill and indefinite lived intangible assets will no longer be amortized, but are required to be tested for impairment annually or whenever events or circumstances indicate that the related carrying amount exceeds fair value. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001 except for goodwill acquired in a business acquisition occurring after June 30, 2001, which will not be amortized. At June 29, 2001, we had unamortized goodwill of $75.0 million related to the Cherry acquisition that will be impacted by this new standard. Annual goodwill amortization approximates $8.6 million, which will be discontinued in 2002 as a result of this standard.

Business Risks and Forward-Looking Statements

      This Quarterly Report on Form 10-Q includes “forward-looking statements” as that term is defined in Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are often characterized by the use of words such as “believes,” “estimates,” “expects,” “projects,” “may,” “will,” “intends,” “plans,” or “anticipates,” or by discussions of strategy, plans or intentions. All forward-looking statements in the Form 10-Q are made based on management’s current expectations and estimates, which involve risks, uncertainties and other factors that could cause results to differ materially from those expressed in forward-looking statements. Among these factors are changes in overall economic conditions, the cyclical nature of the

31

---

Table of Contents

Item 3. Quantitative and Qualitative Disclosures about Market Risk

      We are exposed to financial market risks, including changes in interest rates and foreign currency exchange rates. To mitigate these risks, we utilize derivative financial instruments. We do not use derivative financial instruments for speculative or trading purposes.

      As of June 29, 2001, our long-term debt (including current maturities) totaled $1,389.0 million. We have no interest rate exposure due to rate changes for our fixed rate interest bearing debt, which totaled $392.3 million or our capital lease obligation which totaled $2.4 million. We do have interest rate exposure with respect to the $994.3 million outstanding balance on our variable interest rate senior bank facilities however, we have entered into interest rate swaps to reduce this interest rate exposure. As of June 29, 2001, we had four interest rate swaps covering exposures on $255 million of our variable interest rate debt. A 50 basis point increase in interest rates would result in increased annual interest expense of $3.7 million for the next twelve months.

      A majority of our revenue, expense and capital purchasing activities are transacted in U.S. dollars; however, as a multinational business, we also conduct these activities through transactions denominated in a variety of other currencies. We use forward foreign currency contracts to hedge firm commitments and reduce our overall exposure to the effects of currency fluctuations on our results of operations and cash flows. Gains and losses on these foreign currency exposures would generally be offset by corresponding losses and gains on the related hedging instruments. This strategy reduces, but does not eliminate, the short-term impact of foreign currency exchange rate movements. For example, changes in exchange rates may affect the foreign currency sales price of our products and can lead to increases or decreases in sales volume to the extent that the sales price of comparable products of our competitors are less or more than the sales price of our products.

32

---

Table of Contents

PART II:  OTHER INFORMATION

Item 1.  Legal Proceedings

      The Company is currently involved in a variety of legal matters that arose in the normal course of business. Based on information currently available, management does not believe that the ultimate resolution of these matters, including the matters described in the next paragraph, will have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

      In July 2001 two purported stockholder class actions (“Shareholder Litigation”) were filed against us, certain of our officers and directors, and five investment banking firms who acted as underwriters in connection with our IPO in April 2000. The Shareholder Litigation was filed in the United States District Court — Southern District of New York and generally alleges that the IPO offering documents failed to disclose: (1) certain underwriter fees and commissions and (2) underwriter tie-in and other arrangements with certain customers that impacted the price of our stock in the aftermarket. The Shareholder Litigation is in the initial phases and we intend to vigorously defend against the suits.

Item 2.  Changes in Securities and Use of Proceeds

      Not Applicable.

Item 3.  Defaults Upon Senior Securities

      At June 29, 2001, we had $994.3 million outstanding under our senior bank facilities. The senior bank facilities require us to maintain compliance with certain covenants and restrictions. At June 29, 2001, we were not in compliance with covenants requiring the maintenance of minimum interest expense and leverage coverage ratios. We have received a waiver in respect of such noncompliance at June 29, 2001 (and in respect of any future noncompliance with such covenants through December 31, 2002). In connection with such waiver, we have amended our senior bank facilities. The key terms of this amendment are as follows:

	•	Minimum interest expense coverage ratio and leverage coverage ratio requirements for periods between January 31, 2003 through December 31, 2005 have been reduced, maximum capital expenditure limits have been reduced and covenants requiring the maintenance of a minimum cash and cash equivalent balance until certain financial ratios are achieved and minimum EBITDA levels through December 31, 2002 have been added;
	•	We are required to obtain $100 million through an equity investment from our principal shareholder, an affiliate of Texas Pacific Group, by September 7, 2001;
	•	The interest rate spread on outstanding borrowings will increase to 3.0% with respect to alternate base rate loans and 4.0% with respect to Eurodollar loans. Payment of such interest will be required on a monthly basis. Additionally, a supplemental interest charge of 2.0% will accrue through September 30, 2001, increasing to 3.0% for the period October 1, 2001 through March 31, 2003. Fifty percent of such supplemental interest must be paid by March 31, 2003 with the balance due by June 30, 2003. To the extent that the full amount of such supplemental interest is not paid on March 31, 2003, additional supplemental interest for the period of March 31, 2003 through June 30, 2003 will accrue at a rate of 3.0% on a portion of the outstanding borrowings, which portion is equal to the percentage of supplemental interest accrued but unpaid on March  31, 2003. Such additional supplemental interest will be due by June 30, 2002. As a result of these amendments, our interest expense on an annual basis is expected to increase by approximately $29.5 million; and
	•	Certain mandatory prepayment provisions contained in the original agreement have been revised.

      We believe that, pursuant to our current business plans, we will be able to maintain compliance with the revised covenants as outlined above.

33

---

Table of Contents

Item 4.  Submission of Matters to a Vote of Security Holders.

      Set forth below is information concerning each matter submitted to a vote at the Company’s 2001 Annual Meeting of Stockholders held on May 23, 2001:

      Election of Directors. Each of the following persons was elected as a Class II Director, to hold office until the 2004 Annual Meeting and until his successor is duly elected and qualified, or until retirement, resignation or removal:

Nominee		For				Withheld
David Bonderman			170,831,875				667,084
Justin Chang			170,835,785				663,174
John Legere			170,846,325				652,634

      2000 Stock Incentive Plan. An amendment to increase the number of shares issuable under the Company’s 2000 Stock Incentive Plan, was approved by the following votes:

For:			138,703,350
Against:			23,374,223
Abstain:			20,874
Broker non-vote:			9,400,512

      2000 Employee Stock Purchase Plan. An amendment to increase the number of shares issuable under the Company’s 2000 Employee Stock Purchase Plan and to limit the number of shares issuable to any participant, was approved by the following votes:

For:			161,588,620
Against:			486,486
Abstain:			23,341
Broker non-vote:			9,400,512

      Independent Accountants. Appointment of PricewaterhouseCoopers LLP, as the Company’s Independent Accountants, was ratified by the following votes:

For:			171,422,934
Against:			51,549
Abstain:			24,476

Item 5.  Other Information

      Not Applicable.

Item 6.  Exhibits and Reports on Form 8-K

      (a)  Exhibits —

Exhibit  10.1		Loan Facility Agreement, between Leshan-Phoenix Semiconductor Company Limited and Industrial & Commercial Bank of China, Leshan City Branch, for loan in an amount up to $36 million, dated November 17, 2000
Exhibit  10.2		Loan Agreement between SCG Japan Ltd. and Development Bank of Japan, for loan in an amount up to $26.1 million, dated October 27, 2000
Exhibit  10.3		Guaranty Agreement, executed by Semiconductor Components Industries, LLC on October 27, 2000, in connection with Loan Agreement between SCG Japan Ltd. and Development Bank of Japan, for loan in an amount up to $26.1 million
Exhibit  10.4		ON Semiconductor Corporation 2000 Stock Incentive Plan (amended and restated as of May 23, 2001)(1)

34

---

Table of Contents

Exhibit  10.5		ON Semiconductor Corporation 2000 Employee Stock Purchase Plan (amended and restated as of May 23, 2001)(1)
Exhibit 10.6		Waiver, Consent and Amendment dated as of August 13, 2001 to the Credit Agreement dated as of August 4, 1999, as amended and restated as of April 3, 2000, among ON  Semiconductor Corporation (formerly known as SCG Holding Corporation), Semiconductor Components Industries, LLC, the Lenders party thereto, The Chase Manhattan Bank, as administrative agent, collateral agent and syndication agent, and Credit Lyonnais New York Branch, DLJ Capital Funding, Inc. and Lehman Commercial Paper Inc., as co-documentation agents

(1)	Management contract or compensatory plan or arrangement.

      (b)  Reports on Form 8-K —

      During the first quarter of 2001, the Company filed two reports on Form 8-K (1) dated April 25, 2001 and filed April 26, 2001, and (2) dated and filed May 10, 2001. The April 25, 2001 report was filed pursuant to Items 5 and 7, reported the Company’s first quarter earnings and included as an exhibit a press release dated April 25, 2001 titled “ ON Semiconductor Announces First Quarter 2001 Results.” The May 10, 2001 report was filed pursuant to Items 7 and 9, disclosed information pursuant to Regulation FD Rules 100-103 found in slides and notes from a presentation made by the Company during its Analyst Day on May 10, 2001.

35

---

Table of Contents

SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 13, 2001

	ON SEMICONDUCTOR CORPORATION
	(Registrant)
	/s/DARIO SACOMANI
	By: Dario Sacomani
	Senior Vice President and Chief Financial Officer
	(Duly Authorized Officer and Principal
	Financial Officer of the Registrant)

36

---

Table of Contents

EXHIBIT INDEX

Exhibit  10.1		Loan Facility Agreement, between Leshan-Phoenix Semiconductor Company Limited and Industrial & Commercial Bank of China, Leshan City Branch, for loan in an amount up to $36 million, dated November 17, 2000
Exhibit  10.2		Loan Agreement between SCG Japan Ltd. and Development Bank of Japan, for loan in an amount up to $26.1 million, dated October 27, 2000
Exhibit  10.3		Guaranty Agreement, executed by Semiconductor Components Industries, LLC on October 27, 2000, in connection with Loan Agreement between SCG Japan Ltd. and Development Bank of Japan, for loan in an amount up to $26.1 million
Exhibit  10.4		ON Semiconductor Corporation 2000 Stock Incentive Plan (amended and restated as of May 23, 2001)
Exhibit  10.5		ON Semiconductor Corporation 2000 Employee Stock Purchase Plan (amended and restated as of May 23, 2001)
Exhibit 10.6		Waiver, Consent and Amendment dated as of August 13, 2001 to the Credit Agreement dated as of August 4, 1999, as amended and restated as of April 3, 2000, among ON  Semiconductor Corporation (formerly known as SCG Holding Corporation), Semiconductor Components Industries, LLC, the Lenders party thereto, The Chase Manhattan Bank, as administrative agent, collateral agent and syndication agent, and Credit Lyonnais New York Branch, DLJ Capital Funding, Inc. and Lehman Commercial Paper Inc., as co-documentation agents

   1
                                                                    Exhibit 10.1





                                 LOAN FACILITY



                                    between



                  LESHAN-PHOENIX SEMICONDUCTOR COMPANY LIMITED




                                      and



                    INDUSTRIAL AND COMMERCIAL BANK OF CHINA

                                 LESHAN BRANCH








                               NOVEMBER 17, 2000
   2
Loan Facility

     Exhibit A      Foreign Exchange Loan Contract

     Exhibit B      Renminbi Loan Contract

     Exhibit C      Mortgage Contract

   3
                                                               EXECUTION VERSION

THIS LOAN FACILITY (together with the Appendices hereto, this "Facility") is
entered into on November 17, 2000 by

     Leshan-Phoenix Semiconductor Company Limited, a Sino-foreign equity joint
     venture limited liability company duly organized and existing under the
     laws of the People's Republic of China ("China") with its registered
     address at 27A, West People's Road, Leshan City, Sichuan, China ("Party
     A"); and

     Industrial and Commercial Bank of China, Leshan City Branch, acting through
     its office at 4, Zi Yun Hou Street, Central District, Leshan City, Sichuan,
     China ("Party B").

WHEREAS Party A has requested Party B to extend a certain loan facility to it
and Party B is willing to do so on the terms and conditions set forth herein.

NOW it is therefore agreed as follows:

1.   Loan Amount and Draw-down

     1.1  Subject to the terms and conditions of this Facility, Party B hereby
          agrees to make available to Party A a loan facility in an amount equal
          to Twenty Million US Dollars (US$20,000,000), such amount to be
          divided into two separate loan facilities, one of RMB33,200,000 (the
          "RMB Portion") and one of US$16,000,000 (the "US$ Portion" and
          together with the RMB Portion, the "Loan Facility").

     1.2  Party A may draw down funds under the Loan Facility from time to time
          for a period of six months following the date of this Facility. Party
          A will provide Party B with written notice of its intent to draw down
          funds under this Facility not less than seven business days prior to
          the date of such a draw-down. The maximum amount that may be borrowed
          in single-draw-down under the US$ Portion shall be less than
          US$4,000,000 and less than RMB15,000,000 under the RMB Portion. The
          total amount outstanding at any time under all draw-downs under this
          Facility may exceed the US$ equivalent of US$4,000,000, but shall at
          all times be less than the US$ equivalent of US$20,000,000. (For all
          purposes of determining the US$ equivalent of any RMB amount in
          respect of this Facility, the exchange rate of US$1:RMB8.3 shall be
          used.)

     1.3  At the time of each draw-down, Party A and Party B shall execute a
          loan contract substantially in the form of Exhibit A (for draw-downs
          under the US$ Portion) and Exhibit B (for draw-downs under the RMB
          Portion) (each, a "Loan Contract"), at least seven business days prior
          to the proposed date of such draw-down.

2.   Interest and Fees

     2.1  Interest on each draw-down in US$ will accrue at a rate not to be
          higher than the base interest rate charged by Party B for six-year
          term loans adjusted every six months (as such rate is published by
          Party B's Head Office) as of the date Party A provides notice of its
          intent to make a draw-down in US$. Interest on
   4
     each draw-down in RMB will accrue at a rate not to be higher than the base
     interest rate for six-year term loans adjusted once every year (as
     published by the People's Bank of China) as of the date Party A provides
     notice of its intent to make a draw-down in RMB. The specific interest rate
     applicable to each draw-down shall be listed in the relevant Loan Contract.

2.2  Interest on the amount of each draw-down will be paid quarterly in arrears
     on the 20th day of the last month of each calendar quarter. Payments of
     interest will be made in the currency of the draw-down to which such
     payment of interest relates. If any payment of interest is not made when
     due, interest will accrue on such unpaid interest at the interest rate
     applicable to that draw-down.

2.3  Neither this Facility nor any draw-down will be subject to any
     documentation fee, origination fee or other fee imposed by Party B. The
     loan will not be subject to prepayment fees or termination fees, provided
     that Party A will be required to provide 15 business day's advance notice
     of any prepayment.

3.   Repayment and Prepayment
     ------------------------

3.1  The principal of each draw-down will be due on the third anniversary of the
     Loan Contract for such draw-down. Party A will repay the principal amount
     of each draw-down as a single repayment. All repayments of principal will
     be made in the currency of the draw-down to which such repayment or payment
     of interest relates.

3.2  At the request of Party A, such request to be delivered to Party B not
     later than five business days prior to the due date of such draw-down, the
     term for repayment of any draw-down will be extended by Party B for an
     additional period not to exceed three years. All such extensions of
     maturity on the same terms applied at the time of the original draw-down.

3.3  Party A shall repay the loan and interest thereon using its sales revenue,
     cash freed up from depreciation, profit and other revenue.

3.4  Upon 15 business days' prior written notice to Party B, Party A may prepay
     any draw-down in whole or in part; provided, that such prepayment shall be
     accompanied by payment of all accrued interest to but excluding the date of
     such prepayment.

4.   Security
     --------

4.1  At the time each Loan Contract entered into, Party A shall identify and
grant a security interest in certain of its equipment, the book-value (as
recorded on the records of Party A) of which shall be 142.5% of the amount of
such Loan Contract, to Party B. The value of all property securing the Loan
Facility will not at any time exceed the equivalent of US$28,500,000. The terms
and form of security interest shall be provided in a separate agreement
substantially in the form of Exhibit C to be signed by the parties.

5.   Others
     ------

5.1  Each of Party A and Party B represents and warrants to each other that:

                                       2


   5
          (a)  It possesses full power and authority to enter into this Facility
               and to perform its obligations hereunder.

          (b)  It is in compliance with all material laws, rules, regulations,
               decrees and orders, and all interpretations thereof, of all
               governmental authorities having jurisdiction over it, its
               business, finances, operations or its properties.

          (c)  Its representative, whose signature is affixed hereto, has been
               fully authorized to sign on its behalf pursuant to a valid power
               of attorney or as evidenced by a valid legal representative
               certificate.

     5.2  This Facility shall become effective upon its execution by the parties
          hereto.

     5.3  All exhibits hereto shall form an integral part of this Facility.

     5.4  In the event of any conflict between this Facility, any Loan Contract
          and any security agreement relating to any Loan Contract, this
          Facility shall take precedence.

     5.5  Any amendment or supplement to this Facility shall be made by a
          written agreement signed by each of the parties.

     5.6  This Facility consists of an English language version and a Chinese
          language version, both of which have been examined and confirmed by
          the partes to be identical in all material respects. The English and
          Chinese language versions shall have the same legal effect. In the
          event of any discrepancy between the English and Chinese language
          versions, the parties shall consult to reach an agreement on the
          discrepancy based on the principle of equality and mutual
          understanding. If no agreement is reached through consultation within
          30 days of the first such consultation, the dispute shall be submitted
          for exclusive and final settlement before the China International
          Economic and Trade Arbitration Commission. This Facility is executed
          in 4 originals in the English language and 4 originals in the Chinese
          language, and each party shall retain 2 originals of each language.

IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
representatives to execute this Facility on the date first above written.

LEASHAN-PHOENIX SEMICONDUCTOR COMPANY LIMITED

By:  /s/
     Name:
     Title: Authorized Representative

INDUSTRIAL & COMMERCIAL BANK OF CHINA, LESHAN CITY BRANCH

By:  /s/
     Name:
     Title: Authorized Representative

                                       3

   6
                                                                       Exhibit A

                                                        Contract Number: _______

                         FOREIGN EXCHANGE LOAN CONTRACT

BORROWER (PARTY A):           LESHAN-PHOENIX SEMICONDUCTOR COMPANY LIMITED

Residence (Address):          27A, West People's Road, Leshan City, Sichuan
                              Province, China

Legal Representative:

LENDER (PARTY B):             INDUSTRIAL & COMMERCIAL BANK OF CHINA, LESHAN
                              CITY BRANCH

Residence (Address):          4, Zi Yun Hou Street, Central District, Leshan
                              City, Sichuan Province, China

Legal Representative
(Person in Charge):
   7
                                TABLE OF CONTENT


                                                                           
ARTICLE 1 TYPE OF THE LOAN ................................................... 1

ARTICLE 2 USE OF PROCEEDS .................................................... 1

ARTICLE 3 CURRENCY, AMOUNT AND TERM OF THE LOAN .............................. 1

ARTICLE 4 INTEREST RATE AND COMPUTATION OF INTEREST .......................... 2

ARTICLE 5 SOURCES OF REPAYMENT FUNDS, MANNER OF REPAYMENT .................... 2

ARTICLE 6 SECURITY ........................................................... 3

ARTICLE 7 RIGHTS AND OBLIGATIONS OF EACH PARTY ............................... 3

ARTICLE 8 LIABILITY FOR BREACH OF CONTRACT ................................... 5

ARTICLE 9 EFFECT, CHANGE, CANCELLATION AND TERMINATION OF THE CONTRACT ....... 6

ARTICLE 10 SETTLEMENT OF DISPUTES ............................................ 7

ARTICLE 11 MISCELLANEOUS ..................................................... 7

ARTICLE 12 ADDITIONAL PROVISIONS ............................................. 7


   8
Party A has applied for a loan from Party B for the purpose described in Section
2.1. Party B has agreed to provide the loan to Party A. In order to specify the
rights and obligations of each party, in accordance with the Contract Law, the
Lending General Provisions and other relevant laws & regulations and after
discussion conducted on a basis of equality, Party A and Party B conclude this
Contract:

                                   ARTICLE 1

                                TYPE OF THE LOAN

1.1.   The loan under this Contract is a medium term loan.

                                   ARTICLE 2

                                USE OF PROCEEDS

2.1.   The proceeds of the loan under this Contract shall be used for payments
       relating to Party A's operations.

2.2.   Party A shall not change the usage of the loan proceeds provided under
       this Contract without the written consent of Party B.

                                   ARTICLE 3

                     CURRENCY, AMOUNT AND TERM OF THE LOAN

3.1.   The currency of the loan under this Contract shall be US Dollars and the
       amount shall be three million (in words) US$3,000,000 (numbers). (In the
       event any amount in words is different from that in numbers, the amount
       in words shall prevail. This same rule shall apply throughout this
       Contract.)

3.2.   The term of the loan under this Contract shall be 36 months, from Dec.
       13, 2000 (date/month/year) to Dec. 12, 2003 (date/month/year).

3.3.   Party A shall draw-down the loan in one lump sum on the first date of the
       term pursuant to Section 3.2 of this Contract; in case of special
       circumstance, the draw-down date can be moved up or delayed up to seven
       days with the written consent of Party B. The actual date of the
       draw-down and the date of repayment shall be the dates recorded in the
       receipt for the loan [signed] by Party A and Party B. The loan receipt
       and the draw-down voucher shall be an integral part of this Contract.
       Except for the dates, if there are any other discrepancies between other
       records and this Contract, this Contract shall prevail.

3.4.   Party A shall register this loan in local office of the State
       Administration of Foreign Exchange and submit a copy of such registration
       to Party B in order to draw-down the loan.


   9
                                   ARTICLE 4

                   INTEREST RATE AND COMPUTATION OF INTEREST

4.1. The interest rate and computation of interest for the loan under this
     Contract shall be as follows:

     4.1.1.  Party B's floating interest rate applicable for loans of six years,
             adjusted every six months shall be applied to the loan under this
             Contract.

     4.1.2.  The interest rate of the 1st six-month period shall be ____% per
             annum.

     4.1.3.  The interest rates of the 2nd and all subsequent six-month periods
             will be determined by Party B according to its then prevailing
             interest rates for similar loans. Party A will be notified in
             writing within thirty days after any change in the interest rate.
             However, the delivery or non-delivery of such notice shall not
             affect the implementation of this Contract and any changes in the
             interest rate.

     4.1.4.  Interest on the loan under this Contract shall be accrue on a daily
             basis and be payable on the 20th day of the last month of each
             calendar quarter.

     4.1.5.  Interest shall accrue from the date of draw-down. The final payment
             of accrued interest shall be paid together with repayment of the
             principal amount of the loan.

                                   ARTICLE 5

                SOURCES OF REPAYMENT FUNDS, MANNER OF REPAYMENT

5.1. The source of funds which Party A will use for the repayment of both
     principal and interest of the loan shall include, but is not limited to:

     5.1.1.  Sales revenue, depreciation and profit;

     5.1.2.  Other revenue.

5.2. Notwithstanding any agreement on the source of Party A's funds for
     repayment in any other contracts to which Party A is party, such agreement
     shall not affect Party A's performance of its repayment obligation under
     this Contract. In any case, Party A shall not rely on Section 5.1 in order
     to refuse to perform its repayment obligation under this Contract.

5.3. Party A shall timely pay all accrued interests as provided under this
     Contract and repay the principal of the loan when due.

5.4. Before the date on which any payment of interest or repayment of principal
     provided in this Contract is due, Party A shall deposit sufficient funds in
     its bank account at Party B and authorize Party B to deduct such amount
     from Party A's account on the date on which such payment of interest or
     repayment of principal is due.

                                       2

   10
                                   ARTICLE 6

                                    SECURITY

6.1. The form of security for the loan under this Contract shall be a mortgage.

6.2. PARTY A AND PARTY B SHALL CONCLUDE A SECURITY AGREEMENT (No.    ) for the
     specific security described under this Contract.

6.3. In the event of a change in the value of the security under this Contract
     has had a material adverse effect on Party B's creditor rights, Party A
     shall, upon notice by Party B, provide additional security so that the
     total value of security is equal to the value prior to such change.

                                   ARTICLE 7

                      RIGHTS AND OBLIGATIONS OF EACH PARTY

7.1. Rights and Obligations of Party A.

     7.1.1.    Party A shall draw and use the loan in accordance with the term
               and usage provided in this Contract;

     7.1.2.    Party A shall not prepay the loan without providing Party B with
               fifteen days' written notice of its intention to prepay;

     7.1.3.    Party A shall be responsible for the truthfulness, accuracy and
               completeness of all the materials provided by Party A in
               connection with the application for the loan;

     7.1.4.    Party A shall voluntarily accept Party B's investigation,
               supervision and monitoring of the use of the loan under this
               Contract pursuant to laws and regulations, administrative rules
               and industrial practice;

     7.1.5.    Party A shall actively coordinate with Party B's investigation,
               supervision and monitoring of Party A's manufacturing, operations
               and financial status and provide Party B with profit & loss
               statement, balance sheet and other financial information which it
               prepares in the ordinary course of business for any relevant
               period;

     7.1.6.    Party A shall repay the principal and pay the interest for the
               loan as provided in this Contract;

     7.1.7.    Party A shall pay relevant costs which arise under this Contract,
               including, but not limited to, the expenses of a notary,
               authentication, appraisal and registration fees which are
               required by applicable laws and regulations, administrative rules
               and industrial practice;

     7.1.8.    Party A shall, within three days after its receipt of any
               repayment reminder sent by Party B via mail or other methods,
               send back an acknowledgement of receipt to Party B via mail;

                                       3
   11
     7.1.9.    In the event Party A proposes to be engaged in activities such as
               changing its corporate structure into a company limited by
               shares, beginning joint operations with another entity, merger, a
               material acquisition, entering into an equity joint venture,
               spin-off or split-off, a reduction in its registered capital,
               equity transfers, transfer of material assets, contracting and
               leasing of its operation (as a whole) or any other action which
               will be significant enough to affect the realization of Party B's
               rights under this Contract, Party A shall notify Party B at least
               thirty days prior to undertaking such activities and obtain Party
               B's written consent prior to taking such action. Otherwise Party
               A shall not engage in any of the above activities before its debt
               under this Contract is repaid in full;

     7.1.10.   Party A shall notify Party B in writing of any change in its
               business registration items, such as location, mailing address,
               business scope, legal representatives etc. within seven days of
               such change;

     7.1.11.   Party A shall notify immediately Party B in writing of any events
               which may threaten Party A's normal business or have material
               adverse effect on Party A's ability to perform its repayment
               obligations under this Contract, including, but not limited to,
               material economic disputes, bankruptcy, deterioration of
               financial condition, etc.;

     7.1.12.   In the event Party A's business is closed, dissolved, suspended
               for restructuring, or its business license is revoked or
               cancelled, Party A shall notify Party B in writing within five
               days of such event and the parties shall try to work out a new
               schedule for the repayment of principal and payment of interest.

7.2  Rights and Obligations of Party B

     7.2.1.    Party B shall have the right to request Party A to provide all
               information relevant to this loan;

     7.2.2.    Party B shall have the right to deduct from Party A's account
               with Party B the principal, interest, interest on interest,
               penalty interest and all other expenses payable as provided in
               this Contract or as required by laws and regulations;

     7.2.3.    In case Party A evades Party B's supervision or delays the
               repayment of principal or payment of interest, thus committing a
               material breach of this Contract, Party B shall have the right to
               apply lending sanctions against Party A (for example, not to
               provide additional loans to Party A).

     7.2.4.    Party B shall provide the full amount of the loan to Party A on
               schedule as provided in this Contract (unless the delay is caused
               by Party A).

     7.2.5.    Party B shall keep confidential all the documents, materials and
               information provided by Party A relating to its borrowing,
               financial condition, production, operations, etc. unless
               otherwise provided in this Contract or required by laws and
               regulations.

                                       4

   12
                                   ARTICLE 8

                        LIABILITY FOR BREACH OF CONTRACT

8.1. After this Contract becomes effective, each of the Party A and Party B
     shall perform its obligations as provided under this Contract. Any party
     who fails to perform all or part of its obligations as provided under this
     Contract shall be liable for its breach of the Contract in accordance with
     law.

8.2. If Party A fails to draw-down the loan as provided in Section 3.3 of this
     Contract, Party B shall have the right to charge penalty interest on the
     delayed amount compounded daily payable in arrears at the interest rate
     provided in this Contract.

8.3. If Party B fails to execute and provide the loan as provided in Section 3.3
     of this Contract, Party B shall pay penalty interest on the delayed amount
     compounded daily payable in arrears at the interest rate proved in this
     Contract.

8.4. Party B shall the right to charge interest based on the term and interest
     rate provided under this Contract if Party A prepays the loan under this
     Contract without fifteen days' advance notice to Party B.

8.5. If Party A fails to repay any principal or pay any interest on the loan
     when due under this Contract, Party B shall have the right to establish a
     schedule for repayment, deduct the amount due from any of Party A's bank
     accounts with Party B, and concurrently charge on the overdue amount
     additional interest at a rate which is 20% of the interest rate under this
     Contract and charge interest calculated at a compound rate on the overdue
     interest.

8.6. If Party A fails to use the loan for the purposes specified under this
     Contract, Party B shall have the right to accelerate part or all of the
     loan amount or terminate the Contract, and to charge on the amount and
     duration of unauthorized use an additional interest which is 50% of the
     interest rate under this Contract and charge compound rate on the overdue
     interest.

8.7. If the events of breach described in Section 8.5 and 8.6 occur concurrently
     in connection with Party A's use of the loan, Party B may select the
     penalty provided by either, but not both, sections.

8.8. In the event any of the following events occur, Party A shall within seven
     days after receipt of Party B's notice of such an event correct the noticed
     event and provide remedy satisfactory to Party B. Otherwise, Part B shall
     have the right to accelerate part or all of the loan amount. In the event
     Party B accelerates the loan but does not receive prompt payment from Party
     A, Party B shall charge penalty interest at the same rate applied to the
     overdue amount on a daily basis.

     8.8.1.    Party A provides false balance sheet, profit & loss statement or
               other financial information or holds back material information
               therein;

     8.8.2.    Party A refuses Party B's monitoring of the use of loan proceeds,
               its relevant manufacturing, operations or financial activities;

                                       5
   13
     8.8.3.  Party A transfers or disposes of, or threatens to transfer or
             dispose of, substantial part of its assets without Party B's
             consent;

     8.8.4.  All or a substantial part of Party A's assets are possessed by
             other creditors, taken over by designated trustees, receivers or
             similar personnel or its assets are detained or frozen, and such
             action may be expected to cause material loss to Party B;

     8.8.5.  The security of Party B's creditor rights is threatened as a result
             of Party A, without Party B's consent, engaging in activities such
             as changing its corporate structure into a company limited by
             shares, beginning joint operations with another party, merger,
             entering into a material acquisition, entering into an equity joint
             venture, spin-off or split-off, making a reduction in its
             registered capital, conducting an equity transfer, contracting and
             leasing its operation (as a whole) or other action significant
             enough to affect the realization of Party B's rights;

     8.8.6.  Party A changes its business registration items such as location,
             mailing address, business scope, legal representative, or makes
             significant external investment, which seriously affects or
             threatens the realization of Party B's creditor rights;

     8.8.7.  Party A is involved in any material economic disputes or its
             financial condition is materially deteriorating, and such
             deterioration seriously affects or threatens the realization of
             Party B's creditor rights;

     8.8.8.  Any other material event which may threaten the realization of
             Party B's creditor rights under the Contract, or cause material
             loss to Party B.

                                   ARTICLE 9

          EFFECT, CHANGE, CANCELLATION AND TERMINATION OF THE CONTRACT

9.1. This Contract shall be effective upon the execution and affixing of the
     company seal of both parties. If a security contract is required, this
     Contract shall become effective when such security contract becomes
     effective. This Contract shall terminate on the date when the principal,
     interest, compound interest, penalty interest, default penalty and all
     other payable expenses under this Contract are fully paid.

9.2. In the event any of the following events occurs, Party B shall have the
     right to terminate this Contract, and require Party A to accelerate
     repayment of all principal and payment of interest of the loan and
     compensate for Party B's losses:

     9.2.1.  Party A's business is closed, dissolved, suspended for
             restructuring, or its business license is revoked or cancelled;

     9.2.2.  The change in the security under this Contract has had an adverse
             effect on Party B's creditor rights and Party A fails to provide
             other security required by Party B;

     9.2.3.  Other material breach by Party A of this Contract.

                                       6

   14
9.3.   If Party A provides Party B with a written request to extend the term of
       this loan thirty days before the due date for repayment of the principal
       as provided under Section 3.2., the due date for the loan shall be
       extended and the parties shall execute an extension agreement. This
       Contract shall remain in effect, mutatis mutandi, until the extension
       agreement is executed by both parties.

9.4.   Except as otherwise provided under this Contract, neither Party A nor
       Party B may change or terminate this Contract without the consent of the
       other party. If there is indeed a need to change or terminate this
       Contract, Party A and Party B shall discuss and reach an agreement in
       writing. This Contract shall remain effective until the parties execute a
       written agreement reflecting such change or termination.

                                   ARTICLE 10

                             SETTLEMENT OF DISPUTES

10.1.  In the event a dispute arises between Party A and Party B in connection
       with the implementation of this Contract, the parties shall attempt to
       settle such dispute through consultations. If no settlement is reached
       through consultations within thirty days of the first consultation, the
       dispute shall be settled in accordance with Section 10.1.1:

       10.1.1.  Such dispute shall be submitted for exclusive and final
                settlement before the China International Economic and Trade
                Arbitration Commission ("CIETAC") in accordance with the CIETAC
                rules in effect at the time such dispute is submitted to it,
                which rules are deemed to be incorporated by reference into this
                Section. Arbitration shall take place in at CIETAC, Beijing,
                China. The arbitration award shall be non-appealable, final and
                binding on the parties. Unless otherwise specified in the
                arbitration award, the costs of the proceeding shall be borne by
                the losing party.

                                   ARTICLE 11

                                 MISCELLANEOUS

11.1.  In the event of any conflict between this Contract and the Loan Facility,
       the Loan Facility shall take precedence.

                                   ARTICLE 12

                             ADDITIONAL PROVISIONS

12.1.  The appendices to this Contract shall form an integral part of this
       Contract and shall have the same force and effect as this Contract
       itself.

12.2.  In connection with the implementation of this Contract, if any of the
       date for draw-down or repayment is not a banking business day, then such
       date shall be extended to the following banking business day.

                                       7


   15
Party A (corporate chop):          Party B (corporate chop):
Legal Representative:              Legal Representative (Person in Charge):
(or Authorized Representative)     (or Authorized Representative)

(date/month/year)                  (date/month/year)

[LESHAN-PHOENIX SEMICONDUCTOR      /s/
       CO. LTD. SEAL]

/s/                                /s/

Nov. 17, 2000


                                       8
   16
                                                                       Exhibit B

                                                             Contract Number: 66

                             RENMINBI LOAN CONTRACT

BORROWER (PARTY A):      LESHAN-PHOENIX SEMICONDUCTOR COMPANY LIMITED

Residence (Address):     27A, West People's Road, Leshan City,
                         Sichuan Province, China

Legal Representative:

LENDER (PARTY B):        INDUSTRIAL & COMMERCIAL BANK OF CHINA,
                         LESHAN CITY BRANCH

Residence (Address):     4, Zi Yun Hou Street, Central District, Leshan City,
                         Sichuan Province, China

Legal Representative
(Person in Charge):

   17
                                TABLE OF CONTENT

ARTICLE 1 TYPE OF THE LOAN ................................................ 1

ARTICLE 2 USE OF PROCEEDS ................................................. 1

ARTICLE 3 CURRENCY, AMOUNT AND TERM OF THE LOAN ........................... 1

ARTICLE 4 INTEREST RATE AND COMPUTATION OF INTEREST ....................... 1

ARTICLE 5 SOURCES OF REPAYMENT FUNDS, MANNER OF REPAYMENT ................. 2

ARTICLE 6 SECURITY ........................................................ 2

ARTICLE 7 RIGHTS AND OBLIGATIONS OF EACH PARTY ............................ 3

ARTICLE 8 LIABILITY FOR BREACH OF CONTRACT ................................ 4

ARTICLE 9 EFFECT, CHANGE, CANCELLATION AND TERMINATION OF THE CONTRACT .... 6

ARTICLE 10 SETTLEMENT OF DISPUTES ......................................... 7

ARTICLE 11 MISCELLANEOUS .................................................. 7

ARTICLE 12 ADDITIONAL PROVISIONS .......................................... 7





                                       i
   18
Party A has applied for a loan from Party B for the purpose described in
Section 2.1. Party B has agreed to provide the loan to Party A. In order to
specify the rights and obligations of each party, in accordance with the
Contract Law, the Lending General Provisions and other relevant laws &
regulations and after discussion conducted on a basis of equality, Party A and
Party B conclude this Contract:

                                   ARTICLE I

                                TYPE OF THE LOAN

1.1. The loan under this Contract is a medium term loan.

                                   ARTICLE 2

                                USE OF PROCEEDS

2.1. The proceeds of the loan under this Contract shall be used for payments
     relating to Party A's operations.

2.2. Party A shall not change the usage of the loan proceeds provided under
     this Contract without the written consent by Party B.


                                   ARTICLE 3

                     CURRENCY, AMOUNT AND TERM OF THE LOAN

3.1. The currency of the loan under this Contract shall be Renminbi and the
     amount shall be four million (in words) 4,000,000 (numbers). (In the event
     any amount in words is different from that in numbers, the amount in words
     shall prevail. This same rule shall apply throughout this Contract).

3.2. The term of the loan under this Contract shall be 36 months, from Dec 14,
     2000 (date/month/year) to Dec 13, 2003 (date/month/year).

3.3. Party A shall draw-down the loan in one lump sum on the first date of the
     term pursuant to Section 3.2 of this Contract; in case of special
     circumstance, the draw-down date can be moved up or delayed up to seven
     days with the written consent of Party B. The actual date of the draw-down
     and the date of repayment shall be the dates recorded in the receipt for
     the loan [signed] by Party A and Party B. The loan receipt and the
     draw-down voucher shall be an integral part of this Contract. Except for
     the dates, if there are any other discrepancies between other records and
     this Contract, this Contract shall prevail.

                                   ARTICLE 4

                   INTEREST RATE AND COMPUTATION OF INTEREST

4.1. The interest rate and computation of interest for the loan under this
     Contract shall be as follows:

     4.1.1.  The interest rate applicable for loans of six years (as published
             by the People's Bank of China), adjusted once every year shall be
             applied to the

                                       1
   19
               loan under this Contract.

       4.1.2.  The interest rate of the first period shall be 6.125% per annum.

       4.1.3.  The interest rates of the second and all subsequent periods will
               be determined by Party B according to its then prevailing
               interest rates for similar loans. Party A will be notified in
               writing within thirty days after any change in the interest rate.
               However, the delivery or non-delivery of such notice shall not
               affect the implementation of this Contract and any changes in the
               interest rate.

       4.1.4.  Interest on the loan under this Contract shall be accrue on a
               daily basis and be payable on the 20th day of the last month of
               each calendar quarter.

       4.1.5.  Interest shall accrue from the date of draw-down. The final
               payment of accrued interest shall be paid together with repayment
               of the principal amount of the loan.

                                   ARTICLE 5

                SOURCES OF REPAYMENT FUNDS, MANNER OF REPAYMENT

5.1.   The source of funds which Party A will use for the repayment of both
       principal and interest of the loan shall include, but is not limited to:

       5.1.1.  Sales revenue, depreciation and profit;

       5.1.2.  Other revenue.

5.2.   Notwithstanding any agreement on the source of Party A's funds for
       repayment in any other contracts to which Party A is party, such
       agreement shall not affect Party A's performance of its repayment
       obligation under this Contract. In any case, Party A shall not rely on
       Section 5.1 in order to refuse to perform its repayment obligation under
       this Contract.

5.3.   Party A shall timely pay all accrued interests as provided under this
       Contract and repay the principal of the loan when due.

5.4.   Before the date on which any payment of interest or repayment of
       principal provided in this Contract is due, Party A shall deposit
       sufficient funds in its bank account at Party B and authorize Party B to
       deduct such amount from Party A's account on the date on which such
       payment of interest or repayment of principal is due.

                                   ARTICLE 6

                                    SECURITY

6.1.   The form of security for the loan under this Contract shall be a
       mortgage.

6.2.   Party A and Party B shall conclude a security agreement (No. 66) for the
       specific security described under this Contract.


                                       2




   20
6.3.   In the event of a change in the value of the security under this Contract
       has had a material adverse effect on Party B's creditor rights, Party A
       shall, upon notice by Party B, provide additional security so that the
       total value of security is equal to the value prior to such change.

                                   ARTICLE 7

                      RIGHTS AND OBLIGATIONS OF EACH PARTY

7.1.   Rights and Obligations of Party A.

       7.1.1.  Party A shall draw and use the loan in accordance with the term
               and usage provided in this Contract;

       7.1.2.  Party A shall not prepay the loan without providing Party B with
               fifteen days' written notice of its intention to prepay;

       7.1.3.  Party A shall be responsible for the truthfulness, accuracy and
               completeness of all the materials provided by Party A in
               connection with the application for the loan;

       7.1.4.  Party A shall voluntarily accept Party B's investigation,
               supervision and monitoring of the use of the loan under this
               Contract pursuant to laws and regulations, administrative rules
               and industrial practice;

       7.1.5.  Party A shall actively coordinate with Party B's investigation,
               supervision and monitoring of Party A's manufacturing, operations
               and financial status and provide Party B with profit & loss
               statement, balance sheet and other financial information which it
               prepares in the ordinary course of business for any relevant
               period;

       7.1.6.  Party A shall repay the principal and pay the interest for the
               loan as provided in this Contract;

       7.1.7.  Party A shall pay relevant costs which arise under this Contract,
               including, but not limited to, the expenses of a notary,
               authentication, appraisal and registration fees which are
               required by applicable laws and regulations administrative rules
               and industrial practice;

       7.1.8.  Party A shall, within three days after its receipt of any
               repayment reminder sent by Party B via mail or other methods,
               send back an acknowledgement of receipt to Party B via mail;

       7.1.9.  In the event Party A proposes to be engaged in activities such as
               changing its corporate structure into a company limited by
               shares, beginning joint operations with another entity, merger, a
               material acquisition, entering into an equity joint venture,
               spin-off or split-off, a reduction in its registered capital,
               equity transfers, transfer of material assets, contracting and
               leasing of its operation (as a whole) or any other action which
               will be significant enough to affect the realization of Party B's
               rights under this Contract, Party A shall notify Party B at least
               thirty days prior to undertaking such activities and


                                       3

   21
               obtain Party B's written consent prior to taking such action.
               Otherwise Party A shall not engage in any of the above activities
               before its debt under this Contract is repaid in full;

     7.1.10.   Party A shall notify Party B in writing of any change in its
               business registration items, such as location, mailing address,
               business scope, legal representatives etc. within seven days of
               such change;

     7.1.11.   Party A shall notify immediately Party B in writing of any events
               which may threaten Party A's normal business or have material
               adverse effect on Party A's ability to perform its repayment
               obligations under this Contract, including, but not limited to,
               material economic disputes, bankruptcy, deterioration of
               financial condition, etc.;

     7.1.12.   In the event Party A's business is closed, dissolved, suspended
               for restructuring, or its business license is revoked or
               cancelled, Party A shall notify Party B in writing within five
               days of such event and the parties shall try to work out a new
               schedule for the repayment of principal and payment of interest.

7.2. Rights and Obligations of Party B

     7.2.1.    Party B shall have the right to request Party A to provide all
               information relevant to this loan;

     7.2.2.    Party B shall have the right to deduct from Party A's account
               with Party B the principal, interest, interest on interest,
               penalty interest and all other expenses payable as provided in
               this Contract or as required by laws and regulations;

     7.2.3.    In case Party A evades Party B's supervision or delays the
               repayment of principal or payment of interest, thus committing a
               material breach of this Contract, Party B shall have the right to
               apply lending sanctions against Party A (for example, not
               providing additional loans to Party A).

     7.2.4.    Party B shall provide the full amount of the loan to Party A on
               schedule as provided in this Contract (unless the delay is caused
               by Party A).

     7.2.5.    Party B shall keep confidential all the documents, materials and
               information provided by Party A relating to its borrowing,
               financial condition, production, operation, etc. unless otherwise
               provided in this Contract or required by laws and regulations.

                                   ARTICLE 8

                        LIABILITY FOR BREACH OF CONTRACT

8.1. After this Contract becomes effective, each of the Party A and Party B
     shall perform its obligations as provided under this Contract. Any party
     who fails to perform all or part of its obligations as provided under this
     Contract shall be liable for its breach of the Contract in accordance with
     law.

                                       4
   22
8.2. If Party A fails to draw-down the loan as provided in Section 3.3 of this
     Contract, Party B shall have the right to charge penalty interest on the
     delayed amount compounded daily payable in arrears at the interest rate
     provided in this Contract.

8.3. If Party B fails to execute and provide the loan as provided in Section 3.3
     of this Contract, Party B shall pay penalty interest on the delayed amount
     compounded daily payable in arrears at the interest rate provided in this
     Contract.

8.4. Party B shall the right to charge interest based on the term and interest
     rate provided under this Contract if Party A prepays the loan under this
     Contract without fifteen days' advance notice to Party B.

8.5. If Party A fails to repay any principal or pay any interest on the loan
     when due under this Contract, Party B shall have the right to establish a
     schedule for repayment, deduct the amount due from any of Party A's bank
     accounts with Party B, and concurrently charge on the overdue amount
     additional interest at a rate which is 20% of the interest rate under this
     Contract and charge interest calculated at a compound rate on the overdue
     interest.

8.6. If Party A fails to use the loan for the purposes specified under this
     Contract, Party B shall have the right to accelerate part or all of the
     loan amount or terminate the Contract, and to charge on the amount and
     duration of unauthorized use an additional interest which is 50% of the
     interest rate under this Contract and charge compound rate on the overdue
     interest.

8.7. If the events of breach described in Section 8.5 and 8.6 occur concurrently
     in connection with Party A's use of the loan, Party B may select the
     penalty provided by either, but not both, sections.

8.8. In the event any of the following events occur, Party A shall within seven
     days after receipt of Party B's notice of such an event correct the noticed
     event an provide remedy satisfactory to Party B. Otherwise, Party B shall
     have the right to accelerate part or all of the loan amount. In the event
     Party B accelerates the loan but does not receive prompt payment from Party
     A, Party B shall charge penalty interest at the same rate applied to the
     overdue amount on a daily basis.

     8.8.1.    Party A provides false balance sheet, profit & loss statement or
               other financial information or holds back material information
               therein;

     8.8.2.    Party A refuses Part B's monitoring of the use of loan proceeds,
               its relevant manufacturing, operations or financial activities;

     8.8.3.    Party A transfers or disposes of, or threatens to transfer or
               dispose of, substantial part of its assets without Party B's
               consent;

     8.8.4.    All or a substantial part of Party A's assets are possessed by
               other creditors, taken over by designated trustees, receivers or
               similar personnel or its assets are detained or frozen, and such
               action may be expected to cause material loss to Party B;

                                       5
   23
     8.8.5.  The security of Party B's creditor rights is threatened as a result
             of Party A, without Party B's consent, engaging in activities such
             as changing its corporate structure into a company limited by
             shares, beginning joint operations with another party, merger,
             entering into a material acquisition, entering into an equity joint
             venture, spin-off or split-off, making a reduction in its
             registered capital, conducting an equity transfer, contracting and
             leasing its operation (as a whole) or other action significant
             enough to affect the realization of Party B's rights;

     8.8.6.  Party A changes its business registration items such as location,
             mailing address, business scope, legal representative, or makes
             significant external investment, which seriously affects or
             threatens the realization of Party B's creditor rights;

     8.8.7.  Party A is involved in any material economic disputes or its
             financial condition is materially deteriorating, and such
             deterioration seriously affects or threatens the realization of
             Party B's creditor rights;

     8.8.8.  Any other material event which may threaten the realization of
             Party B's creditor rights under the Contract, or cause material
             loss to Party B.


                                   ARTICLE 9

          EFFECT, CHANGE, CANCELLATION AND TERMINATION OF THE CONTRACT

9.1. This Contract shall be effective upon the execution and affixing of the
     company seal of both parties. If a security contract is required, this
     Contract shall become effective when such security contract becomes
     effective. This Contract shall terminate on the date when the principal,
     interest, compound interest, penalty interest, default penalty and all
     other payable expenses under this Contract are fully paid.

9.2. In the event any of the following events occurs, Party B shall have the
     right to terminate this Contract, and require Party A to accelerate
     repayment of all principal and payment of interest of the loan and
     compensate for Party B's losses:

     9.2.1.  Party A's business is closed, dissolved, suspended for
             restructuring, or its business license is revoked or cancelled;

     9.2.2.  The change in the security under this Contract has had an adverse
             effect on Party B's creditor rights and Party A fails to provide
             other security required by Party B;

     9.2.3.  Other material breach by Party A of this Contract.

9.3. If Party A provides Party B with a written request to extend the term of
     this loan thirty days before the due date for repayment of the principal as
     provided under Section 3.2., the due date for the loan shall be extended
     and the parties shall execute an extension agreement. This Contract shall
     remain in effect, mutatis mutandi, until the extension agreement is
     executed by both parties.




                                       6
   24
9.4.   Except as otherwise provided under this Contract, neither Party A nor
       Party B may change or terminate this Contract without the consent of the
       other party. If there is indeed a need to change or terminate this
       Contract, Party A and Party B shall discuss and reach an agreement in
       writing. This Contract shall remain effective until the parties execute a
       written agreement reflecting such change or termination.


                                   ARTICLE 10

                             SETTLEMENT OF DISPUTES

10.1.  In the event a dispute arises between Party A and Party B in connection
       with the implementation of this Contract, the parties shall attempt to
       settle such dispute through consultations. If no settlement is reached
       through consultations within thirty days of the first consultation, the
       dispute shall be settled in accordance with Section 10.1.1:

       10.1.1. Such dispute shall be submitted for exclusive and final
               settlement before the China International Economic and Trade
               Arbitration Commission ("CIETAC") in accordance with the CIETAC
               rules in effect at the time such dispute is submitted to it,
               which rules are deemed to be incorporated by reference into this
               Section. Arbitration shall take place in at CIETAC, Beijing,
               China. The arbitration award shall be non-appealable, final and
               binding on the parties. Unless otherwise specified in the
               arbitration award, the costs of the proceeding shall be borne by
               the losing party.


                                   ARTICLE 11

                                 MISCELLANEOUS

11.1.  In the event of any conflict between this Contract and the Loan Facility,
       the Loan Facility shall take precedence.


                                   ARTICLE 12

                             ADDITIONAL PROVISIONS

12.1.  The appendices to this Contract shall form an integral part of this
       Contract and shall have the same force and effect as this Contract
       itself.

12.2.  In connection with the implementation of this Contract, if any of the
       date for draw-down or repayment is not a banking business day, then such
       date shall be extended to the following banking business day.

Party A (corporatechop):                Party B (corporatechop):
Legal Representative:                   Legal Representative (Person in Charge):
(or Authorized Representative)          (or Authorized Representative)

(date/month/year)                       (date/month/year)

/s/                                     (namechop)

[LESHAN-PHOENIX SEMICONDUCTOR           /s/
COMPANY LIMITED]

2000.12.1                                2000.12.1

                                       7

   25
                                                                       Exhibit C

                                                                Contract No.----

                               MORTGAGE CONTRACT

Mortgagor (Party A):     Leashan-Phoenix Semiconductor Company Limited

Residence (Address):

Legal Representative:



Mortgage (Party B):      Industrial & Commercial Bank of China, Leshan City
                         Branch

Residence (Address):

Legal Representative (Person in Charge):

   26
                               TABLE OF CONTENTS


ARTICLE 1      REPRESENTATIONS AND WARRANTIES OF PARTY A...................1

ARTICLE 2      TYPE AND AMOUNT OF THE CREDIT COVERED BY THE SECURITY.......1

ARTICLE 3      TERM OF BORROWER'S DEBT UNDER THE MAIN CONTRACT.............1

ARTICLE 4      SCOPE OF MORTGAGE...........................................2

ARTICLE 5      MORTGAGED ASSETS............................................2

ARTICLE 6      REGISTRATION OF MORTGAGE....................................2

ARTICLE 7      POSSESSION OF THE MORTGAGED ASSETS..........................2

ARTICLE 8      INSURANCE...................................................3

ARTICLE 9      EXERCISE RIGHT OVER MORTGAGE................................3

ARTICLE 10     RIGHTS AND OBLIGATIONS OF PARTY A...........................3

ARTICLE 11     RIGHTS AND OBLIGATIONS OF PARTY B...........................5

ARTICLE 12     LIABILITY FOR BREACH OF CONTRACT............................5

ARTICLE 13     EFFECT, CHANGE, CANCELLATION AND TERMINATION OF THE
               CONTRACT....................................................6

ARTICLE 14     SETTLEMENT OF DISPUTES......................................6

ARTICLE 15     OTHER AGREEMENTS BY THE PARTIES.............................6

ARTICLE 16     APPENDICES..................................................7

ARTICLE 17     ADDITIONAL PROVISIONS.......................................7



                                       i

   27
To ensure the exercise of Party B's rights under the loan contract No. (----)
(hereinafter "Main Contract") signed by Party A Leshan Phoenix Semiconductor
Co. Ltd. and Party B Industrial & Commercial Bank of China Leshan City Branch
on Nov. 17, 2000 (date/month/year), Party A wishes to provide a mortgage. In
order to specify the rights and obligations of each party, in accordance with
the Contract Law, the Security Law and other relevant laws and regulations and
after discussions conducted on a basis of equality, Party A and Party B
conclude this Contract:

                                   ARTICLE 1

                   REPRESENTATIONS AND WARRANTIES OF PARTY A

1.1. It is the sole, valid and legitimate owner (or operator authorized by the
     State) of the assets mortgaged under the Contract. There is no pending
     disputes over the ownership or operation rights of the mortgaged assets.

1.2. It understands the use of proceeds of loan by the borrower under the Main
     Contract and is willing to provide a mortgage. All of its representations
     under this Contract are true.

1.3. It has made sufficient and reasonable explanation of any defects in the
     mortgaged assets under this Contract.

1.4. The mortgaged assets under this Contract are eligible for mortgage
     according to law.

1.5. The mortgage under this Contract is not in violation of any restrictions
     applicable to Party A.

1.6. The mortgaged assets under this Contract are not under any seal-up,
     detention or custody arrangement under law.

1.7. If all or part of the mortgaged assets under this Contract are to be
     leased, it shall notify the leasees of the mortgage arrangement and report
     the status of the leasing to Party B in writing.


                                   ARTICLE 2

             TYPE AND AMOUNT OF THE CREDIT COVERED BY THE SECURITY

2.1. The creditor's rights covered by Party A's mortgage shall be the loans in
     RMB and foreign currencies Three Million US Dollars (US$3,000,000) under
     the Main Contract.

                                   ARTICLE 3

                TERM OF BORROWER'S DEBT UNDER THE MAIN CONTRACT

3.1. The term of the loan under the Main Contract shall be 36 months, from Dec.
     13, 2000 (date/month/year) to Dec. 12, 2003 (date/month/year). The term
     shall be as provided in the Main Contract.


                                       1


   28
                                   ARTICLE 4

                               SCOPE OF MORTGAGE

4.1. The scope of the debt secured by the mortgage provided by Party A shall
     include: all principal, interest, compound interest, penalty interest,
     default penalty, compensation payment, expenses for realizing the mortgage
     right and all other expenses payable under the Main Contract.

                                   ARTICLE 5

                                MORTGAGED ASSETS

5.1. Mortgaged assets are listed in the List of Mortgaged Assets.

5.2. The value assigned to the mortgaged assets in the List of Mortgaged Assets
     shall not constitute the basis for the evaluation on the mortgaged assets
     to be conducted by Party B under Article 9 of this Contract, or form any
     restriction to Party B's exercise of its rights under the mortgage.

5.3. Certificates or other documents evidencing ownership of the mortgaged
     assets shall be confirmed and sealed off by the parties and placed with
     Party B for safe-keeping, unless otherwise required by laws and
     regulations.

                                   ARTICLE 6

                            REGISTRATION OF MORTGAGE

6.1. If required by relevant laws and regulations or agreed upon by the parties,
     the parties shall register the mortgage with the relevant registration
     office within 15 days after the execution of this Contract.

6.2. If there is any change in the items under the registration that according
     to applicable law requires a change in registration, the parties shall
     adjust the registration to reflect such change with the relevant
     registration office within 15 days after the occurrence of such change.

                                   ARTICLE 7

                       POSSESSION OF THE MORTGAGED ASSETS

7.1. Party A shall retain possession of the mortgaged assets under this
     Contract. While the mortgaged assets are in its possession, Party A shall
     maintain the mortgaged assets and shall not use the mortgaged assets in any
     unreasonable manner to cause a decrease in their value. Party B shall have
     the right to supervise the use of the mortgaged assets.

7.2. In the event of damage to or loss of the mortgaged assets, Party A shall
     promptly notify Party B and immediately take measures to prevent their
     further deterioration. Party A shall also provide Party B with certificates
     issued by relevant department in charge evidencing the cause of any damage
     to or loss of the mortgaged assets.

                                       2



   29
                                   ARTICLE 8

                                   INSURANCE

8.1.      Party A shall purchase insurance covering basic risks from relevant
          insurance institutions for the mortgaged assets, within 15 days after
          the execution of this Contract. The duration of insurance coverage
          shall not be shorter than that of this Contract and the amount of the
          insurance shall not be less than the principle and interest of the
          loans under the Main Contract.

8.2.      Party A shall list Party B in the relevant insurance policies as
          primary beneficiary. The insurance policies shall not contain any
          provisions restricting Party B's rights or interests.

8.3.      During the term of this Contract, Party A shall not suspend or cancel
          the insurance described in Section 8.1 for any reason. In the event
          such insurance is terminated, Party B shall have the right to purchase
          insurance on behalf of and at the expense of Party A.

8.4.      In the event a loss covered under the insurance policies is suffered
          by the mortgaged assets during the term of this Contract, all
          insurance compensation shall be used as mortgaged assets, or be used
          to restore the value of the mortgaged assets with consent by Party B.

                                   ARTICLE 9

                        EXERCISE OF RIGHT OVER MORTGAGE

9.1.      If it exercises its right of mortgage, Party B shall have the right,
          upon consultation with Party A, reasonably to determine the value of
          the mortgaged assets, using an independent appraisal agent of good
          reputation, so as to set off the debt owed by the borrower under the
          Main Contract, or to auction or otherwise sell the mortgaged assets to
          receive payment on a priority basis, provided, however, that in any
          sale of the mortgaged assets by Party B, Party A or any affiliate of
          Party A shall have a right of first refusal to make such purchase on
          the same terms as any other buyer offering to purchase the mortgaged
          assets being sold.

9.2.      In the event Party B disposes of the mortgaged assets as provided
          under Section 9.1, Party A shall provide assistance and shall not
          create any obstacles.

                                   ARTICLE 10

                       RIGHTS AND OBLIGATIONS OF PARTY A

10.1.     After this Contract becomes effective, Party A shall not, without the
          written consent by Party B, subject the mortgaged assets under this
          Contract to any other mortgage or pledge, or lease, transfer or give
          away the mortgaged assets to any third party.

10.2.     After this Contract becomes effective, in the event Party B transfers
          its creditor rights to a third party in accordance with law, Party A
          shall continue to be responsible for providing the mortgage as
          required under this Contract.


                                       3

   30
10.3.     In the event any action of Party A will result in a decrease in the
          value of the mortgaged assets, Party A shall stop such action. In the
          event the value of the mortgaged assets decreases due to such action,
          Party A shall have the obligation to restore the value of the
          mortgaged assets or provide additional security of corresponding
          value.

10.4.     In the event of the value of any mortgaged assets decreases without
          the fault of Party A, Party A shall use any compensation it receives
          to provide security to Party B. Any mortgaged assets the value of
          which does not decrease shall remain as security to Party B.

10.5.     In the event the mortgaged assets are taken over by the State for its
          construction need, any compensation obtained by Party A from the State
          shall remain as security to Party B.

10.6.     Party A shall pay relevant costs which arise under this Contract,
          including, but not limited to, legal fees, property insurance
          premiums, expenses of authentication, appraisal, registration,
          transfer, safe-keeping and litigation which are required by applicable
          laws and regulations.

10.7.     Party A shall duly implement its obligation under this Contract in the
          event of changes such as spin-off, merger, change of corporate
          structure into a company limited by shares, etc. after this Contract
          becomes effective.

10.8.     In the event the mortgage right is, or threatened to be, infringed by
          any third party, Party A shall notify Party B promptly and assist
          Party B in preventing such infringement.

10.9.     Party A shall notify Party B in writing of any of the following:

          10.9.1.   Change in its operational structure, such as beginning joint
                    operations with another entity, merger, spin-off or
                    split-off, changing its corporate structure into a company
                    limited by shares, contracting and leasing of its operation
                    (as a whole), entering into an equity or a cooperative joint
                    venture with foreign investors, etc.;

          10.9.2.   Change in its business scope, registered capital or equity
                    holding;

          10.9.3.   Material economic disputes;

          10.9.4.   Disputes over the ownership of the mortgaged assets;

          10.9.5.   Bankruptcy, closing, dissolution, suspension for
                    restructuring or revocation or cancellation of its business
                    license; and

          10.9.6.   Change in its residence, telephone number, legal
                    representative.

10.10.    Party A shall notify Party B in writing of any of the events listed in
          10.9.1 or 10.9.2 at least 30 days prior to the occurrence of such
          event and within 15 days of any events listed in 10.9.3 through
          10.9.6.

   31
10.11.    The borrower under the Main Contract shall have the right to request
          the termination of the mortgage under this Contract upon full
          repayment of debt under the Main Contract and Party B shall promptly
          comply with such request.

                                   ARTICLE 11

                       RIGHTS AND OBLIGATIONS OF PARTY B

11.1.     Party B shall have the right to dispose of the mortgaged assets if
          Party A fails to repay any principal, pay interest or other expenses
          as due under the Main Contract.

11.2.     Party B shall have the right to dispose of the mortgaged assets in
          advance and receive payment from the proceeds of such disposal if any
          of the following events occurs:

          11.2.1.   Party B terminates the Main Contract as provided therein or
                    in accordance with relevant laws and regulations prior to
                    the repayment of amounts due under the Main Contract from
                    Party A;

          11.2.2.   Party B accelerates the loan as provided under the Main
                    Contract and fails to realize all or part of its rights as a
                    creditor.

11.3.     Party B shall have the right to request Party A's assistance in
          preventing any infringement of Party B's mortgage right by any third
          party.

11.4.     In the event it transfers its rights as a creditor during the term of
          this Contract, Party B shall notify Party A promptly.

11.5.     In the event Party B disposes of the mortgaged assets under this
          Contract and following repayment of amounts owed by Party A under this
          Contract and the Main Contract, Party B has proceeds in excess of such
          amount, Party B shall promptly return the surplus to Party A.

                                   ARTICLE 12

                        LIABILITY FOR BREACH OF CONTRACT

12.1.     In the event the representations and warranties made by Party A in
          Article 1 of this Contract are false and as a result Party B suffers a
          loss, Party A shall compensate Party B for such loss.

12.2.     After this Contract becomes effective, each of the parties shall
          fulfil its obligations hereunder. If either party fails to fulfil all
          or part of its obligations provided under this Contract, such party
          shall be responsible for its breach and compensate the other party for
          any loss caused by such breach.

12.3.     In the event this Contract becomes void due to the fault of either
          party, the party in fault shall be responsible for any loss suffered
          by the other party as provided under this Contract.


                                       5
   32
                                   ARTICLE 13

          EFFECT, CHANGE, CANCELLATION AND TERMINATION OF THE CONTRACT

13.1.  This Contract shall be effective upon the execution and affixing of the
       company seals of both parties. Provided, however, that if registration of
       the mortgage is required under applicable law, this Contract shall become
       effective when such registration of the mortgage is completed. This
       Contract shall terminate on the date when the principal, interest,
       compound interest, penalty interest, default penalty, damages, expenses
       in realizing creditor rights and all other payable expenses under the
       Main Contract are fully paid.

13.2.  This Contract is independent from the Main Contract. All obligations
       under this Contract shall not be affected by any breach by any party
       under the Main Contract.

13.3.  Except as otherwise provided under this Contract, neither Party A nor
       Party B may change or terminate this Contract without the consent of the
       other party. If there is a need to change or terminate this Contract,
       Party A and Party B shall discuss and reach an agreement regarding such
       change and execute a written agreement documenting the change. This
       Contract shall remain in full force until such a written agreement is
       executed. Any change or termination to this Contract shall be made in
       accordance with such written agreement executed by the parties.

                                   ARTICLE 14

                             SETTLEMENT OF DISPUTES

14.1.  In the event a dispute arises between Party A and Party B in connection
       with the implementation of this Contract, the parties shall attempt to
       settle such dispute through consultations. If no settlement is reached
       through consultations within 30 days of the first such consultation, the
       dispute shall be settled in accordance with Section 14.1.1:

       14.1.1.  Such dispute shall be submitted for exclusive and final
                settlement before the China International Economic and Trade
                Arbitration Commission ("CIETAC") in accordance with the CIETAC
                rules in effect at the time such dispute is submitted to it,
                which rules are deemed to be incorporated by reference into this
                Section. Arbitration shall take place at CIETAC, Beijing, China.
                The arbitration award shall be non-appealable, final and binding
                on the parties. Unless otherwise specified in the arbitration
                award, the costs of the proceeding shall be borne by the losing
                party.

                                   ARTICLE 15

                        OTHER AGREEMENTS BY THE PARTIES

15.1.  The value of the mortgaged assets under this Contract shall not at any
       time exceed the lessor of (i) 142.5% of the outstanding balance under the
       Main Contract and (ii) the RMB equivalent of US$28,500,000.

                                       6

   1
                                                                    Exhibit 10.2



(Tentative Translation)

                                 Loan Agreement

     Development Bank of Japan (hereinafter referred to as "A") has made the
loan to SCG Japan Ltd. (hereinafter referred to as "B") upon the following terms
and conditions (hereinafter referred to as the "Conditions") and those in the
ANNEX (hereinafter referred to as the "Terms and Conditions") and B accepts the
Conditions and the Terms and Conditions.

     The execution, validity, interpretation and performance of this Agreement
shall be governed by Japanese law.

     In Witness Whereof, the parties hereto have executed one original of this
Agreement in Japanese, and A shall keep it.

                                 Date:  October 27th, 2000



                                 A:  Development Bank of Japan
                                     9-1, 1-chome, Otemachi,
                                     Chiyoda-ku, Tokyo

                                     By  Masami Kogayu, Governor


                                 B:  SCG Japan Ltd.
                                     32-1, 4-chome, Nishi-Gotanda,
                                     Shinagawa-ku, Tokyo


                                     By  Takeshi Shindo, Representative Director

   2
                                                   CONDITIONS___________________

Principal:

     Yen2,800,000,000-


Name of and expenses for the project for which the loan is required
(hereinafter referred to as the "Project"):

     Expansion of semiconductor facilities in Aizu

     YEN5,731,339,000-

Repayment schedule of the principal:

Months of repayment of the principal: at intervals of 6 months
           (March and September of every year)

Date of each repayment: the 20th day

Final maturity: 20th day of September, 2010.

Repayment schedule: Repayment shall be made on the 20th day of September, 2003
and thereafter until the 20th day of March 2010 in installments, each amount of
which shall be Yen190,000,000-, and on the 20th day of September,
Yen140,000,000- shall be repaid.

Interest rate:

     2.25% per annum (subject to per diem calculation on the basis of 365 days a
year.)

Method of payment of interest:

Date of first payment of interest: 20th day of March 2001.

Months of payment of interest: at intervals of 6 months.
            (March and September of every year)

Date of each payment of interest: the 20th day

Method of payment: Interest accrued between each payment day shall be paid at
the end of the accrual period.
   3
ANNEX


                              Terms and Conditions

(Purpose for use of money)

Article 1.

     B shall perform the Project in accordance with the project plan at the
date of this Agreement and shall use the borrowed money under this Agreement
only for the Project.

(Delivery of the funds by bank transfer)

Article 2.

     In cases where A delivers the funds under this Agreement by transfer to
B's bank deposit account, completion of A's procedure requesting the delivery
of the funds to B is deemed as constitution of full and complete delivery to B.
Even if B has sustained a loss due to accidents, delays of procedure or other
events in the subsequent process, B shall not ask for compensation or other
claims.

(Repayment of the obligations by bank transfer)

Article 3.

     When the repayment of B's obligations to A is made by transfer to A's
account with checks, notes or other securities (hereinafter collectively
referred to as the "Securities") to A, B shall ensure that the Securities are
paid in full by the due dates of such obligations.

(Repayment of the B's obligations by delivering Securities)

Article 4.

     1.   When the repayment of B's obligations to A is made by delivering
Securities to A, any Securities delivered to A for the payment shall be
negotiable for settlement through the clearing house consented by A and B shall
ensure that the Securities are paid in full by the due dates of such
obligations.

     2.   In case any of the Securities in the preceding paragraph are
dishonored, and returned from A to B, B agrees that no procedure will be taken
by A for the preservation of rights on such Securities.

(Prepayment)

Article 5.

     1.   If the expenses for the Project decreases to less than those for the
Project mentioned in the


   4
Conditions (hereinafter referred to as the "Amount mentioned in the Conditions")
due to a change of the project plan or for other reasons, B shall, upon A's
request, despite the maturities of the loans mentioned in the Conditions, prepay
the borrowed money under this Agreement in accordance with the proportion of the
amount of decrease to the Amount mentioned in the Conditions.

     2.  When such decrease of the expenses for the Project under the preceding
paragraph amounts to so substantial size of the Amount mentioned in the
Conditions that A recognizes that the completion of the purpose of the Project
will become difficult, upon A's request, B shall prepay the borrowed money in
full under this Agreement despite the maturities of the loans mentioned in the
Conditions.

     3.  When B does not perform the Project without justifiable reason, despite
A's instructions, for a reasonable period which A judges to be necessary for
performance of the Project, when B does not apply the loans made by A to the
payments for the expenses of the Project, or when A recognizes that the purpose
of the Project will not be completed because B assigns or leases the object
which B obtains as a result of the Project to a third person after B owns it, or
for other reasons, upon A's request, B shall, despite the maturities of the
loans mentioned in the Conditions, prepay the borrowed money under this
Agreement to A in whole or in part.


Article 6.

     When B prepays the borrowed money under the preceding article, paragraph 2.
of Article 14., B shall pay at the same time the interest on the prepaid amount
accrued to the date of such prepayment.


Article 7.

     1.  When B prepays the borrowed money in part or in whole except in the
case when A requests under these Terms and Conditions or in case of the next
paragraph, B shall obtain A's consent in writing in advance.

     2.  B may prepay the borrowed money under this Agreement in part or in
whole when B gives A a written notice of prepayment not less than ninety (90)
days before the date of prepayment.

     3.  In case of prepayment under the preceding paragraph, notice of
prepayment once received by A shall be irrevocable unless A consents to such
revocation.

     4.  When B prepays the borrowed money in whole or in part on receipt of
A's consent described in the first paragraph or under the notice described in
paragraph 2., B shall pay at the same time the amounts set forth in each
following item:

     (1) Interest on the prepaid amount accrued to the date of such prepayment.

     (2) The following amount calculated through the formula separately
determined by A.

         The differences between "the current value at the date of prepayment
of the total amount of

   5
the principal and interest which A is to receive under the repayment schedule
effective prior to satisfaction of requirements for prepayment" (hereinafter
referred to as "X"), and "the current value at the date of prepayment of the
total amount of the principal and interest (including the prepaid amount) which
A is to receive under the repayment schedule effective subsequent to
satisfaction of requirements for prepayment" (hereinafter referred to as "Y"),
where X is larger than Y.

(Application of repayment)

Article 8.

     When B prepays the borrowed money under this Agreement to A in part or
when the amount of each obligation which B has repaid under this Agreement or
other loan agreements made by and between A and B is less than that B should
repay  under these agreements, A shall apply it in accordance with order and
methods decided by A.

(Inspection and report of the project)

Article 9.

     1. B shall, upon A's request, report A with respect to progress status and
payment status of expenses of the Project in accordance with the method as
instructed by A.

     2. A may at any time inspect progress status of the Project and B's
assets, documents, book and other data, when A deems it necessary for
confirmation of the use of loaned money under this Agreement.

     3. B shall offer necessary convenience to A for the inspection in the
preceding paragraph.

(Matters to be filed, exemption, etc.)

Article 10.

     1. When B or Semiconductor Components Industries, LLC (hereinafter referred
to as the "Guarantor") changes name, corporate name, address, representative,
filed seal-impression or other filed maters of B, B and the Guarantor shall
file to A thereof in writing forthwith.

     2. In the event that any notice given by A or any document, etc. sent by A
is delayed or is not received by B or the Guarantor because of B's or the
Guarantor's failure of filing provided in the preceding paragraph, such notice
or document, etc. shall be deemed as having been received by B or the Guarantor
when they are ordinarily so received.

(Matters to be reported or inspected)

Article 11.

     1. B, the Guarantor shall, at the time of each settlement of accounts
(including mid-year settlement if the company(s) which choose yearly settlement
makes up it), submit a business report,
   6
a balance sheet, an income statement, a plan of disposition of profit, a plan
of treatment of loss and other documents describing the financial conditions of
B, the Guarantor and the ON Semiconductor Corporation (hereinafter referred to
as the "Parent Company") as designated by A.

     2.   B and the Guarantor shall repeat to A in accordance with the method
as instructed by A without delay after the occurrence of important events
concerning B's or the Guarantor's management, finance or business (including
any change of the controlling shareholders of B, the Guarantor and Parent
Company).

     3.   A may inspect B's or the Guarantor's assets, documents, books and
other data when A reasonably deems it necessary for preservation of A's rights.
B and the Guarantor shall offer necessary convenience to A for such inspection.
B and the Guarantor shall, upon A's reasonable request, submit to A any
document designated by A.


(Acceleration of payment)

Article 12.

     If any one of the following events should occur and be continuing, B's
obligations to A shall, upon A's request, immediately become due and payable
and B shall forthwith pay the entire amount of such obligations under this
Agreement.

     (1)  When B does not perform the Project and use the borrowed money under
this Agreement for the purpose other than that of the Project;

     (2)  When B or the Guarantor fails to perform any of its obligations under
Article 9., Article 10 or Article 11, and does not perform such obligations
despite A's request or when B files or reports thereof falsely;

     (3)  When B fails to pay any part of the principal or interest thereon;

     (4)  When B or the Guarantor fails to perform any of its obligations under
this Agreement other than those set forth in each of the preceding items, or
fails to perform any of its obligations to A under any other agreements;

     (5)  When B dishonors any note or check;

     (6)  When attachment with respect to assets which B furnishes or agrees to
furnish to A as security is made;

     (7)  When B or the Guarantor stops payment or an application is filed by
or against B for bankruptcy, civil rehabilitation, corporate rehabilitation or
corporate reorganization;

     (8)  When any license, approval, registration or right with respect to the
whole or a part of B's or the Guarantor's business or management ceases to be
effective or is cancelled, the whole or a part of B's business is suspended, or
an authorization required for establishment of A's security interest is not
obtained or ceases to be effective.

     (9)  When B or the Guarantor is dissolved or its business is closed down;
or
   7
     (10) When any event that requires preservation of A's rights other than
those set forth in each of the preceding items occurs under or in connection
with B.

     (11) When the Guarantor fails to perform any of its obligations under the
Guaranty Agreement with A dated October 27th, 2000 (hereinafter referred to as
the "Guaranty Agreement" in this Article) and, if capable of remedy in the
reasonable opinion of A, such failure to perform such obligation shall continue
unremedied for a period of 30 days; or

     (12) When any event of default occurs under or in connection with any
obligation of the Guarantor to A other than the Guaranty Agreement.

     2.   If the request provided in the preceding paragraph is delayed or not
received by B for a reason attributable to B such as B's failure of filing a
change of address, B's obligations to A shall be deemed as having become due
and payable when it is ordinarily so received.

(Negative pledge)
Article 13.
     1.   B warrants that, as of the date of this Agreement, there is no other
Teitoken (including pre-engagement of creation of a Teitoken), pledge
(including pre-engagement of creation of a pledge) Sakidoritokken nor other
rights which will disturb A's right on the real estate described in the
ATTACHMENT and the equipment and other machineries which B obtains as a result
of the Project (hereinafter referred to as the "Preserved objects").
     2.   If B engages in any conduct which respect to the Preserved objects,
which might cause damage to A, such as assigning, leasing, creating mortgage or
other security interest on, or materially decreasing the value of the Preserved
objects, B shall, in advance, obtain A's consent thereto. If A does not make
any response to a written request of B for such A's consent within 30 days
after receipt of request, A's consent shall be deemed as having been given.
     3.   B agrees that, if B creates a Teitoken, pledge, Jototanpoken or
other rights on the Preserved objects for those other than A, B shall
automatically create a Teitoken of the exclusively first ranking or Jototanpoken
senior to such rights on the Preserved objects as the security for the
obligations under this Agreement, and that B shall forthwith take any necessary
procedures for such creation and for creation of a pledge for A on the claim for
insurance money with respect to the buildings and the insurable objects
mentioned in paragraph 1, in accordance with the methods as instructed by A.

(Procedure taken for any change in Preserved objects)
Article 14.
     1.   If any loss of, injury to or major change in, any important object
appertaining to the Preserved objects should occur, B shall inform A thereof
forthwith.
   8
     2.  When A receives the notice described in the preceding paragraph or
when A recognizes that an important change in the Preserved objects has
occurred, B shall in accordance with A's request take the alternative measure
necessary for the preservation of A's rights, or shall prepay the obligations
in whole or in part.


(Addition or replacement of secured or guarantor)

Article 15.

     1.  When it may be objectively recognized that a reasonable and probable
cause necessitates the preservation of the rights under this Agreement, and A
specifies the reasons therefor in a document and makes a demand to B with
reasonable period, B shall furnish such security or additional security, or such
guarantors or additional guarantors, as may be approved by A, notwithstanding
existence or such nonexistence of security or guarantor under this Agreement or
other agreement.


(Assignment of claims)

Article 16.

     1.  B agrees in advance that A will assign a part or a whole of claims
under this Agreement to any financial institution or other organization in the
future.

     2.  In the event of the preceding paragraph, A may omit to give a notice
to B. Even if A's claims to B are assigned to any financial institution or
other organization, B may repay all the obligations to A in compliance with the
method provided in the Conditions, and A shall transfer the amount repaid by B
to the assignee in proportion to the amount which was assigned. A may request B
to perform all the obligations.

     3.  With regard to the claims which A assigned under paragraph 1. of this
Article, B agrees that A will perform the procedures of administration and
collection of the claims under this Agreement as an attorney-in-fact of the
assignee.


(Execution of notarial deed)

Article 17.

     B and the Guarantor shall at any time upon A's request commission a notary
public in Japan and take necessary procedures to execute a notarial deed
containing the acknowledgement of the obligations under this Agreement and the
statement of acceptance thereof.


(Burden of expenses)

Article 18.

     The expenses for preparation of this Agreement, registration, and all
other expenses

   9
(including cost of litigation and legal counsel's fees) incurred in connection
with this Agreement shall be borne by B.


(Post default interest)

Article 19.

     B shall pay post default interest ("Songaikin") equivalent to 14.5% per
annum (subject to per diem calculation on the basis of 365 days per year) of the
principal, interest and any other amounts payable in the event of default of any
payment obligation, or of advance money A paid for the expenses under the
preceding Article.


(Jurisdiction of court)

Article 20

     In the event of any litigation pertaining to this Agreement, B hereby
submits and consents to the non-exclusive jurisdiction of the Tokyo District
Court.
   10
ATTACHMENT

                         Description of the Real Estate

(Land)

1. Address:  1, Odanichi, Kobuneaza, Oaza, Shiokawa-machi, Yama-gun
   Property:  Residential Land
   Area of the site: 65,096 m(2) 78

1. Address:  50-2, Hatakeda, Kobuneaza, Oaza, Shiokawa-machi, Yama-gun
   Property:  Residential Land
   Area of the site: 18,273 m(2) 51

(Building)

1. Address:  1, Odanichi, Kobuneaza, Oaza, Shiokawa-machi, Yama-gun
   Bldg. No.:  1
   Category:  Facility, Office, Canteen, Warehouse
   Floor space:  1F 12,931 m(2) 86
                 2F 8,419 m(2) 58

(Annex Building)

1. Bldg. No.:  1
   Category:  Machine room and Workroom
   Floor space:  271 m(2) 40

1. Bldg. No.:  2
   Category:  Machine room
   Floor space:  175 m(2) 02

1. Bldg. No.:  4
   Category:  Napping room
   Floor space:  1F 71 m(2) 20
                 2F 68 m(2) 25
   11
1. Bldg. No.:  5
   Category:  Laboratory
   Floor space:  38 m(2) 71

1. Bldg. No.:  6
   Category:  Tank room
   Floor space:  1F 84 m(2) 00
                 2F 84 m(2) 00

1. Bldg. No.:  7
   Category:  Machine room
   Floor space:  91 m(2) 96

1. Bldg. No.:  9
   Category:  Warehouse and Facility
   Floor space:  389 m(2) 63

1. Bldg. No.:  10
   Category:  Facility
   Floor space:  183 m(2) 23

1. Bldg. No.:  11
   Category:  Janitor's room
   Floor space:  41 m(2) 31

1. Bldg. No.:  12
   Category:  Warehouse
   Floor space:  60 m(2) 00

1. Bldg. No.:  13
   Category:  Machine room
   Floor space:  312 m(2) 00

1. Bldg. No.:  14
   Category:  Machine room


   12
     Floor space: 48 m(2) 00

1.   Bldg. No.: 15
     Category: Warehouse
     Floor space: 30 m(2) 98

1.   Bldg. No.: 16
     Category: Cylinder room
     Floor space: 51 m(2) 00

1.   Bldg. No.: 17
     Category: Storage
     Floor space: 19 m(2) 32

1.   Bldg. No.: 18
     Category: Machine room
     Floor space: 89 m(2) 70

1.   Bldg. No.: 19
     Category: Storage
     Floor space: 32 m(2) 50

1.   Bldg. No.: 20
     Category: Storage
     Floor space: 21 m(2) 43

1.   Bldg. No.: 21
     Category: Storage
     Floor space: 13 m(2) 89

1.   Bldg. No.: 22
     Category: Machine room
     Floor space: 1F 222 m(2) 83
                  2F 80  m(2) 52

(Building)
   13

1.   Address: 50-2, Hatakeda, Kobuneaza, Oaza, Shiokawa-machi,Yama-gun
     Bldg. No.: 50-2
     Category: Machine room
     Floor space: 161 m(2) 02

   1
                                                                    Exhibit 10.3

                               GUARANTY AGREEMENT

                                                          Date: October 27, 2000


To: Mr. Masami Kogayu, Governor
    Development Bank of Japan


     The undersigned (hereinafter referred to as the "Guarantor"), after having
accepted the following terms and conditions, hereby guarantees all the
obligations of SCG Japan, Ltd. (hereinafter referred to as the "Debtor") to
Development Bank of Japan (hereinafter referred to as the "Bank") arising out of
the agreement made by and between the Bank and the Debtor dated 27th of
October, 2000 (hereinafter referred to as the "Original Agreement"), certain
basic provisions of which are more fully described in Attachment A.

Article 1.

     The Guarantor hereby confirms the obligations of the Debtor under the
Original Agreement, and agrees to each article and paragraph of the Original
Agreement.

Article 2.

     1.   The Guarantor, as primary obligor and not as surety only, shall be
jointly and severally responsible with the Debtor (this Guaranty being
Rentaihosho under the laws of Japan) for the full and prompt payment to the Bank
of the entire amount of the Debtor's obligations under, and in accordance with
terms of, the Original Agreement, notwithstanding the validity or invalidity of
the Agreement on Commissioning Guaranty entered into by and between the Debtor
and the Guarantor. Even if any change or amendment is made to the Original
Agreement, the Guarantor shall perform its guaranty obligations in accordance
with the Debtor's obligations as changed thereby.

     2.   The Guarantor shall not claim any exemption from its obligations
hereunder even if there occurs any increase, decrease, replacement, release of,
or any other change with respect to the security or the guaranty described in
the Original Agreement.


Article 3.

     In the event the Guarantor performs its guaranty obligations, any rights
it acquires
   2
from the Bank by virtue of subrogation shall not be exercised without the Bank's
consent until the Debtor has paid in full all of its obligations to the Bank
under the original Agreement, as it may be amended from time to time. Further,
upon the Bank's request, such rights or ranking thereof shall be assigned to the
Bank free of charge and all the procedures required therefor shall be taken.


Article 4.

     On or prior to the date of the execution of this Guaranty Agreement, the
Bank shall have confirmed that the Guarantor is able to provide the documents
listed in Attachment B and has executed those documents to which it is a party;
and all such documents shall be dated the date of the execution of this Guaranty
Agreement and shall otherwise be in form and substance satisfactory to the Bank.
In any event, the Bank shall have received the originals of such documents at
its Tokyo head office by a date to be designated by the Bank.


Article 5.

     1. If any change occurs in the name, the authorized signatories (including
the specimen signature(s) thereof), the address, or any other reported matters
of the Guarantor, notification thereof shall immediately be given to the Bank
in writing, and such change shall become effective upon receipt thereof by the
Bank.
     2. In the event that any notice given by the Bank or any document, etc.
sent by the Bank is delayed or is not received by the Guarantor because of the
Guarantor's failure of filing provided in the preceding paragraph, such notice
or document, etc. shall be deemed as having been received by the Guarantor when
they are ordinarily so received.


Article 6.

     All expenses incurred in the preparation of this Guaranty Agreement and
all other expenses otherwise incurred in connection with this Guaranty
Agreement shall be borne by the Guarantor.


Article 7.

     1. This Guaranty Agreement shall be deemed to be a contractual obligation
under, and shall be governed by and construed and interpreted in accordance
with, the laws of Japan.
     2. In the event of any litigation pertaining to this Guaranty Agreement,
the Guarantor hereby submits and consents to the non-exclusive jurisdiction of
the Tokyo District Court. The Guarantor hereby irrevocably appoints SCG Japan,
Ltd./4-32-1, Nishi-
   3
Gotanda, Shinagawa-ku, Tokyo, Japan as its agent to receive service of process
in Japan in connection with any suit, action or proceeding relating to this
Guaranty Agreement. In the event that agent ceases to be able to act as agent of
the Guarantor hereunder or ceases to have an office in Tokyo, Japan and the
Guarantor fails to appoint a successor agent acceptable to the Bank, the
Guarantor agrees that the Bank shall automatically serve as its agent to receive
service of process in Japan.

Article 8.
     The Guarantor agrees that this Guaranty Agreement shall be binding upon it
and its successors and assigns and may not be assigned without the prior written
consent of the Bank.

Article 9.
     This Guaranty Agreement shall be prepared in English.



Semiconductor Components Industries, LLC.


By /s/ Dario Sacomani
  --------------------------------

Name: Dario Sacomani

Title: Sr. Vice President &
       Chief Financial Officer

Address of the principal place of the business
     :5005 East McDowell Rd.
      Phoenix, Arizona 85008

Address of the office registered at time of the current incorporation
     :Corporation Trust Center
      1209 Orange St.
      Wilmington, Delaware
   4
ATTACHMENT A

                   Description of the Original Agreement and
                        Summary of Borrowing Conditions

The Original Agreement:
     Date: October 27, 2000.
     Parties: Development Bank of Japan and SCG Japan, Ltd.


Summary of the Borrowing Conditions thereof

(1)  Principal:
     Yen2,800,000,000-

(2)  Project for which the loan is required:
     Expansion of semiconductor manufacturing facilities at Aizu Plant

(3)  Repayment schedule of the principal:
     Months of repayment of the principal: at intervals of 6 months
               (March, September of every year)
     Date of each repayment: the 20th day
     Final maturity: 20th day of September, 2010
     Repayment schedule: Repayment shall be made on the 20th day of September,
     2003 and thereafter until the 20th day of March, 2010 in installments, each
     amount of which shall be yen190,000,000-, and on the 20th day of September,
     2010, Yen140,000,000- shall be repaid.

(4)  Interest rate:
     2.25% per annum (subject to per diem calculation on the basis of 365 days a
     year.)

(5)  Method of payment of interest:
     Date of first payment of interest: 20th day of March 2001.
     Months of payment of interest: at intervals of 6 months.
               (March, September of every year)
     Date of each payment of interest: the 20th day
     Method of payment: Interest accrued between each payment day shall be paid
     at the end of the accrual period.

   5
ATTACHMENT B


                      Documents Required Under Article 4.


1.   Copies, certified by a duly authorized officer of the Guarantor, of the
Guarantor's certificate of formation, by-laws and limited liability agreement.

2.   Copies, certified by a duly authorized officer of the Guarantor, of a
consent in writing by the Officers of the Guarantor approving and authorizing
the execution, delivery, and performance of the Guaranty Agreement by the
Guarantor and authorizing specified officer(s) of the Guarantor to execute and
deliver the Guaranty Agreement on behalf of the Guarantor.

3.   A certificate  signed by a duly authorized officer of the Guarantor as to
the incumbency of the Chief Executive Officer or those officer(s) of the
Guarantor authorized to sign the Guaranty Agreement and certifying the specimen
signatures of such person(s).

   6
X  [ILLEGIBLE SIGNATURE]
   7
                                 CERTIFICATION

The undersigned, being a duly appointed Sr. Vice President & Chief Financial
Officer of Semiconductor Components Industries, LLC, hereby certifies that the
attached document is a copy of the "Limited Liability Company Agreement for
Semiconductor Components Industries, LLC, a Delaware Limited Liability Company"
signed by the sole member of Semiconductor Components Industries, LLC.

DATED: October 24, 2000
       --------------------------


                           /s/ Dario Sacomani
                           ------------------------------------------
                           Name: Dario Sacomani
                           Title: Sr. Vice President & Chief Financial Officer
                           Semiconductor Components Industries, LLC

   8
                                 CERTIFICATION

The undersigned, being a duly appointed Sr. Vice President & Chief Financial
Officer of Semiconductor Components Industries, LLC, hereby certifies that the
attached document is a copy of the "Certificate of Formation of Semiconductor
Components Industries, LLC."

DATED: October 24, 2000
       --------------------------


                           /s/ Dario Sacomani
                           ------------------------------------------
                           Name: Dario Sacomani
                           Title: Sr. Vice President & Chief Financial Officer
                           Semiconductor Components Industries, LLC

   9
                                 CERTIFICATION

The undersigned, Judith A. Boyle, being a duly appointed Assistant Secretary of
Semiconductor Components Industries, LLC hereby certifies that:

1.   Dario Sacomani is the incumbent Senior Vice President and Chief Financial
Officer of Semiconductor Components Industries, LLC as of the date of this
certification.

2.   The specimen signature below is belonging to Dario Sacomani, Senior Vice
President and Chief Financial Officer of Semiconductor Components Industries,
LLC.


/s/ Dario Sacomani
- -------------------------------------------------
Dario Sacomani
Senior Vice President and Chief Financial Officer
of Semiconductor Components Industries, LLC.

3.   Dario Sacomani, Senior Vice President and Chief Financial Officer of
Semiconductor Components Industries, LLC is authorized to execute and deliver,
on behalf of Semiconductor Components Industries, LLC, the Guaranty Agreement
between Semiconductor Components Industries, LLC and Development Bank of Japan.


SEMICONDUCTOR COMPONENTS INDUSTRIES, LLC


By: /s/ Judith A. Boyle
- -------------------------------------------------
    (Judith A. Boyle)

Its: Assistant Secretary

Dated: October 24th, 2000
      --------------------------------------------

   1

                                                                    Exhibit 10.4


                          ON SEMICONDUCTOR CORPORATION
                   (FORMERLY KNOWN AS SCG HOLDING CORPORATION)

                            2000 STOCK INCENTIVE PLAN
           (AS ADOPTED BY THE BOARD OF DIRECTORS ON FEBRUARY 17, 2000;
                      AMENDED AND RESTATED APRIL 21, 2000;
                       AMENDED AND RESTATED MAY 18, 2001;
                       AMENDED AND RESTATED MAY 23, 2001)

                                    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:


                                                                               1
   2
            (a) "Award" means any Option, Stock Appreciation Right, Restricted
Stock Award, Performance Share Award, Performance-Based Award, or Take Ownership
Grant granted to a Participant under the Plan.

            (b) "Award Agreement" means any written agreement, contract, or
other instrument or document evidencing an Award.

            (c) "Board" means the Board of Directors of the Company.

            (d) "Cause" means (except as otherwise provided in an Award
Agreement) if the Committee, in its reasonable and good faith discretion,
determines that the Participant (i) fails to substantially perform his duties
(other than as a result of Disability), after the Board or the executive to
which the Participant reports delivers to the Participant a written demand for
substantial performance that specifically identifies the manner in which the
Participant has not substantially performed his duties; (ii) engages in willful
misconduct or gross negligence that is materially injurious to the Company or a
Subsidiary; (iii) breaches his duty of loyalty to the Company or a Subsidiary;
(iv) unauthorized removal from the premises of the Company or a Subsidiary of a
document (of any media or form) relating to the Company or a Subsidiary or the
customers of the Company or a Subsidiary; or (v) has committed a felony or a
serious crime involving moral turpitude. Any rights the Company or any of its
Subsidiaries may have hereunder in respect of the events giving rise to Cause
shall be in addition to the rights the Company or any of its Subsidiaries may
have under any other agreement with the Participant or at law or in equity. If,
subsequent to a Participant's termination of employment or services, it is
discovered that such Participant's employment or services could have been
terminated for Cause, the Participant's employment or services shall, at the
election of the Board, in its sole discretion, be deemed to have been terminated
for Cause retroactively to the date the events giving rise to Cause occurred.

            (e) "Change of Control" shall mean the occurrence of any of the
following events: (i) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company or the Operating Subsidiary to any Person or group of
related persons for purposes of Section 13(d) of the Exchange Act (a "Group"),
together with any affiliates thereof other than TPG Semiconductor Holdings LLC,
TPG Partners II, L.P., or any of their affiliates (hereafter collectively
referred to as "TPG"); (ii) the approval by the holders of Stock and the
consummation of any plan or proposal for the liquidation or dissolution of the
Company; (iii) (A) any Person or Group (other than TPG) shall become the
beneficial owner, directly or indirectly, of shares representing more than 25%
of the aggregate voting power of the issued and outstanding stock entitled to
vote in the election of directors (the "Voting Stock") of the Company and such
Person or Group has the power and authority to vote such shares and (B) TPG
beneficially owns (within the meaning of Section 13(d) of the Exchange Act),
directly or indirectly, in the aggregate a lesser percentage of the Voting Stock
of the Company than such other Person or Group; (iv) the actual replacement of a
majority of the Board over a two-year period from the individual directors who
constituted the Board at the beginning of such period, and such replacement
shall not have been approved by a vote of at least a majority of the Board then
still in office who either were members of such Board at the beginning of such
period or whose election as a member of such Board was previously so approved or
who were nominated by, or designees of, TPG; (v) any Person or


                                                                               2
   3
Group other than TPG shall have acquired shares of Voting Stock of the Company
such that such Person or Group has the power and authority to elect a majority
of the members of the Board of Directors of the Company; or (vi) the
consummation of a merger or consolidation of the Company with another entity in
which holders of the Stock immediately prior to the consummation of the
transaction hold, directly or indirectly, immediately following the consummation
of the transaction, 50% or less of the common equity interest in the surviving
corporation in such transaction. Notwithstanding the foregoing, in no event
shall a Change of Control be deemed to have occurred as a result of an initial
public offering of the Stock.

            (f) "Code" means the Internal Revenue Code of 1986, as amended.

            (g) "Committee" means the committee of the Board described in
Article 4.

            (h) "Covered Employee" means an Employee who is a "covered employee"
within the meaning of Section 162(m) of the Code.

            (i) "Disability" shall mean (unless otherwise defined in an
employment agreement between the Company or any of its Subsidiaries and the
Participant or in the Participant's Award Agreement) any illness or other
physical or mental condition of a Participant which renders the Participant
incapable of performing his customary and usual duties for the Company, or any
medically determinable illness or other physical or mental condition resulting
from a bodily injury, disease or mental disorder which in the judgment of the
Committee is permanent and continuous in nature. The Committee may require such
medical or other evidence as it deems necessary to judge the nature and
permanency of the Participant's condition.

            (j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

            (k) "Fair Market Value" means, as of any given date, the fair market
value of Stock on a particular date determined by such methods or procedures as
may be established from time to time by the Committee. Unless otherwise
determined by the Committee, the Fair Market Value of Stock as of any date shall
be the closing price for the Stock as reported on the NASDAQ National Market
System (or on any national securities exchange on which the Stock is then
listed) for that date or, if no closing price is reported for that date, the
closing price on the next preceding date for which a closing price was reported.

            (l) "Incentive Stock Option" means an Option that is intended to
meet the requirements of Section 422 of the Code or any successor provision
thereto.

            (m) "Non-Employee Director" means a member of the Board who
qualifies as a "Non-Employee Director" as defined in Rule 16b-3(b)(3) of the
Exchange Act, or any successor definition adopted by the Board.

            (n) "Non-Qualified Stock Option" means an Option that is not
intended to be an Incentive Stock Option.

            (o) "Operating Subsidiary" means Semiconductor Components
Industries, LLC.


                                                                               3
   4
            (p) "Option" means a right granted to a Participant under Article 7
or Article 12 of the Plan to purchase Stock at a specified price during
specified time periods. An Option may be either an Incentive Stock Option or a
Non-Qualified Stock Option.

            (q) "Participant" means a person who, as a member of the Board,
employee, officer, or executive of, or consultant or advisor providing services
to, the Company or any Subsidiary, has been granted an Award under the Plan.

            (r) "Performance-Based Awards" means the Performance Share Awards
and Restricted Stock Awards granted to selected Covered Employees pursuant to
Articles 9 and 10, but which are subject to the terms and conditions set forth
in Article 11. All Performance-Based Awards are intended to qualify as
"performance-based compensation" under Section 162(m) of the Code.

            (s) "Performance Criteria" means the criteria that the Committee
selects for purposes of establishing the Performance Goal or Performance Goals
for a Participant for a Performance Period. The Performance Criteria that will
be used to establish Performance Goals are limited to the following: pre- or
after-tax net earnings, sales growth, operating earnings, operating cash flow,
return on net assets, return on stockholders' equity, return on assets, return
on capital, Stock price growth, stockholder returns, gross or net profit margin,
earnings per share, price per share of Stock, and market share, any of which may
be measured either in absolute terms or as compared to any incremental increase
or as compared to results of a peer group. The Committee shall, within the time
prescribed by Section 162(m) of the Code, define in an objective fashion the
manner of calculating the Performance Criteria it selects to use for such
Performance Period for such Participant.

            (t) "Performance Goals" means, for a Performance Period, the goals
established in writing by the Committee for the Performance Period based upon
the Performance Criteria. Depending on the Performance Criteria used to
establish such Performance Goals, the Performance Goals may be expressed in
terms of overall Company performance or the performance of a division, business
unit, or an individual. The Committee, in its discretion, may, within the time
prescribed by Section 162(m) of the Code, adjust or modify the calculation of
Performance Goals for such Performance Period in order to prevent the dilution
or enlargement of the rights of Participants (i) in the event of, or in
anticipation of, any unusual or extraordinary corporate item, transaction,
event, or development, or (ii) in recognition of, or in anticipation of, any
other unusual or nonrecurring events affecting the Company, or the financial
statements of the Company, or in response to, or in anticipation of, changes in
applicable laws, regulations, accounting principles, or business conditions.

            (u) "Performance Period" means the one or more periods of time,
which may be of varying and overlapping durations, as the Committee may select,
over which the attainment of one or more Performance Goals will be measured for
the purpose of determining a Participant's right to, and the payment of, a
Performance-Based Award.

            (v) "Performance Share" means a right granted to a Participant under
Article 9, to receive cash, Stock, or other Awards, the payment of which is
contingent upon achieving certain performance goals established by the
Committee.


                                                                               4
   5
            (w) "Plan" means the SCG Holding Corporation 2000 Stock Incentive
Plan, as amended.

            (x) "Restricted Stock Award" means Stock granted to a Participant
under Article 10 that is subject to certain restrictions and to risk of
forfeiture.

            (y) "Stock" means the common stock of the Company and such other
securities of the Company that may be substituted for Stock pursuant to Article
14.

            (z) "Stock Appreciation Right" or "SAR" means a right granted to a
Participant under Article 8 to receive a payment equal to the difference between
the Fair Market Value of a share of Stock as of the date of exercise of the SAR
over the grant price of the SAR, all as determined pursuant to Article 8.

            (aa) "Subsidiary" means any corporation or other entity of which a
majority of the outstanding voting stock or voting power is beneficially owned
directly or indirectly by the Company.

            (bb) "Take Ownership Grant" means the Option granted to each
eligible Participant pursuant to Article 12.

                                   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:

          (a)  Designate Participants to receive Awards;

          (b)  Determine the type or types of Awards to be granted to each
               Participant;


                                                                               5
   6
     (c) Determine the number of Awards to be granted and the number of shares
of Stock to which an Award will relate;

     (d) Determine the terms and conditions of any Award granted under the Plan
including but not limited to, the exercise price, grant price, or purchase
price, any restrictions or limitations on the Award, any schedule for lapse of
forfeiture restrictions or restrictions on the exercisability of an Award, and
accelerations or waivers thereof, based in each case on such considerations as
the Committee in its sole discretion determines; provided, however, that the
Committee shall not have the authority to accelerate the vesting or waive the
forfeiture of any Performance-Based Awards;

     (e) Amend, modify, or terminate any outstanding Award, with the
Participant's consent unless the Committee has the authority to amend, modify,
or terminate an Award without the Participant's consent under any other
provision of the Plan.

     (f) Determine whether, to what extent, and under what circumstances an
Award may be settled in, or the exercise price of an Award may be paid in, cash,
Stock, other Awards, or other property, or an Award may be canceled, forfeited,
or surrendered;

     (g) Prescribe the form of each Award Agreement, which need not be identical
for each Participant;

     (h) Decide all other matters that must be determined in connection with an
Award;

     (i) Establish, adopt, or revise any rules and regulations as it may deem
necessary or advisable to administer the Plan; and

     (j) Interpret the terms of, and any matter arising under, the Plan or any
Award Agreement;

     (k) Make all other decisions and determinations that may be required under
the Plan or as the Committee deems necessary or advisable to administer the
Plan.

     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 as provided in section 14.1,
the aggregate number of shares of Stock reserved and available for grant shall
be 13,000,000, plus an additional number of shares of Stock equal to: (i) three
and one-half percent (3.5%) of the total outstanding shares of Stock effective
as of January 1, 2002; and (ii) by four percent (4.0%) of the total outstanding
shares of Stock effective as of January 1, 2003. In determining these increases
of shares reserved for issuance under the Plan, relevant calculations shall be
made on a non-diluted basis, i.e., excluding all shares previously reserved for
issuance under the Plan and any


                                                                               6
   7
other equity incentive plan of the Company. Notwithstanding the foregoing, the
total number of shares available for grant under the Plan as Incentive Stock
Options 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.

            (a) GENERAL. Persons eligible to participate in this Plan include
all members of the Board, employees, officers, and executives of, and
consultants and advisors to, the Company or a Subsidiary, as determined by the
Committee.

            (b) FOREIGN PARTICIPANTS. Subject to the provisions of Article 16 of
the Plan, in order to assure the viability of Awards granted to Participants
employed in foreign countries, the Committee may provide for such special terms
as it may consider necessary or appropriate to accommodate differences in local
law, tax policy, or custom. Moreover, the Committee may approve such supplements
to, or amendments, restatements, or alternative versions of the Plan as it may
consider necessary or appropriate for such purposes without thereby affecting
the terms of the Plan as in effect for any other purpose; provided, however,
that no such supplements, amendments, restatements, or alternative versions
shall increase the share limitations contained in Section 5.1 of the Plan.

     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:

            (a) EXERCISE PRICE. The exercise price per share of Stock under an
Option shall be determined by the Committee and set forth in the Award
Agreement. It is the


                                                                               7
   8
intention under the Plan that the exercise price for any Option shall not be
less than the Fair Market Value as of the date of grant; provided, however that
the Committee may, in its discretion, grant Options (other than Options that are
intended to be Incentive Stock Options or Options that are intended to qualify
as performance-based compensation under Code Section 162(m)) with an exercise
price of less than Fair Market Value on the date of grant.

            (b) TIME AND CONDITIONS OF EXERCISE. The Committee shall determine
the time or times at which an Option may be exercised in whole or in part. The
Committee shall also determine the performance or other conditions, if any, that
must be satisfied before all or part of an Option may be exercised. Unless
otherwise provided in an Award Agreement, an Option will lapse immediately if a
Participant's employment or services are terminated for Cause.


            (c) PAYMENT. The Committee shall determine the methods by which the
exercise price of an Option may be paid, the form of payment, including, without
limitation, cash, promissory note, shares of Stock (through actual tender or by
attestation), or other property (including broker-assisted "cashless exercise"
arrangements), and the methods by which shares of Stock shall be delivered or
deemed to be delivered to Participants.

            (d) EVIDENCE OF GRANT. All Options shall be evidenced by a written
Award Agreement between the Company and the Participant. The Award Agreement
shall include such additional provisions as may be specified by the Committee.

     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:

            (a) EXERCISE PRICE. The exercise price per share of Stock shall be
set by the Committee, provided that the exercise price for any Incentive Stock
Option may not be less than the Fair Market Value as of the date of the grant.

            (b) EXERCISE. In no event, may any Incentive Stock Option be
exercisable for more than ten years from the date of its grant.

            (c) LAPSE OF OPTION. An Incentive Stock Option shall lapse under the
following circumstances.

                        (1) The Incentive Stock Option shall lapse ten years
            from the date it is granted, unless an earlier time is set in the
            Award Agreement.

                        (2) The Incentive Stock Option shall lapse upon
            termination of employment for Cause or for any other reason, other
            than the Participant's death or Disability, unless otherwise
            provided in the Award Agreement.

                        (3) If the Participant terminates employment on account
            of Disability or death before the Option lapses pursuant to
            paragraph (1) or (2) above, the Incentive Stock Option shall lapse,
            unless it is previously exercised, on the earlier of (i) the date on
            which the Option would have lapsed had the Participant not become
            Disabled or lived


                                                                               8
   9
            and had his employment status (i.e., whether the Participant was
            employed by the Company on the date of his Disability or death or
            had previously terminated employment) remained unchanged; or (ii) 12
            months after the date of the Participant's termination of employment
            on account of Disability or death. Upon the Participant's Disability
            or death, any Incentive Stock Options exercisable at the
            Participant's Disability or death may be exercised by the
            Participant's legal representative or representatives, by the person
            or persons entitled to do so under the Participant's last will and
            testament, or, if the Participant fails to make testamentary
            disposition of such Incentive Stock Option or dies intestate, by the
            person or persons entitled to receive the Incentive Stock Option
            under the applicable laws of descent and distribution.

            (d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market Value
(determined as of the time an Award is made) of all shares of Stock with respect
to which Incentive Stock Options are first exercisable by a Participant in any
calendar year may not exceed $100,000.00 or such other limitation as imposed by
Section 422(d) of the Code, or any successor provision. To the extent that
Incentive Stock Options are first exercisable by a Participant in excess of such
limitation, the excess shall be considered Non-Qualified Stock Options.

            (e) TEN PERCENT OWNERS. An Incentive Stock Option shall be granted
to any individual who, at the date of grant, owns stock possessing more than ten
percent of the total combined voting power of all classes of Stock of the
Company only if such Option is granted at a price that is not less than 110% of
Fair Market Value on the date of grant and the Option is exercisable for no more
than five years from the date of grant.

            (f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an Incentive
Stock Option may be made pursuant to this Plan after the tenth anniversary of
the Effective Date.

            (g) RIGHT TO EXERCISE. During a Participant's lifetime, an Incentive
Stock Option may be exercised only by the Participant.

                                   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:

            (a) RIGHT TO PAYMENT. Upon the exercise of a Stock Appreciation
Right, the Participant to whom it is granted has the right to receive the
excess, if any, of:

                        (1) The Fair Market Value of a share of Stock on the
            date of exercise; over

                        (2) The grant price of the Stock Appreciation Right as
            determined by the Committee, which shall not be less than the Fair
            Market Value of a share of Stock on the date of grant in the case of
            any SAR related to any Incentive Stock Option.


                                                                               9
   10
            (b) OTHER TERMS. All awards of Stock Appreciation Rights shall be
evidenced by an Award Agreement. The terms, methods of exercise, methods of
settlement, form of consideration payable in settlement, and any other terms and
conditions of any Stock Appreciation Right shall be determined by the Committee
at the time of the grant of the Award and shall be reflected in the Award
Agreement.

                                   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

                                                                              10
   11
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.

     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
   12
     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:

            (a) EFFECTIVE DATE OF GRANTS. The effective date of the Take
Ownership Grants shall be on the day on which the Company's initial public
offering of Stock is consummated; provided, however, that Take Ownership Grants
shall not be made to those persons who are not United States residents if the
jurisdiction in which any such person resides prohibits such Grants or makes it
impractical for the Company to make such Grants.

            (b) EXERCISE PRICE FOR GRANTS. Notwithstanding any other provision
hereof, the exercise price per share of Stock under the Take Ownership Grants
shall be the price at which the Company's Stock is offered under its initial
public offering of Stock ("IPO Price"), provided, however, that, with respect to
Participants who do not reside in the United States, if the day on which the
Company receives approval by the applicable foreign jurisdiction to offer Stock
to Participants residing in that jurisdiction is later than the day on which the
Company's initial public offering becomes effective, the exercise price per
share of Stock under the Take Ownership Grants shall be the Fair Market Value on
the day on which the Company receives approval by the applicable foreign
jurisdiction to offer Stock to such Participants.

            (c) AMOUNT OF THE TAKE OWNERSHIP GRANTS. Each Participant selected
to receive a Take Ownership Grant shall be entitled to receive an Option to
purchase 50 shares of Stock. Such Option shall be designated as a Non-Qualified
Stock Option.

            (d) TIME AND CONDITIONS OF EXERCISE. The Take Ownership Grants shall
become fully exercisable on the second anniversary of the date of grant.

            (e) PAYMENT. The Committee shall determine the methods by which the
exercise price of the Take Ownership Grants may be paid, the form of payment,
including, without limitation, cash, promissory note, shares of Stock (through
actual tender or by attestation), or other property (including broker-assisted
"cashless exercise" arrangements), and the methods by which shares of Stock
shall be delivered or deemed to be delivered to Participants.

            (f) EVIDENCE OF GRANT. All Take Ownership Grants shall be evidenced
by a written Award Agreement between the Company and the Participant. The Award
Agreement shall provide that upon a Participant's termination of employment or
service with the Company or a Subsidiary for any reason, the Participant may, at
any time within 90 days after the effective date of the Participant's
termination, exercise the Take Ownership Grant to the


                                                                              12
   13
extent that the Participant was entitled to exercise the Take Ownership Grant at
the date of termination, provided that in no event shall the Take Ownership
Grant be exercisable after its expiration date, as provided in the Award
Agreement. The Award Agreement shall also include such other provisions as
determined by the Committee.



                                   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


                                                                              13
   14
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 shall be made to the person entitled thereto
under the Participant's will or the laws of descent and distribution. Subject to
the foregoing, a beneficiary designation may be changed or revoked by a
Participant at any time provided the change or revocation is filed with the
Committee.

     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. At the time of the grant of an
Option, Stock Appreciation Right or other Award or any time thereafter, the
Board shall have the authority and discretion, but shall not have any
obligation, to provide for the acceleration of the vesting and exercisability of
any outstanding Option, Stock Appreciation Right or other Award upon a Change in
Control.

                                   ARTICLE 14
                          CHANGES IN CAPITAL STRUCTURE

     14.1 GENERAL.

            (a) SHARES AVAILABLE FOR GRANT. In the event of any change in the
number of shares of Stock outstanding by reason of any stock dividend or split,
recapitalization, merger, consolidation, combination or exchange of shares or
similar corporate change, the maximum aggregate number of shares of Stock with
respect to which the Committee may grant Awards shall be appropriately adjusted
by the Committee. In the event of any change in the number of shares of Stock
outstanding by reason of any other event or transaction, the Committee may, but
need not, make such adjustments in the number and class of shares of Stock with
respect to which Awards may be granted as the Committee may deem appropriate.

            (b) OUTSTANDING AWARDS - INCREASE OR DECREASE IN ISSUED SHARES
WITHOUT CONSIDERATION. Subject to any required action by the shareholders of the
Company, in the event of any increase or decrease in the number of issued shares
of Stock resulting from a subdivision or consolidation of shares of Stock or the
payment of a stock


                                                                              14
   15
dividend (but only on the shares of Stock), or any other increase or decrease in
the number of such shares effected without receipt or payment of consideration
by the Company, the Committee shall proportionally adjust the number of shares
of Stock subject to each outstanding Award and the exercise price per share of
Stock of each such Award.

            (c) OUTSTANDING AWARDS - CERTAIN MERGERS. Subject to any required
action by the shareholders of the Company, in the event that the Company shall
be the surviving corporation in any merger or consolidation (except a merger or
consolidation as a result of which the holders of shares of Stock receive
securities of another corporation), each Award outstanding on the date of such
merger or consolidation shall pertain to and apply to the securities which a
holder of the number of shares of Stock subject to such Award would have
received in such merger or consolidation.

            (d) OUTSTANDING AWARDS - CERTAIN OTHER TRANSACTIONS. In the event of
(i) a dissolution or liquidation of the Company, (ii) a sale of all or
substantially all of the Company's assets, (iii) a merger or consolidation
involving the Company in which the Company is not the surviving corporation or
(iv) a merger or consolidation involving the Company in which the Company is the
surviving corporation but the holders of shares of Stock receive securities of
another corporation and/or other property, including cash, the Committee shall,
in its absolute discretion, have the power to:

                        (1) cancel, effective immediately prior to the
            occurrence of such event, each Award outstanding immediately prior
            to such event (whether or not then exercisable), and, in full
            consideration of such cancellation, pay to the Participant to whom
            such Award was granted an amount in cash, for each share of Stock
            subject to such Award, respectively, equal to the excess of (A) the
            value, as determined by the Committee in its absolute discretion, of
            the property (including cash) received by the holder of a share of
            Stock as a result of such event over (B) the exercise of such Award;
            or

                        (2) provide for the exchange of each Award outstanding
            immediately prior to such event (whether or not then exercisable)
            for an option, a stock appreciation right, restricted stock award,
            performance share award or performance-based award with respect to,
            as appropriate, some or all of the property for which such Award is
            exchanged and, incident thereto, make an equitable adjustment as
            determined by the Committee in its absolute discretion in the
            exercise price or value of the option, stock appreciate right,
            restricted stock award, performance share award or performance-based
            award or the number of shares or amount of property subject to the
            option, stock appreciation right, restricted stock award,
            performance share award or performance-based award or, if
            appropriate, provide for a cash payment to the Participant to whom
            such Award was granted in partial consideration for the exchange of
            the Award.

            (e) OUTSTANDING AWARDS - OTHER CHANGES. In the event of any other
change in the capitalization of the Company or corporate change other than those
specifically referred to in Article 14, the Committee may, in its absolute
discretion, make such adjustments in the number and class of shares subject to
Awards outstanding on the date on


                                                                              15
   16
which such change occurs and in the per share exercise price of each Award as
the Committee may consider appropriate to prevent dilution or enlargement of
rights.

            (f) NO OTHER RIGHTS. Except as expressly provided in the Plan, no
Participant shall have any rights by reason of any subdivision or consolidation
of shares of stock of any class, the payment of any dividend, any increase or
decrease in the number of shares of stock of any class or any dissolution,
liquidation, merger, or consolidation of the Company or any other corporation.
Except as expressly provided in the Plan, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number of shares of Stock subject to an Award or the exercise
price of any Award.

                                   ARTICLE 15
                    AMENDMENT, MODIFICATION, AND TERMINATION

     15.1 AMENDMENT, MODIFICATION, AND TERMINATION. With the approval of the
Board, at any time and from time to time, the Committee may terminate, amend or
modify the Plan; provided, however, that to the extent necessary and desirable
to comply with any applicable law, regulation, or stock exchange rule, the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.

     15.2 AWARDS PREVIOUSLY GRANTED. Except as otherwise provided in the Plan,
including without limitation, the provisions of Article 14, no termination,
amendment, or modification of the Plan shall adversely affect in any material
way any Award previously granted under the Plan, without the written consent of
the Participant.

                                   ARTICLE 16
                     PROVISIONS RELATING TO FRENCH EMPLOYEES

         Notwithstanding any other provisions of the Plan to the contrary, the
following provisions shall apply to Awards granted to any employee who is a
French citizen or who works primarily in France as of the grant date (referred
to herein as "French Employee").

     16.1 CONSULTANTS. Notwithstanding anything to the contrary herein, no
French Employee who would otherwise be considered a consultant under French law
may be granted an Award under the Plan.

     16.2 TERMINATION FOR CAUSE. The last sentence of Section 3.1(d) (definition
of Cause) shall not apply to French Employees.

     16.3 TEN PERCENT OWNERS. Notwithstanding Section 6.1(a) above, no Award
shall be granted to any French Employee who holds more than ten percent of the
Stock on the grant date.

     16.4 EXERCISE PRICE. Notwithstanding Section 7.1(a) above, all Awards
granted to French Employees shall be granted at an exercise price per share
equal to Fair Market Value per share as of the grant date.


                                                                              16
   17
     16.5 TIME LIMITATIONS. No Options shall be granted to any French Employee
five years after the later of (a) the date the Company's stockholders initially
approved the Plan, or (b) the date the Plan has been subsequently re-authorized,
in its original form or as amended from time to time by the Board, by the
Company's stockholders.

     16.6 VESTING OF OPTIONS. Notwithstanding Section 7.1(b) above, no portion
of any Award granted to a French Employee shall become exercisable before the
five-year anniversary of the grant date.

     16.7 EFFECT OF PARTICIPANT'S DEATH. Notwithstanding Section 7.1(b) or any
other provision hereof, upon a French Employee's death, the vested portion of
such Participant's Award shall remain exercisable for a period of six months
after the date of his death and shall be exercisable by his heirs.

     16.8 EXCHANGE OF OPTIONS. Notwithstanding Section 13.2 above, the Company
shall not terminate any portion of an Award granted to any French Employee.

     16.9 ADJUSTMENT OF OPTIONS. Notwithstanding Section 14.1 herein, any
adjustment made to any Award granted to a French Employee shall comply with
applicable French law.

                                   ARTICLE 17
                               GENERAL PROVISIONS

     17.1 NO RIGHTS TO AWARDS. No Participant, employee, or other person shall
have any claim to be granted any Award under the Plan, and neither the Company
nor the Committee is obligated to treat Participants, employees, and other
persons uniformly.

     17.2 NO STOCKHOLDERS RIGHTS. No Award gives the Participant any of the
rights of a stockholder of the Company unless and until shares of Stock are in
fact issued to such person in connection with such Award.

     17.3 WITHHOLDING. The Company or any Subsidiary shall have the authority
and the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy Federal, state, and local taxes
(including the Participant's FICA obligation) required by law to be withheld
with respect to any taxable event arising as a result of this Plan. With the
Committee's consent, a Participant may elect to have the Company withhold from
those Stock that would otherwise be received upon the exercise of any Option, a
number of shares having a Fair Market Value equal to the minimum statutory
amount necessary to satisfy the Company's applicable federal, state, local and
foreign income and employment tax withholding obligations.

     17.4 NO RIGHT TO EMPLOYMENT OR SERVICES. Nothing in the Plan or any Award
Agreement shall interfere with or limit in any way the right of the Company or
any Subsidiary to terminate any Participant's employment or services at any
time, nor confer upon any Participant any right to continue in the employ of the
Company or any Subsidiary.


                                                                              17
   18
     17.5 UNFUNDED STATUS OF AWARDS. The Plan is intended to be an "unfunded"
plan for incentive compensation. With respect to any payments not yet made to a
Participant pursuant to an Award, nothing contained in the Plan or any Award
Agreement shall give the Participant any rights that are greater than those of a
general creditor of the Company or any Subsidiary.

     17.6 INDEMNIFICATION. To the extent allowable under applicable law, each
member of the Committee or of the Board shall be indemnified and held harmless
by the Company from any loss, cost, liability, or expense that may be imposed
upon or reasonably incurred by such member in connection with or resulting from
any claim, action, suit, or proceeding to which he or she may be a party or in
which he or she may be involved by reason of any action or failure to act under
the Plan and against and from any and all amounts paid by him or her in
satisfaction of judgment in such action, suit, or proceeding against him or her
provided he or she gives the Company an opportunity, at its own expense, to
handle and defend the same before he or she undertakes to handle and defend it
on his or her own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Articles of Incorporation or Bylaws, as a matter of
law, or otherwise, or any power that the Company may have to indemnify them or
hold them harmless.

     17.7 RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or other benefit plan of the
Company or any Subsidiary.

     17.8 EXPENSES. The expenses of administering the Plan shall be borne by the
Company and its Subsidiaries.

     17.9 TITLES AND HEADINGS. The titles and headings of the Sections in the
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control.

     17.10 FRACTIONAL SHARES. No fractional shares of stock shall be issued and
the Committee shall determine, in its discretion, whether cash shall be given in
lieu of fractional shares or whether such fractional shares shall be eliminated
by rounding up or down as appropriate.

     17.11 SECURITIES LAW COMPLIANCE. With respect to any person who is, on the
relevant date, obligated to file reports under Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent
any provision of the Plan or action by the Committee fails to so comply, it
shall be void to the extent permitted by law and voidable as deemed advisable by
the Committee.

     17.12 GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to
make payment of awards in Stock or otherwise shall be subject to all applicable
laws, rules, and regulations, and to such approvals by government agencies as
may be required. The Company shall be under no obligation to register under the
Securities Act of 1933, as


                                                                              18
   19
amended, any of the shares of Stock paid under the Plan. If the shares paid
under the Plan may in certain circumstances be exempt from registration under
the Securities Act of 1933, as amended, the Company may restrict the transfer of
such shares in such manner as it deems advisable to ensure the availability of
any such exemption.

     17.13 GOVERNING LAW. The Plan and all Award Agreements shall be construed
in accordance with and governed by the laws of the State of Delaware.





                                                                              19

   1

                                                                    Exhibit 10.5

                          ON SEMICONDUCTOR CORPORATION
                   (FORMERLY KNOWN AS SCG HOLDING CORPORATION)

                        2000 EMPLOYEE STOCK PURCHASE PLAN
          (AS ADOPTED BY THE BOARD OF DIRECTORS ON FEBRUARY 17, 2000;
                      AMENDED AND RESTATED APRIL 21, 2000;
                       AMENDED AND RESTATED MAY 23, 2001)

         1. PURPOSE. The purpose of this SCG Holding Corporation 2000 Employee
Stock Purchase Plan (the "Plan") is to encourage stock ownership by eligible
employees of SCG Holding Corporation (the "Company") and its Subsidiaries and
thereby provide employees with an incentive to contribute to the profitability
and success of the Company. The Plan is intended to qualify as an "employee
stock purchase plan" under Section 423 of the Code and will be maintained for
the exclusive benefit of eligible employees of the Company and its Subsidiaries.

         2. DEFINITIONS. For purposes of the Plan, in addition to the terms
defined in Section 1, the following terms are defined:

              (a) "Board" means the Board of Directors of the Company.

              (b) "Cash Account" means the account maintained on behalf of a
Participant by the Company for the purpose of holding cash contributions
withheld from payroll pending investment in Stock.

              (c) "Code" means the Internal Revenue Code of 1986, as amended.

              (d) "Custodian" means Solomon Smith Barney or any successor or
replacement appointed by the Board or its delagatee under Section 3(a).

              (e) "Earnings" means a Participant's salary or wages, including
bonuses, for services performed for the Company and its Subsidiaries and
received by a Participant for services rendered during an Offering Period.

              (f) "Fair Market Value" means the closing price of the Stock on
the relevant date as reported on NASDAQ (or any national securities exchange or
quotation system on which the Stock is then listed), or if there were no sales
on that date the closing price on the next preceding date for which a closing
price was reported; provided, however, that for any Offering Period beginning on
the IPO Date, the Fair Market Value of the Stock on the first day of such
Offering Period shall be deemed to be the price at which the Company's Stock is
offered under its initial public offering of Stock.

              (g) "IPO Date" means the date on which the Company's initial
public offering of Stock is consummated.

              (h) "Offering Period" means the period beginning on the IPO Date
and ending on the last day of the next calendar quarter, and every three-month
period thereafter. For

                                                                               1
   2
Participants who do not reside in the United States, if the day on which the
Company receives approval by the applicable foreign jurisdiction to offer common
stock to Participants residing in that jurisdiction is later than the day on
which the Company's initial public offering becomes effective, the Offering
Period means the period beginning on the day on which the Company receives
approval by the applicable foreign jurisdiction to offer common stock to such
Participants and ending on the last day of the next calendar quarter, and every
three-month period thereafter.

              (i) "Participant" means an employee of the Company or a Subsidiary
who is participating in the Plan.

              (j) "Purchase Right" means a Participant's option to purchase
Stock that is deemed to be outstanding during an Offering Period. A Purchase
Right represents an "option" under Section 423 of the Code.

              (k) "Stock" means the common stock of the Company.

              (l) "Stock Account" means the account maintained on behalf of the
Participant by the Custodian for the purpose of holding Stock acquired under the
Plan.

              (m) "Subsidiary" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain as set forth in Code Section
424(f).

         3. ADMINISTRATION.

              (a) Board Administration. The Plan will be administered by the
Board. The Board may delegate its administrative duties and authority (other
than its authority to amend the Plan) to any Board committee or to any officers
or employees or committee thereof as the Board may designate (in which case
references to the Board will be deemed to refer to the administrator to which
such duties and authority have been delegated). The Board will have full
authority to adopt, amend, suspend, waive, and rescind rules and regulations and
appoint agents as it deems necessary or advisable to administer the Plan, to
correct any defect or supply any omission or reconcile any inconsistency in the
Plan and to construe and interpret the Plan and rules and regulations
thereunder, to furnish to the Custodian such information as the Custodian may
require, and to make all other decisions and determinations under the Plan
(including determinations relating to eligibility). No person acting in
connection with the administration of the Plan will, in that capacity,
participate in deciding any matter relating to his or her participation in the
Plan.

              (b) The Custodian. The Custodian will act as custodian under the
Plan, and will perform duties under the Plan and in any agreement between the
Company and the Custodian. The Custodian will establish and maintain
Participants Stock Accounts and any subaccounts as may be necessary or desirable
to administer the Plan.

                                                                               2
   3
              (c) Waivers. The Board may waive or modify any requirement that a
notice or election be made or filed under the Plan a specified period in advance
on an individual case or by adopting a rule or regulation under the Plan,
without amending the Plan.

              (d) Other Administrative Provisions. The Company will furnish
information from its records as directed by the Board, and such records,
including a Participant's Earnings, will be conclusive on all persons unless
determined by the Board to be incorrect. Each Participant and other person
claiming benefits under the Plan must furnish to the Company in writing an
up-to-date mailing address and any other information as the Board or Custodian
may reasonably request. Any communication, statement, or notice mailed with
postage prepaid to any such Participant or other person at the last mailing
address filed with the Company will be deemed sufficiently given when mailed and
will be binding upon the named recipient. The Plan will be administered on a
reasonable and nondiscriminatory basis and uniform rules will apply to all
persons similarly situated. All Participants will have equal rights and
privileges (subject to the terms of the Plan) with respect to Purchase Right
outstanding during any given Offering Period in accordance with Code Section
423(b)(5).

         4. STOCK SUBJECT TO PLAN. Subject to adjustment as provided below, the
total number of shares of Stock reserved and available for issuance or which may
be otherwise acquired upon exercise of Purchase Rights under the Plan will be
5,500,000. If, at the end of any Offering Period, the number of shares of Stock
with respect to which Purchase Rights are to be exercised exceeds the number of
shares of Stock then available under the Plan, the Board shall make a pro rata
allocation of the shares of Stock remaining available for purchase in as uniform
a manner as shall be practicable and as it shall determine to be equitable. Any
shares of Stock delivered by the Company under the Plan may consist, in whole or
in part, of authorized and unissued shares or treasury shares or shares of Stock
purchased on the open market. The number and kind of such shares of Stock
subject to the Plan will be proportionately adjusted, as determined by the
Board, in the event of any extraordinary dividend or other distribution,
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event affecting the Stock.

         5. ENROLLMENT AND CONTRIBUTIONS.

              (a) Eligibility. An employee of the Company or any Subsidiary
designated by the Board may be enrolled in the Plan for any Offering Period if
such employee is employed by the Company or a Subsidiary authorized to
participate in the Plan on the first day of the Offering Period, unless one of
the following applies to the employee:

                  (i)      such person has been employed by the Company or a
                           Subsidiary less than 90 days; or

                  (ii)     such person is customarily employed by the Company or
                           a Subsidiary for 20 hours or less a week; or

                                                                               3
   4
                  (iii)    such person is customarily employed by the Company or
                           a Subsidiary for not more than five months in any
                           calendar year;

                  (iv)     such person would, immediately upon enrollment, be
                           deemed to own, for purposes of Section 423(b)(3) of
                           the Code, an aggregate of five percent or more of the
                           total combined voting power or value of all
                           outstanding shares of all classes of the Stock of the
                           Company or any Subsidiary.

              Notwithstanding the above, solely for purposes of the first
Offering Period under the Plan, an employee who is employed by the Company or a
Subsidiary on the first day of such Offering Period and who is otherwise
eligible to participate in the Plan shall not be required to satisfy the 90 day
employment period specified in 5(a)(i) above.

              The Company will notify an employee of the date as of which he or
she is eligible to enroll in the Plan, and will make available to each eligible
employee the necessary enrollment forms. Notwithstanding the above, any
individual who is employed by the Company or a Subsidiary designated by the
Board and who is working outside of the United States shall not be eligible to
participate in the Plan if the laws of the country in which the employee is
working makes the offer of the Purchase Right or the delivery of Stock under the
Plan impractical. Additionally, the offer of the Purchase Right and the delivery
of Stock under the Plan shall be effective for any individual who is employed by
the Company or a Subsidiary and who is working outside of the United States only
after the Company has complied with the applicable laws of the country in which
the employee is working.

              (b) Initial Enrollment. An employee who is eligible under Section
5(a) (or who will become eligible on or before a given Offering Period) may,
after receiving current information about the Plan, initially enroll in the Plan
by executing and filing with the Company a properly completed enrollment form,
including the employee's election as to the rate of payroll contributions for
the Offering Period. To be effective for any Offering Period, such enrollment
form must be filed at least two weeks (or such other period determined by the
Board) preceding such Offering Period.

              (c) Automatic Re-enrollment for Subsequent Offering Periods. A
Participant whose enrollment in, and payroll contributions under, the Plan
continues throughout a Offering Period will automatically be re-enrolled in the
Plan for the next Offering Period unless (i) the Participant terminates
enrollment before the next Offering Period in accordance with Section 7(a), or
(ii) the Participant is ineligible to participate under Section 5(a). The
initial rate of payroll contributions for a Participant who is automatically
re-enrolled for a Offering Period will be the same as the rate of payroll
contribution in effect at the end of the preceding Offering Period, unless the
Participant files a new enrollment form designating a different rate of payroll
contributions and such new enrollment form is received no later than two weeks
(or such other period determined by the Board) prior to the beginning of the
next Offering Period.

              (d) Payroll Contributions. A Participant will make contributions
under the Plan by means of payroll deductions from each payroll period which
ends during the Offering Period,

                                                                               4
   5
at the rate elected by the Participant in his or her enrollment form in effect
for that Offering Period (except that such rate may be changed during the
Offering Period to the extent permitted below). The rate of payroll
contributions elected by a Participant may not be less than one percent (1%) nor
more than ten percent (10%) of the Participant's Earnings for each payroll
period, and only whole percentages may be elected; provided, however, that the
Board may specify a lower minimum rate and higher maximum rate, subject to
Section 8(c). Notwithstanding the above, a Participant's payroll contributions
will be adjusted downward by the Company as necessary to ensure that the limit
on the amount of Stock purchased for an Offering Period set forth in Section
6(a)(iii) is not exceeded. A Participant may elect to increase, decrease, or
discontinue payroll contributions for a future Offering Period by filing a new
enrollment form designating a different rate of payroll contributions, which
form must be received at least two weeks (or such other period determined by the
Board) prior to the beginning of an Offering Period to be effective for that
Offering Period. In addition, a Participant may elect to discontinue payroll
contributions during an Offering Period by filing a new enrollment form, such
change to be effective for the next payroll after the Participant's new
enrollment form is received.

              (e) Crediting Payroll Contributions to Cash Accounts. All payroll
contributions by a Participant under the Plan will be credited to a Cash Account
maintained by the Company on behalf of the Participant. The Company will credit
payroll contributions to each Participant's Cash Account as soon as practicable
after the contributions are withheld from the Participant's Earnings.

              (f) No Interest on Cash Accounts. No interest will be credited or
paid on cash balances in Participant's Cash Accounts pending investment in
Stock.

         6. PURCHASES OF STOCK

              (a) Purchase Rights. Enrollment in the Plan for any Offering
Period by a Participant will constitute a grant by the Company of a Purchase
Right to such Participant for such Offering Period. Each Purchase Right will be
subject to the following terms:

                  (i)      The purchase price of each share of Stock purchased
                           for each Offering Period will equal 85% of the lesser
                           of the Fair Market Value of a share of Stock on the
                           first day of an Offering Period, or the Fair Market
                           Value of a share of Stock on the last day of an
                           Offering Period.

                  (ii)     Except as limited in (iii) below, the number of
                           shares of Stock that may be purchased upon exercise
                           of the Purchase Right for a Offering Period will
                           equal the number of shares (including fractional
                           shares) that can be purchased at the purchase price
                           specified in Section 6(a)(i) with the aggregate
                           amount credited to the Participant's Cash Account as
                           of the last day of an Offering Period.

                                                                               5
   6
                  (iii)    The number of shares of Stock subject to a
                           Participant's Purchase Right for any Offering Period
                           will not exceed the lesser of: (1) 500 shares of
                           Stock, or (2) the number derived by dividing $6,250
                           by 100% of the Fair Market Value of one share of
                           Stock on the first day of the Offering Period for the
                           Offering Period.

                  (iv)     The Purchase Right will be automatically exercised on
                           the last day of the Offering Period.

                  (v)      Payments by a Participant for Stock purchased under a
                           Purchase Right will be made only through payroll
                           deduction in accordance with Section 5(d) and (e).

                  (vi)     The Purchase Right will expire on the earlier of the
                           last day of the Offering Period or the date on which
                           the Participant's enrollment in the Plan terminates.

              (b) Purchase of Stock. At or as promptly as practicable after the
last day of an Offering Period, amounts credited to each Participant's Cash
Account will be applied by the Company to purchase Stock, in accordance with the
terms of the Plan. Shares of Stock will be purchased from the Company or in the
open market, as the Board determines. The Company will aggregate the amounts in
all Cash Accounts when purchasing Stock, and shares purchased will be allocated
to each Participant's Stock Account in proportion to the cash amounts withdrawn
from such Participant's Cash Account. After completing purchases for each
Offering Period (which will be completed in not more than 15 calendar days after
the last day of an Offering Period), all shares of Stock so purchased for a
Participant will be credited to the Participant's Stock Account.

              (c) Dividend Reinvestment; Other Distributions. Cash dividends on
any Stock credited to a Participant's Stock Account will be automatically
reinvested in additional shares of Stock; such amounts will not be available in
the form of cash to Participants. The Company will aggregate all purchases of
Stock in connection with dividend reinvestment for a given dividend payment
date. Purchases of Stock for purposes of dividend reinvestment will be made as
promptly as practicable (but not more than 15 calendar days) after a dividend
payment date. The purchases will be made directly from the Company at 100% of
the Fair Market Value of a share of Stock on the dividend payment date or on the
open market. Any shares of Stock distributed as a dividend or distribution in
respect of shares of Stock or in connection with a split of the Stock credited
to a Participant's Stock Account will be credited to such Account.

              (d) Withdrawals and Transfers. Shares of Stock may be withdrawn
from a Participant's Stock Account, in which case one or more certificates for
whole shares may be issued in the name of, and delivered to, the Participant,
with such Participant receiving cash in lieu of fractional shares based on the
Fair Market Value of a share of Stock on the day preceding the date of
withdrawal. Alternatively, whole shares of Stock may be withdrawn from a
Participant's Stock Account by means of a transfer to a broker-dealer or
financial institution that maintains an account for the Participant, together
with the transfer of cash in lieu of fractional

                                                                               6
   7
shares based on the Fair Market Value of a share of Stock on the day preceding
the date of withdrawal. Participants may not designate any other person to
receive shares of Stock withdrawn or transferred under the Plan. A Participant
seeking to withdraw or transfer shares of Stock must give instructions to the
Custodian in such manner and form as may be prescribed by the Custodian, which
instructions will be acted upon as promptly as practicable. Withdrawals and
transfers will be subject to any fees imposed in accordance with Section 8(a).

              (e) Excess Account Balances. If any amounts remain in a Cash
Account following the date on which the Company purchases Stock for an Offering
Period as a result of the limitation set forth in Section 6(a)(iii) or for any
other reason, such amounts will be returned to the Participant as promptly as
practicable.

         7. TERMINATION AND DISTRIBUTIONS.

              (a) Termination of Enrollment. A Participant's enrollment in the
Plan will terminate upon (i) the beginning of any payroll period or Offering
Period that begins after he or she files a written notice of termination of
enrollment with the Company, provided that such Participant will continue to be
deemed to be enrolled with respect to any completed Offering Period for which
purchases have not been completed, (ii) such time as the Participant becomes
ineligible to participate under Section 5(a) of the Plan, or (iii) the
termination of the Participant's employment by the Company and its Subsidiaries.
An employee whose enrollment in the Plan terminates may again enroll in the Plan
as of any subsequent Offering Period that is at least 90 days after such
termination of enrollment if he or she satisfies the eligibility requirements of
Section 5(a) as of such Offering Period. A Participant's election to discontinue
payroll contributions will not constitute a termination of enrollment.

              (b) Distribution. As soon as practicable after a Participant's
enrollment in the Plan terminates, amounts in the Participant's Cash Account
which resulted from payroll contributions will be repaid to the Participant. The
Custodian will continue to maintain the Participant's Stock Account for the
Participant until the earlier of such time as the Participant directs the sale
of all Stock in the Account, withdraws, or transfers all Stock in the Account,
or one year after the Participant ceases to be employed by the Company and its
Subsidiaries. If a Participant's termination of enrollment results from his or
her death, all amounts payable will be paid to his or her estate.

         8. GENERAL.

              (a) Costs. Costs and expenses incurred in the administration of
the Plan and maintenance of Accounts will be paid by the Company, to the extent
provided in this Section 8(a). Any brokerage fees and commissions for the
purchase of Stock under the Plan (including Stock purchased upon reinvestment of
dividends and distributions) will be paid by the Company, but any brokerage fees
and commissions for the sale of Stock under the Plan by a Participant will be
borne by such Participant. The rate at which such fees and commissions will be
charged to Participants will be determined by the Custodian or any broker-dealer
used by the Custodian (including an affiliate of the Custodian), and
communicated from time to time to Participants. In addition, the Custodian may
impose or pass through a reasonable fee for the withdrawal of Stock

                                                                               7
   8
in the form of stock certificates (as permitted under Section 6(d)), and
reasonable fees for other services unrelated to the purchase of Stock under the
Plan, to the extent approved in writing by the Company and communicated to
Participants.

              (b) Statements to Participants. The Participant's statement will
reflect payroll contributions, purchases, sales, and withdrawals and transfers
of shares of Stock and other Plan transactions by appropriate adjustments to the
Participant's Accounts. The Custodian will, not less frequently than quarterly,
provide or cause to be provided a written statement to the Participant showing
the transactions in his or her Stock Account and the date thereof, the number of
shares of Stock credited or sold, the aggregate purchase price paid or sales
price received, the purchase or sales price per share, the brokerage fees and
commissions paid (if any), the total shares held for the Participant's Stock
Account (computed to at least three decimal places), and such other information
as agreed to by the Custodian and the Company.

              (c) Compliance with Section 423. It is the intent of the Company
that this Plan comply in all respects with applicable requirements of Section
423 of the Code and regulations thereunder. Accordingly, if any provision of
this Plan does not comply with such requirements, such provision will be
construed or deemed amended to the extent necessary to conform to such
requirements.

         9. GENERAL PROVISIONS.

              (a) Compliance With Legal and Other Requirements. The Plan, the
granting and exercising of Purchase Rights hereunder, and the other obligations
of the Company and the Custodian under the Plan will be subject to all
applicable federal and state laws, rules, and regulations, and to such approvals
by any regulatory or governmental agency as may be required. The Company may, in
its discretion, postpone the issuance or delivery of Stock upon exercise of
Purchase Rights until completion of such registration or qualification of such
Stock or other required action under any federal or state law, rule, or
regulation, or the laws of any country in which employees of the Company and a
Subsidiary who are nonresident aliens and who are eligible to participate
reside, or other required action with respect to any automated quotation system
or stock exchange upon which the Stock or other Company securities are
designated or listed, or compliance with any other contractual obligation of the
Company, as the Company may consider appropriate. In addition, the Company may
require any Participant to make such representations and furnish such
information as it may consider appropriate in connection with the issuance or
delivery of Stock in compliance with applicable laws, rules, and regulations,
designation or listing requirements, or other contractual obligations.

              (b) Limits on Encumbering Rights. No right or interest of a
Participant under the Plan, including any Purchase Right, may be pledged,
encumbered, or hypothecated to or in favor of any party, subject to any lien,
obligation, or liability of such Participant, or otherwise assigned,
transferred, or disposed of except pursuant to the laws of descent or
distribution, and any right of a Participant under the Plan will be exercisable
during the Participant's lifetime only by the Participant.

                                                                               8
   9
              (c) No Right to Continued Employment. Neither the Plan nor any
action taken hereunder, including the grant of a Purchase Right, will be
construed as giving any employee the right to be retained in the employ of the
Company or any of its Subsidiaries, nor will it interfere in any way with the
right of the Company or any of its Subsidiaries to terminate any employee's
employment at any time.

              (d) Taxes. The Company or any Subsidiary is authorized to withhold
from any payment to be made to a Participant, including any payroll and other
payments not related to the Plan, amounts of withholding and other taxes due in
connection with any transaction under the Plan, and a Participant's enrollment
in the Plan will be deemed to constitute his or her consent to such withholding.
In addition, Participants may be required to advise the Company of sales and
other dispositions of Stock acquired under the plan in order to permit the
Company to comply with tax laws and to claim any tax deductions to which the
Company may be entitled with respect to the Plan. This provision and other Plan
provisions do not set forth an explanation of the tax consequences to
Participants under the Plan. A brief summary of the tax consequences will be
included in disclosure documents to be separately furnished to Participants.

              (e) Changes to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan without the consent of shareholders or
Participants, except that any such action will be subject to the approval of the
Company's shareholders within one year after such Board action if such
shareholder approval is required by any federal or state law or regulation or
the rules of any automated quotation system or stock exchange on which the Stock
may then be quoted or listed, or if such shareholder approval is necessary in
order for the Plan to continue to meet the requirements of Section 423 of the
Code, and the Board may otherwise, in its discretion, determine to submit other
such actions to shareholders for approval. However, without the consent of an
affected Participant, no amendment, alteration, suspension, discontinuation, or
termination of the Plan may materially and adversely affect the rights of such
Participant with respect to outstanding Purchase Rights relating to any Offering
Period that has been completed prior to such Board action. The foregoing
notwithstanding, upon termination of the Plan the Board may (i) elect to
terminate all outstanding Purchase Rights at such time as the Board may
designate, and all amounts contributed to the Plan which remain in a
Participant's Cash Account will be returned to the Participant (without
interest) as promptly as practicable, or (ii) shorten the Offering Period to
such period determined by the Board and use amounts credited to a Participant
Cash Account to purchase Stock.

              (f) No Rights to Participate; No Shareholder Rights. No
Participant or employee will have any claim to participate in the Plan with
respect to Offering Periods that have not commenced, and the Company will have
no obligation to continue the Plan. No Purchase Right will confer on any
Participant any of the rights of a shareholder of the Company unless and until
Stock is duly issued or transferred and delivered to the Participant (or
credited to the Participant's Stock Account).

              (g) Fractional Shares. Unless otherwise determined by the Board,
purchases of Stock under the Plan executed by the Custodian may result in the
crediting of fractional shares of Stock to the Participant's Stock Account. Such
fractional shares will be computed to at least three decimal places. Fractional
shares will not, however, be issued by the Company, and

                                                                               9
   10
certificates representing fractional shares will not be delivered to
Participants under any circumstances.

              (h) Plan Year. The Plan will operate on a plan year that begins on
January 1 and ends December 31 in each year.

              (i) Governing Law. The validity, construction, and effect of the
Plan and any rules and regulations relating to the Plan will be determined in
accordance with the laws of the State of Arizona, without giving effect to
principles of conflicts of laws, and applicable federal law.

              (j) Effective Date. The Plan will become effective on the IPO
Date, subject to the Plan being approved by shareholders of the Company, at a
meeting by a vote sufficient to meet the requirements of Section 423(b)(2) of
the Code. If the Plan is not approved in accordance with Section 423(b)(2) of
the Code, each Participant's Purchase Right shall be void and amounts credited
to the Participant's Cash Account shall be promptly returned to the Participant.


                                                                              10

   1
                                                                    EXHIBIT 10.6

                                                                               1

                                                                  EXECUTION COPY







                                    WAIVER, CONSENT AND AMENDMENT dated as of
                           August 13, 2001 to the Credit Agreement dated as of
                           August 4, 1999, as amended and restated as of April
                           3, 2000, as amended (the "Credit Agreement"), among
                           ON SEMICONDUCTOR CORPORATION (formerly known as SCG
                           HOLDING CORPORATION, "Holdings"), SEMICONDUCTOR
                           COMPONENTS INDUSTRIES, LLC (the "Borrower"), the
                           LENDERS party thereto, THE CHASE MANHATTAN BANK, as
                           administrative agent, collateral agent and
                           syndication agent, and CREDIT LYONNAIS NEW YORK
                           BRANCH, CREDIT SUISSE FIRST BOSTON and LEHMAN
                           COMMERCIAL PAPER INC., as co-documentation agents.

            A. Pursuant to the Credit Agreement, the Lenders have extended
credit to the Borrower, and have agreed to extend credit to the Borrower, in
each case pursuant to the terms and subject to the conditions set forth therein.

            B. Holdings and the Borrower have requested that the Lenders agree
to amend and waive certain provisions of the Credit Agreement pursuant to the
terms and subject to the conditions set forth herein.

            C. The undersigned Lenders are willing so to waive such provisions
and to amend the Credit Agreement pursuant to the terms and subject to the
conditions set forth herein.

            D. Capitalized terms used but not defined herein have the meanings
assigned to them in the Credit Agreement, as amended hereby.

            Accordingly, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, and subject to the conditions set forth
herein, the parties hereto hereby agree as follows:

            SECTION 1. Waiver. The undersigned Lenders hereby waive any Default
arising from the failure of the Borrower to comply with the requirements of
Section 6.12 or 6.13 of the Credit Agreement during the period from and
including June 29, 2001 to and including December 31, 2002.

            SECTION 2. Amendments to Section 1.01 (Defined Terms). Section 1.01
of the Credit Agreement is hereby amended as follows:

            (a) by deleting in its entirety the definition of the term
"Applicable Rate" and substituting the following therefor:
   2
                                                                               2

            "Applicable Rate" means, for any day (a) with respect to any Loan,
            (i) 3.00% per annum, in the case of an ABR Loan, or 4.00% per annum,
            in the case of a Eurodollar Loan, plus (ii) either (A) 2.00% per
            annum prior to and including September 30, 2001, or (B) 3.00% per
            annum from and including October 1, 2001 to and including the
            Supplemental Interest Termination Date, or (C) 1.00% per annum on
            and after the date that the aggregate principal amount of
            outstanding Loans plus the LC Exposure is less than $750,000,000
            (notwithstanding whether clause (A) or (B) above would otherwise
            apply) to and including the Supplemental Interest Termination Date,
            and (b) with respect to the commitment fees payable hereunder, 0.50%
            per annum; provided that all Supplemental Interest shall cease to
            accrue on the Supplemental Interest Termination Date and, if the
            Supplemental Interest Termination Date does not occur on March 31,
            2003, then any Supplemental Interest that accrues after March 31,
            2003, shall be reduced to a rate per annum determined by multiplying
            the rate otherwise applicable pursuant to clause (a)(ii) above by a
            fraction, the numerator of which shall be equal to the total amount
            of Supplemental Interest accrued prior to March 31, 2003, that
            remains unpaid on March 31, 2003 (giving effect to any payments made
            on March 31, 2003), and the denominator of which shall be equal to
            the total amount of Supplemental Interest accrued prior to March 31,
            2003.

            (b) by deleting in its entirety the definition of the term
"Consolidated EBITDA" and substituting the following therefor:

            "Consolidated EBITDA" means, for any period (subject to Section
            1.05), Consolidated Net Income for such period plus (a) without
            duplication and to the extent deducted in determining such
            Consolidated Net Income, the sum of (i) consolidated interest
            expense for such period, (ii) consolidated income tax expense for
            such period, (iii) all amounts attributable to depreciation and
            amortization for such period, (iv) the aggregate amount of letter of
            credit fees accrued during such period, (v) all extraordinary
            charges during such period, (vi) noncash expenses during such period
            resulting from the grant of stock options to management and
            employees of Holdings, the Borrower or any of the Subsidiaries,
            (vii) the aggregate amount of deferred financing expenses for such
            period, (viii) all other noncash expenses or losses of Holdings, the
            Borrower or any of the Subsidiaries for such period (excluding any
            such charge that constitutes an accrual of or a reserve for cash
            charges for any future period), (ix) any non-recurring fees,
            expenses or charges realized by Holdings, the Borrower or any of the
            Subsidiaries for such period related to any offering of capital
            stock or incurrence of Indebtedness, (x) noncash dividends on the
            Cumulative Preferred Stock, (xi) cash restructuring charges (A)
            during the fiscal year ending on December 31, 2001 and the portion
            of the fiscal year ending on June 30, 2002 (or any fiscal quarter of
            such portion) not in excess of $131,000,000 in the aggregate (for
            all such periods), and (B) during any fiscal year (or any fiscal
            quarter of any such fiscal year) ending on or prior to December 31,
            2002 (or any quarter of such fiscal year) not in excess of an
            additional $10,000,000 in the aggregate (for all such periods),
            (xii) the amount of cash fees, service and product payments,
            dividends and other distributions actually paid to the Borrower or a
            Subsidiary by the
   3
                                                                               3

            OnMOS Joint Venture during such period and (xiii) fees and expenses
            of Alvarez & Marsal, Inc., paid by or reimbursed by the Borrower
            pursuant to Section 9.03 hereof and minus (b) without duplication
            and to the extent included in determining such Consolidated Net
            Income, (i) any extraordinary gains for such period, (ii) all
            noncash items increasing Consolidated Net Income for such period
            (excluding any items that represent the reversal of any accrual of,
            or cash reserve for, anticipated cash charges in any prior period)
            and (iii) all gains during such period attributable to any sale or
            disposition of assets (other than in the ordinary course of
            business), all determined on a consolidated basis in accordance with
            GAAP. For purposes of calculating the Leverage Ratio as of any date,
            if the Borrower or any consolidated Subsidiary has made any
            Permitted Acquisition or sale, transfer, lease or other disposition
            of assets outside of the ordinary course of business permitted by
            Section 6.05 during the period of four consecutive fiscal quarters
            ending on the date on which the most recent fiscal quarter ended,
            Consolidated EBITDA for the relevant period for testing compliance
            shall be calculated after giving pro forma effect thereto, as if
            such Permitted Acquisition or sale, transfer, lease or other
            disposition of assets outside of the ordinary course of business
            (and any related incurrence, repayment or assumption of Indebtedness
            with any new Indebtedness being deemed to be amortized over the
            applicable testing period in accordance with its terms) had occurred
            on the first day of the relevant period for testing compliance.

            (c) by deleting in its entirety the definition of the term "Interest
Payment Date" and substituting the following therefor:

            "Interest Payment Date" means (a) with respect to any ABR Loan
            (other than a Swingline Loan), the last day of each calendar month,
            (b) with respect to any Eurodollar Loan, the last day of the
            Interest Period applicable to the Borrowing of which such Loan is a
            part and, in the case of a Eurodollar Borrowing with an Interest
            Period of more than one month's duration, each day prior to the last
            day of such Interest Period that occurs at intervals of one month's
            duration after the first day of such Interest Period, and (c) with
            respect to any Swingline Loan, the day that such Loan is required to
            be repaid.

            (d)(i) by deleting the phrase "other than Indebtedness permitted by
Section 6.01" at the end of clause (c) of the definition of the term "Prepayment
Event" and substituting the phrase "excluding any Indebtedness (other than,
prior to the Transition Date, Permitted Convertible Debt) permitted by Section
6.01"; and

            (ii) by inserting the following text at the end of the definition
of the term "Prepayment Event":

            (d) prior to the Transition Date, the issuance by Holdings, the
            Borrower or any Subsidiary of any Equity Interests, other than (i)
            any such issuance by the Borrower or any Subsidiary to Holdings or
            the Borrower or to another Subsidiary, (ii) the issuance of Equity
            Interests expressly permitted by Section 6.01(d), (iii) the issuance
            of common stock or preferred stock of Holdings pursuant to the TPG
            Equity Purchase and (iv) Equity Interests issued in the form, or
            upon the exercise of, options to acquire common stock of Holdings
            issued to members of management and employees of Holdings, the
            Borrower or any Subsidiary and options or warrants in respect of the
            capital stock of Holdings issued as compensation to consultants to
            Holdings, the Borrower or any Subsidiary.

            (e) by adding the following text at the end of the definition of the
term "Consolidated Net Income":
   4
                                                                               4

            For purposes of calculating Consolidated EBITDA and Excess Cash
            Flow, Consolidated Net Income shall be calculated excluding all
            income, expenses, gains, losses and other items of the OnMOS Joint
            Venture.

            (f) by deleting in its entirety clause (a) of the definition of the
term "Excess Cash Flow" and substituting the following therefor:

            (a) Consolidated Net Income for such fiscal year, adjusted to
            exclude any gains or losses attributable to Prepayment Events, plus
            (without duplication) the amount of cash dividends or other
            distributions actually paid to the Borrower or a Subsidiary by the
            OnMOS Joint Venture during such period; plus

            (g) by adding the text "(plus, without duplication, any Supplemental
Interest deducted in calculating Consolidated EBITDA)" after the text
"Consolidated EBITDA" in the definition of the term "Leverage Ratio".

            (h) to add each of the following defined terms in the appropriate
alphabetical order:

            "Facilities Transfer" means the transfer by the Borrower and/or one
            or more of its Subsidiaries of the packaging and testing facilities
            located in Carmona, Philippines, Seremban, Malaysia and Guadalajara,
            Mexico, which transfer may involve one or more transactions or
            series of transactions taking the form of (i) sales, leases or other
            transfers or dispositions of assets, (ii) sales or other transfers
            or dispositions of capital stock and/or debt securities of
            Subsidiaries that directly or indirectly own such facilities, (iii)
            other types of transfers or dispositions, (iv) facilities closures
            or (v) any one or combination of the foregoing.

            "Interest Expense Coverage Ratio" shall have the meaning assigned to
            such term in Section 6.12.

            "Liquidity Amount" means, at any time, the aggregate amount of cash
            and Permitted Investments owned by the Borrower and its consolidated
            subsidiaries at such time, excluding (i) cash or Permitted
            Investments owned by the OnMOS Joint Venture and (ii) cash or
            Permitted Investments subject to any Lien in favor of any Person
            other than the Collateral Agent for the benefit of the Secured
            Parties.
   5
                                                                               5

            "OnMOS Joint Venture" means a Person organized (or to be organized)
            in a jurisdiction outside the United States to which Subsidiaries of
            Holdings will contribute the assets and operations of their TMOS
            business.

            "Partial Facilities Transfer" shall have the meaning assigned to
            such term in Section 6.15.

            "Permitted Convertible Debt" means Indebtedness of Holdings in
            respect of subordinated convertible debt securities (i) that is
            unsecured and subordinated to the Obligations on terms no less
            favorable to the Lenders than the terms of the Subordinated Debt,
            (ii) that does not provide for scheduled payments of principal
            earlier than 91 days after the final scheduled repayment of
            principal of the Term Loans, (iii) that is convertible into common
            equity of Holdings and (iv) the other terms (excluding the aggregate
            principal amount and conversion rate thereof) of which are
            reasonably satisfactory to the Administrative Agent in all material
            respects.

            "Qualified Liquidity Financing" means the issuance by Holdings of
            preferred stock, common stock or warrants in respect of preferred
            stock or common stock to TPG, or the incurrence by Holdings or the
            Borrower of Indebtedness for borrowed money owed to TPG, in each
            case for cash consideration; provided that (a) any such Indebtedness
            shall be unsecured, (b) the terms of any such preferred stock or
            Indebtedness shall not include any covenants, redemption provisions,
            events of default or other terms that would entitle the holder
            thereof to make any claim or assert any right or remedy prior to
            payment in full of the Obligations and termination of the
            Commitments and (c) prior to any such issuance of preferred stock or
            incurrence of Indebtedness, TPG and Holdings or the Borrower, as
            applicable, shall have entered into an agreement with the
            Administrative Agent, in form and substance reasonably satisfactory
            to the Administrative Agent, effectively subordinating any and all
            obligations in respect of such preferred stock or Indebtedness to
            the Obligations and providing that, prior to repayment in full of
            all the Obligations and termination of the Commitments, the holder
            or holders of such preferred stock or Indebtedness, as applicable,
            shall not be entitled to receive any cash payments in respect
            thereof or to exercise any rights or remedies (other than, in the
            case of clauses (b) and (c) above, rights and remedies the exercise
            of which would not constitute or result in a Default).

            "Senior Leverage Ratio" means, on any date, the ratio of (a) Total
            Senior Indebtedness as of such date to (b) Consolidated EBITDA
            (plus, without duplication, any Supplemental Interest deducted in
            calculating Consolidated EBITDA) for the period of four consecutive
            fiscal quarters of Holdings ended on such date.

            "Supplemental Interest" means the portion of any interest accrued in
            respect of any Loan attributable to clause (a)(ii) of the definition
            of the term Applicable Rate.
   6
                                                                               6

            "Supplemental Interest Termination Date" means (a) if all
            Supplemental Interest accrued to but excluding March 31, 2003, has
            been paid on or prior to March 31, 2003, then March 31, 2003, or (b)
            otherwise, June 30, 2003.

            "Total Senior Indebtedness" means, as of any date, the aggregate
            principal amount of Indebtedness of Holdings, the Borrower and the
            Subsidiaries outstanding on such date, determined on a consolidated
            basis, excluding the Subordinated Debt, any Permitted Convertible
            Debt, the Junior Subordinated Note, Qualified Liquidity Financing
            and any other Indebtedness that is effectively subordinated to the
            Obligations on terms no less favorable to the Lenders than the terms
            of the Subordinated Debt.

            "TPG Equity Purchase" means the purchase by TPG of common stock or
            preferred stock of Holdings for cash consideration in an amount
            equal to $100,000,000 and the immediate contribution by Holdings to
            the Borrower of such cash as common equity; provided that, in the
            case of any such purchase of preferred stock, (a) the terms of such
            preferred stock shall not include any covenants, redemption
            provisions, events of default or other terms that would entitle the
            holder thereof to make any claim or assert any right or remedy prior
            to payment in full of the Obligations and termination of the
            Commitments and (b) prior to any such issuance of preferred stock,
            TPG and Holdings shall have entered into an agreement with the
            Administrative Agent, in form and substance reasonably satisfactory
            to the Administrative Agent, effectively subordinating any and all
            obligations in respect of such preferred stock to the Obligations
            and providing that, prior to the repayment in full of all the
            Obligations and termination of the Commitments, the holder or
            holders of such preferred stock shall not be entitled to receive any
            cash payments in respect thereof or to exercise any rights (other
            than in the case of clauses (a) and (b) above, rights and remedies
            the exercise of which would not constitute or result in a Default).

            "Transition Date" means the date on which the Borrower shall have
            delivered to the Administrative Agent financial statements
            demonstrating that as of the end of the immediately preceding fiscal
            quarter of Holdings (a) the Leverage Ratio was less than or equal to
            3.75 to 1.00, (b) the Senior Leverage Ratio was less than or equal
            to 2.75 to 1.00 and (c) the Interest Expense Coverage Ratio for the
            period of four consecutive fiscal quarters ending on the last day of
            such quarter was greater than or equal to 2.50 to 1.00.

            SECTION 3. Amendments to Section 2.11 (Prepayment of Loans). Section
2.11 of the Credit Agreement is hereby amended as follows:

            (a) Paragraph (c) of Section 2.11 of the Credit Agreement is deleted
in its entirety and replaced with the following:

            (c) (i) Prior to the Transition Date, in the event and on each
            occasion that any Net Proceeds are received by or on behalf of
            Holdings, the Borrower or any Subsidiary in respect of any
            Prepayment Event, the Borrower shall, within ten Business Days after
            such Net Proceeds are received, prepay
   7
                                                                               7

            Term Borrowings in an aggregate amount equal to (A) 100% (or 50%, in
            the case of Net Proceeds from the sale of Equity Interests in the
            OnMOS Joint Venture) of such Net Proceeds if such Net Proceeds
            result from an event described in clause (a) of the definition of
            the term "Prepayment Event", (B) 100% of such Net Proceeds if such
            Net Proceeds result from an event (other than the issuance of
            Permitted Convertible Debt) described in clause (b) or (c) of the
            definition of the term "Prepayment Event" and (C) 75% of such Net
            Proceeds if such Net Proceeds result from the issuance of Permitted
            Convertible Debt or an event described in clause (d) of the
            definition of the term "Prepayment Event".

            (ii) After the Transition Date, in the event and on each occasion
            that any Net Proceeds are received by or on behalf of Holdings, the
            Borrower or any Subsidiary in respect of any Prepayment Event, the
            Borrower shall, within ten Business Days after such Net Proceeds are
            received, prepay Term Borrowings in an aggregate amount equal to
            such Net Proceeds, provided that, in the case of any event described
            in clause (a) of the definition of the term "Prepayment Event"
            (other than the sale, transfer or other disposition of Receivables
            in connection with a Permitted Receivables Financing), if the
            Borrower shall deliver to the Administrative Agent a certificate of
            a Financial Officer to the effect that Holdings, the Borrower and
            the Subsidiaries intend to apply the Net Proceeds from such event
            (or a portion thereof specified in such certificate), within 180
            days after receipt of such Net Proceeds, to acquire real property,
            equipment or other assets to be used in the business of the Borrower
            and the Subsidiaries, and certifying that no Default has occurred
            and is continuing, then no prepayment shall be required pursuant to
            this paragraph in respect of the Net Proceeds in respect of such
            event (or the portion of such Net Proceeds specified in such
            certificate, if applicable) except to the extent of any such Net
            Proceeds therefrom that have not been so applied by the end of such
            180-day period, at which time a prepayment shall be required in an
            amount equal to such Net Proceeds that have not been so applied.

            (b) Paragraph (d) of Section 2.11 of the Credit Agreement is amended
by deleting the text "50%" and replacing it with the text "75% (or, after the
Transition Date, 50%)".

            SECTION 4. Amendment to Section 2.13 (Interest). Paragraph (d) of
Section 2.13 of the Credit Agreement is hereby amended by adding the following
text at the end of such paragraph:

            Notwithstanding the foregoing, Supplemental Interest shall not be
            required to be paid at the time required by the preceding sentence,
            except that (A) 50% of the total amount of Supplemental Interest
            accrued prior to March 31, 2003 shall be payable on March 31, 2003
            (to the extent not previously paid) and (B) if the Supplemental
            Interest Termination Date does not occur on March 31, 2003, then all
            Supplemental Interest remaining unpaid on June 30, 2003, shall be
            payable in full on June 30, 2003; provided that all unpaid
            Supplemental Interest shall be payable upon repayment in full of the
            Loans.
   8
                                                                               8

            SECTION 5. Amendments to Section 5.01 (Financial Statements and
Other Information). Section 5.01 of the Credit Agreement is hereby amended as
follows:

            (a) Clause (c) of Section 5.01 is amended by deleting the text
"Sections 6.12 and 6.13" and inserting the text "Sections 6.12, 6.13, and, prior
to the Transition Date, 6.14, 6.15 and 6.16" therefor.

            (b) Clause (f) of Section 5.01 is amended by deleting the text "and"
following the ";".

            (c) Clause (g) of Section 5.01 is amended by substituting the text
"; and" for the text ".".

            (d) Section 5.01 is further amended by inserting the following new
clause (h):

            (h) in respect of each fiscal month ending on or prior to the
            earlier of (i) the Transition Date and (ii) March 31, 2003, (A)
            within 30 days after the end of each of the first two fiscal months
            of each fiscal quarter of Holdings, (1) Holdings' unaudited
            consolidated balance sheet and related statements of operations,
            stockholders' equity and cash flows as of the end of and for each
            such month in substantially the form of Schedule 5.01(h) and (2) a
            letter executed by a Financial Officer describing the results of the
            Borrower's business for such fiscal month and for the then elapsed
            portion of the fiscal year and (B) within 45 days after the end of
            the last fiscal month of each fiscal quarter of Holdings, (1)
            Holdings' unaudited consolidated balance sheet and related
            statements of operations, stockholders' equity and cash flows as of
            the end of and for such fiscal quarter, in substantially the form of
            Schedule 5.01(h), (2) a letter executed by a Financial Officer
            describing the results of the Borrower's business for such fiscal
            month and for the then elapsed portion of the fiscal year and (3) a
            variance analysis setting forth Holdings' consolidated financial
            results for such quarter relative to the figures set forth in
            Holdings' financial plan provided to the Lenders in attendance at
            the June 28, 2001 bank meeting held at the offices of the
            Administrative Agent, including an updated 6-month cash reforecast
            based upon Holdings' consolidated financial results for such
            quarter.

            SECTION 6. Amendments to Section 6.01 (Indebtedness; Certain Equity
Securities). Section 6.01 of the Credit Agreement is hereby amended as follows:

            (a) Clause (ix) of Section 6.01(a) is hereby deleted in its entirety
and replaced by "(ix) Permitted Convertible Debt;".

            (b) Section 6.01 is hereby further amended by inserting the
following new paragraphs (e) and (f):

            (e) Notwithstanding anything contained in Section 6.01(a), (b) or
            (c), (i) Holdings may issue preferred stock, or Holdings or the
            Borrower may incur Indebtedness, in each case pursuant to a
            Qualified Liquidity
   9
                                                                               9

            Financing and (ii) Holdings may issue preferred stock pursuant to
            the TPG Equity Purchase.

            (f) Notwithstanding anything contained in Section 6.01(a), the OnMOS
            Joint Venture may incur Indebtedness that is guaranteed by Mosel in
            an aggregate principal amount not exceeding $10,000,000 at any time
            outstanding, provided that such Indebtedness shall not be Guaranteed
            by, or otherwise be recourse to, any of Holdings, the Borrower or
            the Subsidiaries (other than the OnMOS Joint Venture or any
            subsidiaries of the OnMOS Joint Venture). Any such Indebtedness of
            the OnMOS Joint Venture shall be deemed not to be Indebtedness of
            Holdings, the Borrower and the Subsidiaries for the purpose of
            calculating Funded Indebtedness and Total Senior Indebtedness and
            any interest expense with respect to such Indebtedness shall be
            excluded from consolidated interest expense for the purpose of
            calculating Consolidated Cash Interest Expense.

            SECTION 7. Amendments to Section 6.04 (Investments, Loans, Advances,
Guarantees and Acquisitions). Section 6.04 of the Credit Agreement is hereby
amended as follows:

            (a) Clause (h) of Section 6.04 is hereby amended by adding the text
"after the Transition Date," at the beginning thereof.

            (b) Clause (s) of Section 6.04 is hereby amended by deleting the
text "and" at the end thereof.

            (c) Clause (t) of Section 6.04 is amended by (i) deleting the text
"$100,000,000" and replacing it with the text "$40,000,000 (or, after the
Transition Date, $100,000,000)" and (ii) by deleting the text "." at the end
thereof and replacing it with the text "; and".

            (d) Section 6.04 is further amended by adding the following new
Clause (u):

            (u) the creation by the Borrower of a limited liability company
            organized under the laws of a jurisdiction in the United States of
            America and the Borrower's contribution to the OnMOS Joint Venture
            through such limited liability company of (i) $51 in exchange for a
            51% interest therein and (ii) the assets and operations of the TMOS
            business of the Subsidiaries and Holdings; provided that promptly
            following the contribution of such assets and operations to the
            OnMOS Joint Venture contemplated by this clause (u), the Borrower
            shall deliver to the Administrative Agent copies of all definitive
            documentation regarding such investment, certified by a Financial
            Officer as complete and correct.

            SECTION 8. Amendments to Section 6.05 (Asset Sales). Section 6.05 of
the Credit Agreement is hereby amended as follows:

                        (a) by deleting clause (d) in its entirety and replacing
            it with the text "(d) the Borrower may consummate the Facilities
            Transfer;".
   10
                                                                              10

            (b) by deleting the text "$50,000,000" in clause (e) and replacing
it with the text "$30,000,000 (or, after the Transition Date, $50,000,000)".

            (c) by inserting the text ", except for sales of Equity Interests in
the OnMOS Joint Venture to the extent such sales do not result in the failure of
the Borrower to comply with Section 6.17" immediately following the text
"Subsidiary" and before the text ")" in clause (e).

            (d) by adding the text "and" at the end of clause (e) thereof;

            (e) by adding the following new paragraph at the end thereof:

            (f) sales, transfers and other dispositions of assets listed on
Schedule 6.05 hereto.

            (f) by deleting in its entirety the final proviso thereto and
substituting the following text therefor:

provided that (i) all sales, transfers, leases and other dispositions permitted
hereby shall be made for fair value (other than those permitted by clause (b)
above) and for consideration of at least 80% cash or cash equivalents (other
than those permitted by clause (b) and (f) above) and (ii) the fair value of all
consideration (other than cash and cash equivalents) received in respect of
dispositions permitted by clause (f) above does not exceed $15,000,000.

            SECTION 9. Amendment to Section 6.09 (Transactions with Affiliates).
Section 6.09 of the Credit Agreement is hereby amended:

                        (a) by deleting the text "and (i)" and replacing it with
            the text ", (i)" and deleting the text "." at the end thereof; and

                        (b) by adding the following new text at the end of
            Section 6.09:

            and (j) any ancillary agreements entered into between Holdings, the
            Borrower or any Subsidiary and the OnMOS Joint Venture at any time
            that Holdings owns directly and indirectly less than 80% of the
            economic interest of the OnMOS Joint Venture; provided, however,
            that, prior to the Transition Date, all management fees payable to
            TPG or its Affiliates shall accrue and not be payable in cash, it
            being understood that any such fees may be paid by the issuance of
            common stock of or warrants in respect of common stock of Holdings
            and any other fees may be paid in cash

            SECTION 10. Amendment to Section 6.12 (Interest Expense Coverage
Ratio). Section 6.12 of the Credit Agreement is hereby amended and restated in
its entirety to read as follows:

                        SECTION 6.12. Interest Expense Coverage Ratio. (a) The
            Borrower will not permit the ratio of (i) Consolidated EBITDA (plus,
            without duplication, any Supplemental Interest deducted in
            calculating Consolidated EBITDA) to (ii) Consolidated Cash Interest
            Expense (excluding any Supplemental Interest otherwise included
            therein) (the "Interest Expense
   11
                                                                              11

Coverage Ratio"), in each case for any period of four consecutive fiscal
quarters ending on any date during any period set forth below, to be less than
the ratio set forth below opposite such period:



Period                                                                      Ratio
- ------                                                                      -----

                                                                     
January 1, 2003 to and including December 31, 2003                      2.00 to 1.00
January 1, 2004 to and including July 2, 2004                           2.25 to 1.00
July 3, 2004 to and including December 31, 2004                         2.50 to 1.00
January 1, 2005 to and including July 1, 2005                           2.75 to 1.00
July 2, 2005 and thereafter                                             3.00 to 1.00



                        (b) For purposes of calculating the Interest Expense
            Coverage Ratio under clause (a) of this Section 6.12, Consolidated
            EBITDA for the period of four consecutive fiscal quarters of
            Holdings (i) ended March 31, 2003 shall be deemed to be equal to
            Consolidated EBITDA for the fiscal quarter then ended multiplied by
            4, (ii) ended June 30, 2003 shall be deemed to be equal to
            Consolidated EBITDA for the two consecutive fiscal quarters then
            ended multiplied by 2 and (iii) ended September 30, 2003 shall be
            deemed to be equal to Consolidated EBITDA for the three consecutive
            fiscal quarters then ended multiplied by 4/3.

            SECTION 11. Amendment to Section 6.13 (Leverage Ratio). Section 6.13
of the Credit Agreement is hereby amended and restated in its entirety to read
as follows:

                        SECTION 6.13. Leverage Ratio. (a) The Borrower will not
            permit the Leverage Ratio as of the end of any fiscal quarter during
            any period set forth below to exceed the ratio set forth opposite
            such period:




Period                                                            Ratio
- ------                                                            -----
                                                               
January 1, 2003 to and including June 30, 2003                    5.00 to 1.00
July 1, 2003 to and including December 31, 2003                   4.75 to 1.00
January 1, 2004 to and including July 2, 2004                     4.50 to 1.00
July 3, 2004 to and including December 31, 2004                   4.25 to 1.00
January 1, 2005 to and including July 1, 2005                     4.00 to 1.00
July 2, 2005 and thereafter                                       3.75 to 1.00




                        (b) For purposes of calculating the Leverage Ratio under
            clause (a) of this Section 6.13, Consolidated EBITDA for the period
            of
   12
            four consecutive fiscal quarters of Holdings (i) ended March 31,
            2003 shall be deemed to be equal to Consolidated EBITDA for the
            fiscal quarter then ended multiplied by 4, (ii) ended June 30, 2003
            shall be deemed to be equal to Consolidated EBITDA for the two
            consecutive fiscal quarters then ended multiplied by 2 and (iii)
            ended September 30, 2003 shall be deemed to be equal to Consolidated
            EBITDA for the three consecutive fiscal quarters then ended
            multiplied by 4/3. In addition, for purposes of this Section 6.13,
            the Funded Indebtedness component of the Leverage Ratio shall be
            calculated excluding any Supplemental Interest otherwise included
            therein.

            SECTION 12. Amendment to Section 6.14 (Capital Expenditures).
Section 6.14 of the Credit Agreement is hereby amended and restated in its
entirety to read as follows:

                        SECTION 6.14. Capital Expenditures. The Borrower and
            Subsidiaries shall not incur or make any Capital Expenditures:

                        (a) prior to the Transition Date, during any period set
            forth below in an amount exceeding the amount set forth opposite
            such period:



                                                     Maximum
Period                                         Capital Expenditures
- ------                                         --------------------

                                            
July 1, 2001 to December 31, 2001                 $35,000,000
January 1, 2002 to March 31, 2003                 $52,500,000
April 1, 2003 to December 31, 2003                $87,500,000
Each fiscal year thereafter                       $150,000,000


            Notwithstanding the foregoing, if the actual amount of Capital
            Expenditures incurred or made by the Borrower and its Subsidiaries
            during the period from July 1, 2001 to December 31, 2001, is less
            than $35,000,000, then the Borrower and its Subsidiaries may incur
            or make additional Capital Expenditures during the period January 1,
            2002 to March 31, 2003, in excess of $52,500,000, but such
            additional Capital Expenditures during such period shall not exceed
            the lesser of (i) $15,000,000 and (ii) the excess of $35,000,000
            over the actual amount of Capital Expenditures incurred or made from
            July 1, 2001, to December 31, 2001.

                        (b) after the Transition Date, in an amount exceeding
            $150,000,000 in any fiscal year, provided that such $150,000,000
            permitted amount shall be increased with respect to any fiscal year
            by an amount equal to the portion of Excess Cash Flow for the
            immediately preceding fiscal year that is not required to be applied
            to make prepayments of Loans pursuant to Section 2.11(d).
   13
                                                                              13

            After the Transition Date the amount of Capital Expenditures
            permitted to be made by the immediately preceding paragraph (b) in
            respect of any fiscal year shall be increased by (i) the unused
            amount of Capital Expenditures that were permitted to be made during
            the immediately preceding fiscal year pursuant to the immediately
            preceding paragraph (b) (without giving effect to the proviso to
            such paragraph) minus (ii) an amount equal to the unused permitted
            Capital Expenditures carried forward to such preceding fiscal year.

                        For purposes of determining compliance with this
            Section, Capital Expenditures incurred or made by the OnMOS Joint
            Venture and its subsidiaries shall be disregarded.

            SECTION 13. Addition of New Section 6.15 to the Credit Agreement.
The Credit Agreement is hereby amended by adding the following new section
following Section 6.14:

                        SECTION 6.15. Minimum Consolidated EBITDA. (a) The
            Borrower will not permit Consolidated EBITDA for any period set
            forth below to be less than the amount set forth opposite such
            period (subject to adjustment pursuant to paragraph (b) below):



Period                                            Amount
- ------                                            ------

                                               
July 1, 2001 to and including                     $(15,000,000)
December 31, 2001

July 1, 2001 to and including                     $0.0
March 31, 2002

July 1, 2001 to and including                     $35,000,000
June 30, 2002

October 1, 2001 to and including                  $80,000,000
September 30, 2002

January 1, 2002 to and including                  $120,000,000
December 31, 2002


                        (b) Following the completion of the Facilities Transfer,
            the amounts set forth in paragraph (a) above shall be reduced (i)
            for the period from July 1, 2001 to and including December 31, 2001,
            by $31,400,000, (ii) for the period from July 1, 2001 to and
            including March 31, 2002, by $47,100,000 and (iii) for each of the
            periods (A) from July 1, 2001 to and including June 30, 2002, (B)
            from October 1, 2001 to and including September 30, 2002 and (C)
            from January 1, 2002 to and including December 31, 2002, by
            $62,800,000.

            For purposes of this paragraph (b), Consolidated EBITDA for any
            period during which the Facilities Transfer is completed shall be
            calculated after giving pro forma effect to the Borrower's
            consummation of the Facilities
   14
                                                                              14

            Transfer, as if the consummation of the Facilities Transfer had
            occurred on the first day of the relevant period for testing
            compliance.

            Following any transfer in partial completion of the Facilities
            Transfer (a "Partial Facilities Transfer"), the Borrower and the
            Administrative Agent shall agree to reduce the amount set forth in
            paragraph (a) above in respect of the period during which such
            Partial Facilities Transfer occurred, provided that (i) any such
            reduction shall be based on the ratio of (A) Consolidated EBITDA
            attributable to all of the business of Holdings, the Borrower and
            the Subsidiaries transferred pursuant to such Partial Facilities
            Transfer to (B) the Consolidated EBITDA attributable to all assets
            of the business of Holdings, the Borrower and its Subsidiaries that
            may be transferred pursuant to the Facilities Transfer, (ii) any
            such reduction shall not exceed the amount of the reduction set
            forth for the relevant period in paragraph (b) above that would be
            allowed for the relevant period and (iii) there shall be such a
            reduction in respect of no more than one Partial Facilities
            Transfer.

            SECTION 14. Addition of New Section 6.16 to the Credit Agreement.
The Credit Agreement is hereby amended by adding the following new section
following Section 6.15:

                        SECTION 6.16. Minimum Cash and Cash Equivalents. Prior
            to the Transition Date, the Borrower will not permit the Liquidity
            Amount for any period of five consecutive Business Days ending on or
            after the date hereof (calculated at the close of business on each
            Business Day), to be less than $50,000,000.

            SECTION 15. Addition of New Section 6.17 to the Credit Agreement.
The Credit Agreement is hereby amended by adding the following new section
following Section 6.16:

                        SECTION 6.17. OnMOS Joint Venture Interest. At all times
            after consummation of its investment in the OnMOS Joint Venture the
            Borrower shall own (directly or indirectly) at least 51% of the
            voting power represented by the outstanding Equity Interests of the
            OnMOS Joint Venture.

            SECTION 16. Schedules. The Credit Agreement is hereby amended by
adding a new Schedule 5.01(h) and a new Schedule 6.05 in the respective forms
attached to this Amendment.

            SECTION 17. Amendments to Section 7.01 (Events of Default). Section
7.01 is hereby amended as follows:

                        (a) Clause (n) is hereby amended by deleting the text
            "or" at the end thereof.

                        (b) Clause (o) is hereby amended by adding the text "or"
            at the end thereof.
   15
                                                                              15

                        (c) Section 7.01 is hereby further amended by inserting
            the following new paragraph (p) at the end thereof:

                                    (p) the TPG Equity Purchase shall not have
                        been consummated on or prior to September 7, 2001;

            SECTION 18. Amendment to Section 9.04 (Successors and Assigns).
Paragraph (b) of Section 9.04 of the Credit Agreement is hereby amended by
deleting the text "$5,000,000" and replacing it with the text "$1,000,000".

            SECTION 19. Consent to Consultant. For the period from the date
hereof through the earlier of (a) the Transition Date and (b) March 31, 2003,
the Borrower consents to the engagement of (on terms to be agreed upon), and
agrees to pay (in accordance with Section 9.03 of the Credit Agreement) the
reasonable fees and reasonable out-of-pocket expenses (not to exceed $250,000 in
the aggregate) of, Alvarez & Marsal, Inc., a third party consulting firm engaged
by counsel to the Administrative Agent to evaluate and monitor the Borrower's
business plan and perform other services requested by counsel to the
Administrative Agent with respect to the Borrower. The Borrower will cooperate
with Alvarez & Marsal, Inc., in connection with its performance of services for
counsel to the Administrative Agent (including providing access to the records
(financial and otherwise), properties, books, contracts and personnel of the
Borrower and its Subsidiaries).

            SECTION 20. Amendment Fee. In consideration of the agreements of the
Lenders contained in this Amendment, the Borrower agrees to pay to the
Administrative Agent, for the account of each Lender that delivers an executed
counterpart of this Amendment at or prior to 12:00 (noon) on August 13, 2001, an
amendment fee in an amount equal to 0.25% of the sum of such Lender's Revolving
Commitment and outstanding Term Loans; provided that such fee shall not be
payable unless and until this Amendment becomes effective as provided in Section
20.

            SECTION 21. Representations and Warranties. Each of Holdings and the
Borrower represents and warrants to the Administrative Agent and to each of the
Lenders that:

            (a) This Amendment has been duly authorized, executed and delivered
by each of Holdings and the Borrower and constitutes a legal, valid and binding
obligation of Holdings and the Borrower, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors' rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.

            (b) After giving effect to this Amendment, each of the
representations and warranties of Holdings and the Borrower set forth in the
Loan Documents is true and correct on and as of the date hereof, except to the
extent such representations and warranties expressly relate to an earlier date,
in which case such representations and warranties are true and correct as of
such earlier date.

            (c) Immediately after giving effect to this Amendment, no Default
shall have occurred and be continuing.
   16
                                                                              16

            SECTION 22. Conditions to Effectiveness. This Amendment shall become
effective as of the date first above written when (i) the Administrative Agent
shall have received counterparts of this Amendment that, when taken together,
bear the signatures of (a) Holdings, (b) the Borrower and (c) the Required
Lenders, (ii) all fees and expenses required to be paid or reimbursed by the
Borrower under or in connection with this Amendment or the Credit Agreement and
(in the case of expenses to be reimbursed, including fees, charges and
disbursements of counsel or other advisors) invoiced in writing to the Borrower
on or prior to August 13, 2001, shall have been paid or reimbursed, as
applicable (including all fees and disbursements of counsel previously
invoiced), (iii) the Administrative Agent and the Borrower shall have received a
written acknowledgment from TPG that all management fees (other than fees
permitted by the final proviso to Section 6.09) payable to TPG or its Affiliates
by Holdings, the Borrower or any Subsidiary shall accrue and not be payable
until such time as the Obligations shall have been repaid in full and (iv)
Holdings shall have received a written commitment to make, on or prior to
September 7, 2001, the TPG Equity Purchase and a copy of such written commitment
shall have been delivered to the Administrative Agent.

            SECTION 23. Credit Agreement. Except as specifically waived or
amended hereby, the Credit Agreement shall continue in full force and effect in
accordance with the provisions thereof as in existence on the date hereof. After
the date hereof, any reference to the Credit Agreement shall mean the Credit
Agreement as amended or modified hereby. This Amendment shall be a Loan Document
for all purposes.

            SECTION 24. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

            SECTION 25. Counterparts. This Amendment may be executed in two or
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one agreement. Delivery of an executed
signature page to this Amendment by facsimile transmission shall be effective as
delivery of a manually signed counterpart of this Amendment.

            SECTION 26. Expenses. The Borrower agrees to reimburse the
Administrative Agent for its reasonable out-of-pocket expenses in connection
with this Amendment, including the fees, charges and disbursements of Cravath,
Swaine & Moore, counsel for the Administrative Agent.

            SECTION 27. Headings. The Section headings used herein are for
convenience of reference only, are not part of this Amendment and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Amendment.
   17
                                                                              17

            IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective authorized officers as of the day and year
first written above.

                                            ON SEMICONDUCTOR CORPORATION,

                                            by /s/
                                              ----------------------------
                                              Name:  Authorized Officer
                                              Title:



                                            SEMICONDUCTOR COMPONENTS
                                            INDUSTRIES, LLC,

                                            by /s/
                                              ----------------------------
                                              Name:  Authorized Officer
                                              Title:



                                            THE CHASE MANHATTAN BANK,
                                            individually and as administrative
                                            agent,

                                            by /s/
                                              ----------------------------
                                              Name:  Authorized Officer
                                              Title:



                                            CREDIT LYONNAIS NEW YORK BRANCH,
                                            individually and as co-documentation
                                            agent,

                                            by /s/
                                              ----------------------------
                                              Name:  Authorized Officer
                                              Title:



                                            CREDIT SUISSE FIRST BOSTON
                                            individually and as co-documentation
                                            agent,

                                            by /s/
                                              ----------------------------
                                              Name:  Authorized Officer
                                              Title:
   18
                                                                              18

                                            LEHMAN COMMERCIAL PAPER INC.,
                                            individually and as co-documentation
                                            agent,

                                            by /s/
                                              ----------------------------
                                              Name:
                                              Title: Authorized Officer



   19
                                                                              19

                                    SIGNATURE PAGE TO THE WAIVER, CONSENT AND
                                    AMENDMENT DATED AS OF AUGUST 13, 2001 TO THE
                                    CREDIT AGREEMENT AMONG ON SEMICONDUCTOR
                                    CORPORATION, SEMICONDUCTOR COMPONENTS
                                    INDUSTRIES, LLC, THE LENDERS PARTY THERETO,
                                    THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE
                                    AGENT, COLLATERAL AGENT AND SYNDICATION
                                    AGENT, AND CREDIT LYONNAIS NEW YORK BRANCH,
                                    CREDIT SUISSE FIRST BOSTON AND LEHMAN
                                    COMMERCIAL PAPER INC., AS CO-DOCUMENTATION
                                    AGENTS.

Name of Institution

                                            by /s/
                                              ----------------------------
                                              Name:
                                              Title: Authorized Officer