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e10vq

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 28, 2002

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number 000-30419

ON SEMICONDUCTOR CORPORATION
(Exact name of registrant as specified in its charter)


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

5005 E. McDowell Road
Phoenix, AZ 85008
(602) 244-6600
(Address and telephone number of principal executive offices)

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.


Yes		No

The number of shares outstanding of each of the issuer’s classes of common stock as of the close of business on July 22, 2002:


Class		Number of Shares

Common Stock; $.01 par value		175,782,281

TABLE OF CONTENTS


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
Exhibit 3.1 (a)
Exhibit 3.1(b)
Exhibit 4.1
Exhibit 4.2
Exhibit 4.5
Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 10.4
Exhibit 10.5
Exhibit 10.6
Exhibit 10.7
Exhibit 10.8
Exhibit 99

INDEX


		Page

Part I			3




	Financial Information		3




	Item 1 Financial Statements		3




	Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations		20




	Item 3 Quantitative and Qualitative Disclosures About Market Risk		37









Part II			37




	Other Information		37




	Item 1 Legal Proceedings		37




	Item 2 Changes in Securities and Use of Proceeds		38




	Item 3 Defaults Upon Senior Securities		38




	Item 4 Submission of Matters to a Vote of Security Holders		38




	Item 5 Other Information		38




	Item 6 Exhibits and Reports on Form 8-K		38




Signatures			41




Exhibits

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements

ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)


		June 28,			December 31,
		2002			2001

		(unaudited)
ASSETS




Cash and cash equivalents		$	167.7		$	179.8




Receivables, net (including $15.0 and $21.3 due from Motorola)			143.5			142.3




Inventories, net			160.0			183.7




Other current assets			34.1			35.8




Deferred income taxes			7.7			9.2

	Total current assets		513.0			550.8




Property, plant and equipment, net			503.0			555.5




Deferred income taxes			—			1.3




Investments in and advancements to joint ventures			99.1			95.4




Goodwill			77.3			77.3




Intangible assets, net			32.7			38.6




Other assets			41.6			41.5

	Total assets	$	1,266.7		$	1,360.4

LIABILITIES, MINORITY INTERESTS, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT




Accounts payable (including $1.3 and $3.3 payable to Motorola)		$	94.1		$	111.5




Accrued expenses (including $0.0 and $11.7 payable to Motorola)			93.4			90.2




Income taxes payable			5.3			8.0




Accrued interest			29.3			13.4




Deferred income on sales to distributors			75.3			99.4




Current portion of long-term debt			7.5			12.4

	Total current liabilities		304.9			334.9




Long-term debt (including $120.8 and $115.2 payable to Motorola)			1,392.6			1,374.5




Other long-term liabilities			55.0			62.7




Deferred income taxes			1.0			—

	Total liabilities		1,753.5			1,772.1

Commitments and contingencies (see Note 9)			—			—

Minority interests in consolidated subsidiaries			3.9			4.1

Series A Cumulative Convertible Redeemable Preferred Stock ($0.01 par value, 100,000 shares authorized, 10,000 shares issued and outstanding; 8% annual dividend rate; liquidation value — $100.0 plus $6.6 and $2.4 of accrued dividends)			105.8			101.6




Common stock ($0.01 par value, 300,000,000 shares authorized, 175,781,962 and 174,653,586 shares issued and outstanding)			1.8			1.7




Additional paid-in capital			737.7			738.8




Accumulated other comprehensive loss			(29.1	)		(32.8	)




Accumulated deficit			(1,306.9	)		(1,225.1	)

	Total stockholders’ deficit		(596.5	)		(517.4	)

	Total liabilities, minority interests, redeemable preferred stock and stockholders’ deficit	$	1,266.7		$	1,360.4

See accompanying notes to consolidated financial statements.

ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(in millions, except per share data)


			Quarter Ended						Six Months Ended

			June 28, 2002			June 29, 2001			June 28, 2002			June 29, 2001

			(unaudited)			(unaudited)			(unaudited)			(unaudited)
Revenues:




	Net product revenues (including $22.4, $23.2, $40.2 and $44.4 from Motorola)		$	277.5		$	307.3		$	546.2		$	664.3




	Foundry revenues from Motorola			0.2			3.4			0.6			6.9

		Total revenues		277.7			310.7			546.8			671.2




Cost of sales				201.7			255.6			412.6			529.5

Gross profit				76.0			55.1			134.2			141.7

Operating expenses:




	Research and development			16.2			22.9			33.5			45.8




	Selling and marketing			15.2			20.8			29.8			44.6




	General and administrative			26.7			34.0			55.9			70.8




	Amortization of goodwill and other intangibles			3.0			5.6			6.0			11.4




	Restructuring and other charges			3.1			95.8			10.2			133.8

		Total operating expenses		64.2			179.1			135.4			306.4

Operating income (loss)				11.8			(124.0	)		(1.2	)		(164.7	)

Other income (expenses), net:




	Interest expense			(36.3	)		(29.7	)		(71.0	)		(58.9	)




	Equity in earnings of joint ventures			2.5			1.5			3.7			2.1




	Gain on sale of investment in joint venture			—			—			—			3.1

		Other income (expenses), net		(33.8	)		(28.2	)		(67.3	)		(53.7	)

Loss before income taxes, minority interests, extraordinary loss and cumulative effect of accounting change				(22.0	)		(152.2	)		(68.5	)		(218.4	)




Income tax benefit (provision)				(3.3	)		—			(7.0	)		22.7




Minority interests				—			—			0.2			0.5

Net loss before extraordinary loss and cumulative effect of accounting change				(25.3	)		(152.2	)		(75.3	)		(195.2	)




Extraordinary loss on debt prepayment (See Note 8)				(6.5	)		—			(6.5	)		—




Cumulative effect of accounting change (net of income taxes of $38.8) (See Note 3)				—			—			—			(116.4	)

Net loss				(31.8	)		(152.2	)		(81.8	)		(311.6	)




Less: Redeemable preferred stock dividends				(2.1	)		—			(4.2	)		—

Net loss applicable to common stock			$	(33.9	)	$	(152.2	)	$	(86.0	)	$	(311.6	)

Comprehensive loss:




	Net loss		$	(31.8	)	$	(152.2	)	$	(81.8	)	$	(311.6	)




	Foreign currency translation adjustments			2.5			(0.8	)		1.7			(3.3	)




	Additional minimum pension liability adjustment			—			—			—			(0.4	)




	Cash flow hedges:




		Cumulative effect of accounting change					—			—			(3.4	)




		Net gains (losses) on derivative instruments		(0.9	)		0.5			0.9			(2.6	)




		Deferred tax impacts		(0.5	)		—			0.8			—




		Reclassification adjustments		0.2			0.2			0.3			0.3

Comprehensive loss			$	(30.5	)	$	(152.3	)	$	(78.1	)	$	(321.0	)

See accompanying notes to consolidated financial statements.

ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(in millions, except per share data)


			Quarter Ended						Six Months Ended

			June 28, 2002			June 29, 2001			June 28, 2002			June 29, 2001

			(unaudited)			(unaudited)			(unaudited)			(unaudited)
Loss per common share:




	Basic (1):




		Before extraordinary loss and cumulative effect of accounting change less redeemable preferred stock dividends	$	(0.16	)	$	(0.88	)	$	(0.45	)	$	(1.13	)




		Extraordinary loss on debt prepayment		(0.04	)		—			(0.04	)		—




		Cumulative effect of accounting change		—			—			—			(0.67	)

		Net loss applicable to each common share	$	(0.19	)	$	(0.88	)	$	(0.49	)	$	(1.80	)

	Diluted (1):




		Before extraordinary loss and cumulative effect of accounting change less redeemable preferred stock dividends	$	(0.16	)	$	(0.88	)	$	(0.45	)	$	(1.13	)




		Extraordinary loss on debt prepayment		(0.04	)		—			(0.04	)		—




		Cumulative effect of accounting change		—			—			—			(0.67	)

		Net loss applicable to each common share	$	(0.19	)	$	(0.88	)	$	(0.49	)	$	(1.80	)

Weighted average common shares outstanding:




	Basic			175.5			173.5			175.2			172.8

	Diluted			175.5			173.5			175.2			172.8

(1)

Certain amounts may not total due to rounding of individual components

See accompanying notes to consolidated financial statements.

ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)


				Quarter Ended						Six Months Ended

				June 28, 2002			June 29, 2001			June 28, 2002			June 29, 2001

				(unaudited)			(unaudited)			(unaudited)			(unaudited)
Cash flows from operating activities:




	Net loss			$	(31.8	)	$	(152.2	)	$	(81.8	)	$	(311.6	)




	Adjustments to reconcile net loss to net cash provided by (used in) operating activities:




		Depreciation and amortization			33.0			42.9			67.0			85.4




		Extraordinary loss on debt prepayment			6.5			—			6.5			—




		Cumulative effect of accounting change			—			—			—			116.4




		Amortization of debt issuance costs and debt discount			2.0			1.4			3.6			2.7




		Provision for excess inventories			4.0			23.2			14.7			32.6




		Non-cash impairment write-down of property, plant and equipment			8.4			42.2			8.4			45.1




		Non-cash interest on junior subordinated note payable to Motorola			2.9			2.7			5.6			5.3




		Non-cash supplemental interest on senior bank facilities			4.2			—			11.6			—




		Undistributed earnings of unconsolidated joint ventures			(2.5	)		(1.5	)		(3.7	)		(2.1	)




		Gain on sale of investment in unconsolidated joint venture			—			—			—			(3.1	)




		Deferred income taxes			3.9			(1.4	)		4.6			(24.2	)




		Non-cash stock compensation expense			1.0			1.2			1.3			3.4




		Other			0.8			1.3			0.5			1.1




Changes in assets and liabilities:




		Receivables			9.7			31.8			(0.5	)		113.2




		Inventories			6.4			(5.1	)		9.3			(33.1	)




		Other assets			3.4			2.5			2.2			(13.1	)




		Accounts payable			(18.2	)		(3.1	)		(17.6	)		(32.4	)




		Accrued expenses			(4.0	)		31.0			0.3			(7.8	)




		Income taxes payable			(4.5	)		(5.0	)		(2.7	)		(12.9	)




		Accrued interest			13.2			13.0			4.9			6.3




		Deferred income on sales to distributors			(2.8	)		(18.9	)		(24.1	)		(46.1	)




		Other long-term liabilities			(8.1	)		3.4			(7.0	)		3.8

			Net cash provided by (used in) operating activities		27.5			9.4			3.1			(71.1	)

Cash flows from investing activities:




	Purchases of property, plant and equipment				(9.8	)		(36.1	)		(15.4	)		(88.0	)




	Investments in and advances to unconsolidated companies and joint venture				—			—			—			(5.5	)




	Acquisition of minority interests in consolidated subsidiaries				—			—			—			(0.1	)




	Proceeds from sale of investment in joint venture				—			—			—			20.4




	Proceeds from sales of property, plant and equipment				2.3			1.8			2.5			2.1

			Net cash used in investing activities		(7.5	)		(34.3	)		(12.9	)		(71.1	)

Cash flows from financing activities:




	Proceeds from senior credit facilities and other borrowings				—			125.0			—			125.0




	Proceeds from debt issuance, net of issuance costs and discount				279.3						279.3			—




	Proceeds from issuance of common stock under the employee stock purchase plan				0.4			1.1			0.8			3.4




	Proceeds from exercise of stock options				0.3			0.4			1.1			0.5




	Payment of capital lease obligation				(0.4	)		(0.6	)		(1.1	)		(0.6	)




	Repayment of senior credit facilities				(280.5	)		(0.1	)		(283.3	)		—

			Net cash provided by (used in) financing activities		(0.9	)		125.8			(3.2	)		128.3

Effect of exchange rate changes on cash and cash equivalents					1.0			0.1			0.9			0.7

Net increase (decrease) in cash and cash equivalents					20.1			101.0			(12.1	)		(13.2	)




Cash and cash equivalents, beginning of period					147.6			74.7			179.8			188.9

Cash and cash equivalents, end of period				$	167.7		$	175.7		$	167.7		$	175.7

See accompanying notes to consolidated financial statements.

ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1: Background and Basis of Presentation

The accompanying consolidated financial statements 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 as of December 31, 2001 and for the year then ended included in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on March 29, 2002.

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. Certain prior period amounts have been reclassified to conform to the current period presentation. These changes had no impact on previously reported results of operations or stockholders’ deficit.

Note 2: Liquidity

At June 28, 2002, the Company had $167.7 million in cash and cash equivalents, net working capital of $208.1 million, term or revolving debt of $1,400.1 million and a stockholders’ deficit of $596.5 million. The Company’s long-term debt includes $705.4 million under its senior bank facilities, $290.9 (net of debt discount) of its senior secured notes due 2008, $260.0 million of its senior subordinated notes due 2009, $120.8 million under its junior subordinated note payable to Motorola and $23.0 million under a note payable to a Japanese bank.

During the quarter and six months ended June 28, 2002, the Company generated net cash from operations of $27.5 and $3.1 million, respectively. This is in contrast to the net cash generated from operations of $9.4 in the June quarter of 2001 and the net cash used in operations of $71.1 million for the six months ended June 29, 2001. The Company’s cash balance increased by $20.1 compared to the prior quarter.

As described in Note 8 “Long-Term Debt”, ON Semiconductor Corporation and its principal domestic operating subsidiary, Semiconductor Components Industries, LLC (collectively, the “Issuers”), issued $300.0 million of 12% Senior Secured Notes (the “Notes”) on May 6, 2002, pursuant to a Rule 144A/Regulation S offering that was exempt from registration requirements of the federal securities laws. The net cash proceeds from the Notes were $279.3 million after the debt discount and issuance costs. The Notes mature on May 15, 2008 and are non-callable for four years. The Company used these proceeds (excluding $0.6 million withheld for remaining closing costs) to pay down certain senior bank facilities (the “Debt Refinancing”). In connection with the Debt Refinancing, the Company and its senior lenders agreed to amend certain of the covenants under these facilities. At June 28, 2002, the Company was in compliance with the covenants outlined in Note 8 “Long-Term Debt” and expects to remain in compliance over the next 12 months.

Debt maturities have also been extended due to the Debt Refinancing. The following table details the Company’s debt maturities before and after the Debt Refinancing:


	Remainder
	of 2002			2003			2004			2005			2006			Thereafter		Total

Actual	$	3.8		$	9.3		$	11.8		$	236.9		$	280.9		$	857.4	$	1,400.1




Pro Forma (1)		5.7			13.8			18.3			290.1			412.3			646.7		1,386.9

Difference	$	(1.9	)	$	(4.5	)	$	(6.5	)	$	(53.2	)	$	(131.4	)	$	210.7	$	13.2

Cumulative difference	$	(1.9	)	$	(6.4	)	$	(12.9	)	$	(66.1	)	$	(197.5	)	$	13.2

(1)

Pro Forma amounts assume the issuance of the Notes and related prepayment on the senior bank facilities had not occurred during the second quarter of 2002.

Besides restructuring debt in the June quarter of 2002, the Company also filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission to register 40,000,000 shares of common stock. Pursuant to this shelf registration statement, the Company may sell the registered shares in one or more offerings depending on market and general business conditions.

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

The Company’s primary liquidity requirements, both in the short term and in the long term, will focus on debt service, capital spending and working capital. Although there can be no assurances, management believes that cash flow from operations, coupled with existing cash and cash equivalent balances and proceeds from targeted sales of assets, will be adequate to fund the Company’s operating and cash flow needs as well as enable it to maintain compliance with its various debt agreements through June 28, 2003. To the extent that actual results or events differ from the Company’s financial projections and business plans, its liquidity may be adversely affected.

Note 3: 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. Management believes that this accounting change was 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, as the timing of revenue recognition is no longer influenced by our distributors’ stocking decisions. This revenue recognition policy is commonly used in the semiconductor industry.

The cumulative effect prior to 2001 of the accounting change was a charge of $155.2 million ($116.4 million or $0.67 per share, net of income taxes) for the six months ended June 29, 2001. The accounting change resulted in a reduction of the Company’s net loss for the quarter and six months ended June 29, 2001 of $12.2 million, or $0.07 per share and $26.4 million, or $0.15 per share, respectively.

Note 4: Balance Sheet Information

Balance sheet information is as follows (in millions):


		June 28,			December 31,
		2002			2001

Inventories:




	Raw materials	$	13.6		$	14.4




	Work in process		121.8			139.9




	Finished goods		75.1			80.7

			210.5			235.0




	Less: Inventory reserves		(50.5	)		(51.3	)

		$	160.0		$	183.7

Intangible assets:




	Developed technology	$	59.3		$	59.3




	Less: Accumulated amortization		(26.6	)		(20.7	)

		$	32.7		$	38.6

Estimated amortization expense of intangible assets is as follows:


Year ending
December 31,
2002	$	11.9




2003		11.9




2004		11.9




2005		2.9

	$	38.6

Note 5: Restructuring and Other Charges

In June 2002, the Company recorded charges of $16.7 million to cover costs associated with a worldwide restructuring program involving manufacturing, selling, general and administrative functions. The charge includes $3.9 million to cover employee separation costs associated with the termination of 79 employees, $8.4 million for fixed asset impairments that were charged directly against the related assets, $2.8 million in costs related to termination of certain purchase and supply agreements, and $1.6 million of additional exit costs associated with the shutdown of the Company’s Guadalajara, Mexico facility. Employee separation costs included $1.0 million of non-cash charges associated with the modification of stock options for certain terminated employees. As of June 28, 2002, 79 employees had been terminated under this restructuring program. As of June 28, 2002, the remaining liability related to this restructuring was $5.5 million. The Company released to income $1.2 million of exit costs previously accrued in connection with a 2001 restructuring program. The Company also recorded a gain of $12.4 million related to a settlement with Motorola on April 8, 2002, which partially offset the charges above for a net charge of $3.1 million (see Note 10 “Related Party Transactions” for further discussion of the settlement agreement).

In March 2002, the Company recorded a $7.1 million charge (net of a $0.1 million recovery) to cover costs associated with a worldwide restructuring program involving selling, general and administrative functions. The charge was to cover employee separation costs associated with the termination of 72 employees and included $0.2 million of non-cash charges associated with the acceleration of the vesting of stock options for certain terminated employees. As of June 28, 2002, the remaining liability relating to the March 2002 charge to the restructuring program was $4.8 million. As of June 28, 2002, 14 employees had been terminated under this restructuring program.

In June 2001, the Company recorded charges of $95.8 million to cover costs associated with a worldwide restructuring program involving both manufacturing locations, selling, general and administrative functions and other costs. The charge included $43.6 million to cover employee separation costs associated with the termination of approximately 3,200 employees, $42.2 million for asset impairments that were charged directly against the related assets and $10.0 million of other costs primarily related to facility closures and contract terminations. 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 28, 2002 the remaining liability associated with the June 2001 restructuring charge was $7.3 million and 125 employees remain to be terminated under this restructuring program.

In March 2001, the Company recorded charges of $38.0 million to cover costs associated with a worldwide restructuring program involving both manufacturing locations, selling, general and administrative functions and other costs. The charge included $31.3 million to cover employee separation costs associated with the termination of approximately 1,100 employees, $2.9 million for asset impairments that were charged directly against the related assets and a $3.8 million charge to cover costs associated with the separation of one of the Company’s executive officers. As of June 28, 2002, there was no remaining liability relating to the March 2001 charge to the restructuring program.

A summary of activity in the Company’s restructuring related reserves for the six months ended June 28, 2002 is as follows (in millions):


	Facility closures and other exit costs			Employee separations			Total

Balance, January 1, 2002	$	10.0		$	9.8		$	19.8




Plus: March 2002 charges		—			7.0			7.0




Plus: June 2002 charges		4.4			2.9			7.3




Less: Payments charged against the reserve		(6.5	)		(7.8	)		(14.3	)




Less: Reserve released to income		(1.3	)		—			(1.3	)

Balance, June 28, 2002	$	6.6		$	11.9		$	18.5

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, effective December 31, 2000, 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 in the six months ended June 29, 2001.

Note 7: Earnings (loss) per Common Share

Basic earnings (loss) per share are computed by dividing net income (loss) applicable to common stock adjusted for dividends accrued on the Company’s convertible redeemable preferred stock by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share generally assumes the conversion of the convertible redeemable preferred stock into common stock and also 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 quarters and six months ended June 28, 2002 and June 29, 2001, the effect of stock option shares (as well as the assumed conversion of the convertible redeemable preferred stock for the quarter and six months ended June 28, 2002) were not included as the related impact would have been anti-dilutive. Pro Forma earnings (loss) per share assume that Statement of Financial Accounting Standard (SFAS) 142 “Goodwill and Other Intangible Assets”, which the Company adopted January 1, 2002, was effective January 1, 2001. Earnings (loss) per share calculations are as follows (in millions, except per share data):


		Quarter Ended									Six Months Ended

								Pro Forma									Pro Forma
		June 28,			June 29,			June 29,			June 28,			June 29,			June 29,
		2002			2001			2001			2002			2001			2001

Reported net loss before extraordinary loss and cumulative effect of accounting change		$	(25.3	)	$	(152.2	)	$	(152.2	)	$	(75.3	)	$	(195.2	)	$	(195.2	)




Less: Redeemable preferred stock dividends			(2.1	)		—			—			(4.2	)		—			—

Net loss before extraordinary loss and cumulative effect of accounting change applicable to common stock			(27.4	)		(152.2	)		(152.2	)		(79.5	)		(195.2	)		(195.2	)




Add back: Goodwill amortization			—			—			2.6			—			—			5.4

Adjusted net loss before extraordinary loss and cumulative effect of accounting change			(27.4	)		(152.2	)		(149.6	)		(79.5	)		(195.2	)		(189.8	)




Extraordinary loss on debt prepayment			(6.5	)		—			—			(6.5	)		—			—




Cumulative effect of accounting change			—			—			—			—			(116.4	)		(116.4	)

Net loss applicable to common stock		$	(33.9	)	$	(152.2	)	$	(149.6	)	$	(86.0	)	$	(311.6	)	$	(306.2	)

Basic weighted average common shares outstanding			175.5			173.5			173.5			175.2			172.8			172.8




Add incremental shares for:




	Dilutive effect of stock options		—			—			—			—			—			—




	Convertible redeemable preferred stock		—			—			—			—			—			—

Diluted weighted average common shares outstanding			175.5			173.5			173.5			175.2			172.8			172.8

Earnings per share (1):




Basic:




Net loss before extraordinary loss and cumulative effect of accounting change		$	(0.16	)	$	(0.88	)	$	(0.88	)	$	(0.45	)	$	(1.13	)	$	(1.13	)




Add back: Goodwill amortization			—			—			0.02			—			—			0.03

Adjusted net loss before extraordinary loss and cumulative effect of accounting change			(0.16	)		(0.88	)		(0.86	)		(0.45	)		(1.13	)		(1.10	)




Extraordinary loss on debt prepayment			(0.04	)		—			—			(0.04	)		—			—




Cumulative effect of accounting change			—			—			—			—			(0.67	)		(0.67	)

Net loss applicable to common stock		$	(0.19	)	$	(0.88	)	$	(0.86	)	$	(0.49	)	$	(1.80	)	$	(1.77	)

Diluted(1):




Reported net loss before extraordinary loss and cumulative effect of accounting change		$	(0.16	)	$	(0.88	)	$	(0.88	)	$	(0.45	)	$	(1.13	)	$	(1.13	)




Add back: Goodwill amortization			—			—			0.02			—			—			0.03

Adjusted net loss before extraordinary loss and cumulative effect of accounting change			(0.16	)		(0.88	)		(0.86	)		(0.45	)		(1.13	)		(1.10	)




Extraordinary loss on debt prepayment			(0.04	)		—			—			(0.04	)		—			—




Cumulative effect of accounting change			—			—			—			—			(0.67	)		(0.67	)

Net loss applicable to common stock		$	(0.19	)	$	(0.88	)	$	(0.86	)	$	(0.49	)	$	(1.80	)	$	(1.77	)

(1)

Certain amounts may not total due to rounding of individual components

Note 8: Long-Term Debt

On May 6, 2002, the Issuers issued $300 million of Notes pursuant to a Rule 144A/Regulation S offering that was exempt from the registration requirements of the federal securities laws. The Notes mature on May 15, 2008 and are non-callable for four years. The Notes were issued at a discount of 96.902% and generated net cash proceeds of $279.3 million after such discount and the payment of issuance costs. The proceeds (excluding $0.6 million withheld for remaining closing costs) were used to prepay a portion of the Company’s senior bank facilities. In connection with this debt prepayment, the Company wrote off $6.5 million of debt issuance costs which is reflected as an extraordinary loss in the Company’s Consolidated Statements of Operations. The Notes will accrue interest at the rate of 12% per annum from May 6, 2002. Commencing on February 6, 2003, the Notes will accrue interest at a rate of 13% per annum unless prior thereto the Company has issued common stock or certain convertible preferred stock to financial sponsors generating at least $100 million in gross cash proceeds and has used the net cash proceeds to repay indebtedness under its senior bank facilities or under any other credit facility secured by a first-priority lien and has permanently reduced the related loan commitment equal to the amount prepaid. Such increase in interest rate, if any, will remain effective until such time as the Company has completed such a stock issuance and repayment, unless such stock issuance and repayment occurs after August 6, 2003, in which case such increase in interest rate will remain in effect. The Company will pay interest on the Notes semi-annually on May 15 and November 15, commencing November 15, 2002.

The Notes are jointly and severally guaranteed on a senior basis by the Company’s domestic restricted subsidiaries that are guarantors under its senior subordinated notes. In addition, the Notes and the guarantees are secured on a second priority basis by the capital stock or other equity interest of domestic subsidiaries, 65% of the capital stock or other equity interests of first-tier foreign subsidiaries and substantially all other assets, in each case that are held by the Company or any of the guarantors, but only to the extent that obligations under its senior bank facilities are secured by a first-priority lien thereon.

The Issuers have agreed to file an exchange offer registration statement or, under certain circumstances, a shelf registration statement, pursuant to a registration rights agreement. If the Issuers fail to comply with certain obligations under the registration rights agreement, the Issuers will incur additional interest up to a maximum of 2.0%.

The Company used the net proceeds from the issuance and sale of the Notes to prepay a portion of its senior bank facilities. Because the remaining principal on the senior bank facilities was reduced below $750 million, the supplemental interest charges (described in the Company’s Form 10-K as filed with the SEC on March 29, 2002) were reduced from 3.0% to 1.0%.

The following table presents the components of long-term debt and their related maturities. Comparative pro forma figures (which assume the Debt Refinancing had not occurred as of June 28, 2002) are also presented to illustrate the effects of the Debt Refinancing that occurred during the second quarter of 2002 (in millions):


												Pro Forma			Pro Forma
			Amount of			Interest			June 28, 2002			Interest			June 28, 2002
			Facility			Rate			Balance			Rate (1)			Balance (1)			Change

Senior Bank Facilities
	Tranche A		$	200.0			6.8750	%	$	7.5			8.8750	%	$	15.6		$	(8.1	)




	Tranche B			325.0			6.8750	%		210.9			8.8750	%		310.9			(100.0	)




	Tranche C			350.0			6.8750	%		227.2			8.8750	%		334.9			(107.7	)




	Tranche D			200.0			6.8750	%		134.8			8.8750	%		196.7			(61.9	)




	Revolver			150.0			6.8750	%		125.0			8.8750	%		125.0			—




12% Senior Subordinated Notes due 2009										260.0						260.0			—




12% Senior Secured Notes due 2008 interest payable semi-annually, net of debt discount of $9.1										290.9						—			290.9




10% Junior Subordinated Note to Motorola due 2011, interest compounded semi- annually, payable at maturity										120.8						120.8			—




2.25% Note Payable due 2010 (Japan)										23.0						23.0			—




Less: Current maturities										(7.5	)					(12.2	)		4.7

									$	1,392.6					$	1,374.7		$	17.9






		Annual maturities are as follows:							Actual						Pro Forma (1)			Change

			Remainder of




					2002				$	3.8					$	5.7		$	(1.9	)




					2003					9.3						13.8			(4.5	)




					2004					11.8						18.3			(6.5	)




					2005					236.9						290.1			(53.2	)




					2006					280.9						412.3			(131.4	)




			Thereafter							857.4						646.7			210.7

						Total			$	1,400.1					$	1,386.9		$	13.2

(1)

Pro Forma amounts assume the issuance of the Notes and related prepayment on the senior bank facilities had not occurred as of June 28, 2002.

On April 17, 2002, the Company’s senior bank facilities were amended to permit the issuance of the Notes, to permit the second-priority liens securing the Notes and to provide that, subject to specified conditions:

•

minimum interest expense coverage ratio and maximum leverage ratio requirements will not apply until periods beginning after December 31, 2003;

•		from January 1, 2004 to June 30, 2006, the minimum required interest expense coverage ratio will be lower and the maximum permitted leverage ratio will be higher, in each case as compared to the ratios previously required under the credit agreement;

•		minimum EBITDA levels will apply until December 31, 2003 and minimum cash levels will apply until certain minimum interest coverage ratio and maximum leverage ratio requirements are met;

•		sales of property, plant and equipment in connection with specified restructuring activities will be permitted; and

•		borrowings of up to $100.0 million by or for the benefit of the Company’s joint venture in Leshan, China will be permitted, the proceeds of which would be used to prepay loans under the senior bank facilities.

At June 29, 2001 the Company was not in compliance with minimum interest expense coverage ratio and leverage ratio covenants under its senior bank facilities. On August 13, 2001, the Company received a waiver in respect of this noncompliance at June 29, 2001. In connection with this waiver, the Company’s senior bank facilities were amended. As a condition to the waiver and amendment, the Company was required to obtain $100.0 million through an equity investment from an affiliate of Texas Pacific Group (“TPG”), the Company’s majority stockholder. The Company satisfied this requirement on September 7, 2001, when it issued 10,000 shares of Series A Cumulative Convertible Redeemable Preferred Stock to an affiliate of TPG in exchange of $100.0 million ($99.2 million net of issuance costs). The key terms of this amendment, as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, were further amended in April 2002, as described above. At June 28, 2002, the Company was in compliance with the covenants, as amended.

The Company and SCI LLC are co-issuers of both the senior subordinated notes and the senior secured notes. The Company’s other domestic subsidiaries (collectively, the “Guarantor Subsidiaries”) irrevocably and unconditionally guaranteed on a joint and several basis, the Issuers’ obligations under the senior subordinated notes and the Notes. The Guarantor Subsidiaries include holding companies whose net assets consist primarily of investments in the Company’s Czech subsidiaries, the Leshan joint venture and nominal equity interests in certain of the Company’s other foreign subsidiaries as well as Semiconductor Components Industries of Rhode Island, Inc. The Company’s remaining subsidiaries (collectively, the “Non-Guarantor Subsidiaries”) are not guarantors of either the senior subordinated notes or the Notes.

Condensed consolidating financial information for the Issuers, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries as of June 28, 2002 and December 31, 2001 and for quarters and six months ended June 28, 2002 and June 29, 2001 are as follows (in millions):


			Issuers

			ON Semiconductor						Guarantor		Non-Guarantor
			Corporation			SCI LLC			Subsidiaries		Subsidiaries			Eliminations			Total

	As of June 28, 2002




Cash and cash equivalents			$	—		$	80.7		$	—	$	87.0		$	—		$	167.7




Receivables, net				—			55.1			—		88.4			—			143.5




Inventories				—			24.6			2.4		128.6			4.4			160.0




Other current assets				—			8.0			0.3		33.5			—			41.8

		Total current assets		—			168.4			2.7		337.5			4.4			513.0




Property, plant and equipment, net				—			125.0			37.2		345.2			(4.4	)		503.0




Deferred income taxes				—			—			—		—			—			—




Goodwill and other intangibles, net				—			8.1			101.9		—			—			110.0




Investments and other assets				(531.3	)		156.3			47.3		1.1			467.3			140.7

		Total assets	$	(531.3	)	$	457.8		$	189.1	$	683.8		$	467.3		$	1,266.7

Accounts payable			$	—		$	19.6		$	2.7	$	71.8		$	—		$	94.1




Accrued expenses and other current liabilities				—			96.7			1.6		35.7			1.5			135.5




Deferred income on sales to distributors				—			34.0			—		41.3			—			75.3

		Total current liabilities		—			150.3			4.3		148.8			1.5			304.9




Long-term debt (1)				550.9			1,369.6			—		23.0			(550.9	)		1,392.6




Other long-term liabilities				—			42.4			—		13.6			—			56.0




Intercompany (1)				(591.5	)		(549.6	)		170.7		419.5			550.9			—

		Total liabilities		(40.6	)		1,012.7			175.0		604.9			1.5			1,753.5




Minority interests in consolidated subsidiaries				—			—			—		—			3.9			3.9




Redeemable preferred stock				105.8			—			—		—			—			105.8




Stockholders’ equity (deficit)				(596.5	)		(554.9	)		14.1		78.9			461.9			(596.5	)

Liabilities, minority interests and stockholders’ equity (deficit)			$	(531.3	)	$	457.8		$	189.1	$	683.8		$	467.3		$	1,266.7

	As of December 31, 2001




Cash and cash equivalents			$	—		$	124.9		$	0.1	$	54.8		$	—		$	179.8




Receivables, net				—			62.4			—		79.9			—			142.3




Inventories				—			25.9			3.1		158.8			(4.1	)		183.7




Other current assets				—			6.8			0.1		38.1			—			45.0

		Total current assets		—			220.0			3.3		331.6			(4.1	)		550.8




Property, plant and equipment, net				—			148.3			42.7		368.9			(4.4	)		555.5




Deferred income taxes				—			—			—		1.3			—			1.3




Goodwill and other intangibles, net				—			8.0			107.9		—			—			115.9




Investments and other assets				(453.1	)		62.4			45.4		1.0			481.2			136.9

		Total assets	$	(453.1	)	$	438.7		$	199.3	$	702.8		$	472.7		$	1,360.4

Accounts payable			$	—		$	33.4		$	2.4	$	75.7		$	—		$	111.5




Accrued expenses and other current liabilities				—			86.8			0.2		37.0			—			124.0




Deferred income on sales to distributors				—			43.3			—		56.1			—			99.4

		Total current liabilities		—			163.5			2.6		168.8			—			334.9




Long-term debt (1)				260.0			1,352.6			—		21.9			(260.0	)		1,374.5




Other long-term liabilities				—			50.6			—		12.1			—			62.7




Intercompany (1)				(297.3	)		(630.4	)		156.1		510.1			261.5			—

		Total liabilities		(37.3	)		936.3			158.7		712.9			1.5			1,772.1




Minority interests in consolidated subsidiaries				—			—			—		—			4.1			4.1




Redeemable preferred stock				101.6			—			—		—			—			101.6




Stockholders’ equity (deficit)				(517.4	)		(497.6	)		40.6		(10.1	)		467.1			(517.4	)

Liabilities, minority interests and stockholders’ equity (deficit)			$	(453.1	)	$	438.7		$	199.3	$	702.8		$	472.7		$	1,360.4


				Issuers

				ON Semiconductor						Guarantor			Non-Guarantor
				Corporation			SCI LLC			Subsidiaries			Subsidiaries			Eliminations			Total

	For the quarter ended June 28, 2002




Revenues				$	—		$	143.8		$	13.0		$	320.1		$	(199.2	)	$	277.7




Cost of sales					—			141.6			14.5			243.1			(197.5	)		201.7

Gross profit					—			2.2			(1.5	)		77.0			(1.7	)		76.0

Research and development					—			0.5			5.6			16.7			(6.6	)		16.2




Selling and marketing					—			8.0			0.4			6.8			—			15.2




General and administrative					—			19.8			(0.6	)		7.5			—			26.7




Amortization of goodwill and other intangibles					—			—			3.0			—			—			3.0




Restructuring and other charges					—			(0.5	)		0.5			3.1			—			3.1

Total operating expenses					—			27.8			8.9			34.1			(6.6	)		64.2

Operating income (loss)					—			(25.6	)		(10.4	)		42.9			4.9			11.8




Interest expense, net					—			(20.3	)		(6.3	)		(9.7	)		—			(36.3	)




Other income and expense (2)					—			(40.4	)		—			40.4			—			—




Equity earnings (losses)					(31.8	)		58.9			2.5			—			(27.1	)		2.5

Income (loss) before income taxes, minority interests and extraordinary loss					(31.8	)		(27.4	)		(14.2	)		73.6			(22.2	)		(22.0	)




Income tax benefit (provision)					—			(0.3	)		—			(3.0	)		—			(3.3	)




Minority interests					—			—			—			—			—			—




Extraordinary loss, net					—			(6.5	)		—			—			—			(6.5	)

Net income (loss)				$	(31.8	)	$	(34.2	)	$	(14.2	)	$	70.6		$	(22.2	)	$	(31.8	)

	For the six months ended June 28, 2002




Revenues				$	—		$	271.4		$	26.0		$	626.1		$	(376.7	)	$	546.8




Cost of sales					—			266.7			29.9			488.0			(372.0	)		412.6

Gross profit					—			4.7			(3.9	)		138.1			(4.7	)		134.2

Research and development					—			10.8			6.8			29.0			(13.1	)		33.5




Selling and marketing					—			15.4			0.9			13.5			—			29.8




General and administrative					—			36.4			(0.6	)		20.1			—			55.9




Amortization of goodwill and other intangibles					—			—			6.0			—			—			6.0




Restructuring and other charges					—			6.6			0.5			3.1			—			10.2

Total operating expenses					—			69.2			13.6			65.7			(13.1	)		135.4

Operating income (loss)					—			(64.5	)		(17.5	)		72.4			8.4			(1.2	)




Interest expense, net					—			(39.4	)		(11.0	)		(20.6	)		—			(71.0	)




Other income and expense (2)					—			(40.4	)		—			40.4			—			—




Equity earnings (losses)					(81.8	)		92.7			2.0			—			(9.2	)		3.7

Income (loss) before income taxes, minority interests and extraordinary loss					(81.8	)		(51.6	)		(26.5	)		92.2			(0.8	)		(68.5	)




Income tax benefit (provision)					—			(2.0	)		—			(5.0	)		—			(7.0	)




Minority interests					—			—			—			—			0.2			0.2




Extraordinary loss					—			(6.5	)		—			—			—			(6.5	)

Net income (loss)				$	(81.8	)	$	(60.1	)	$	(26.5	)	$	87.2		$	(0.6	)	$	(81.8	)

Net cash provided by (used in) operating activities				$	—		$	(151.8	)	$	0.1		$	154.8		$	—		$	3.1

Cash flows from investing activities:




		Purchases of property, plant and equipment			—			(4.7	)		(0.2	)		(10.5	)		—			(15.4	)




		Proceeds from sales of property, plant and equipment			—			2.4			—			0.1			—			2.5

			Net cash used in investing activities		—			(2.3	)		(0.2	)		(10.4	)		—			(12.9	)

Cash flows from financing activities:




		Intercompany loans			—			(137.6	)		—			137.6			—			—




		Intercompany loan repayments			—			250.7			—			(250.7	)		—			—




		Proceeds from debt issuance, net of closing costs and discount			—			279.3			—			—			—			279.3




		Payments on capital lease obligation			—			(1.1	)		—			—			—			(1.1	)




		Repayment of long term debt			—			(283.3	)		—			—			—			(283.3	)




		Proceeds from exercise of stock options and issuance of common stock under the employee stock purchase plan			—			1.9			—			—			—			1.9

			Net cash provided by financing activities		—			109.9			—			(113.1	)		—			(3.2	)

Effect of exchange rate changes on cash and cash equivalents					—			—			—			0.9			—			0.9

Net increase (decrease) in cash and cash equivalents					—			(44.2	)		(0.1	)		32.2			—			(12.1	)




Cash and cash equivalents, beginning of period					—			124.9			0.1			54.8			—			179.8

Cash and cash equivalents, end of period				$	—		$	80.7		$	—		$	87.0		$	—		$	167.7


			Issuers

			ON Semiconductor						Guarantor			Non-Guarantor
			Corporation			SCI LLC			Subsidiaries			Subsidiaries			Eliminations			Total

For the quarter ended June 29, 2001




Revenues			$	—		$	182.4		$	9.5			386.8		$	(268.0	)	$	310.7




Cost of sales				—			145.4			8.1			363.7			(261.6	)		255.6

Gross profit				—			37.0			1.4			23.1			(6.4	)		55.1

Research and development				—			3.4			5.0			20.3			(5.8	)		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				—			53.5			14.8			116.6			(5.8	)		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




Gain on the sale of investment in joint venture				—			—			—			—			—			—

Income (loss) before income taxes, minority interests and cumulative effect of accounting change, net				(152.2	)		(66.6	)		(16.1	)		(106.7	)		189.4			(152.2	)




Income tax benefit (provision)				—			44.1			8.9			(0.6	)		(52.4	)		—




Minority interests				—			—			—			—			—			—




Cumulative effect of accounting change				—			—			—			—			—			—

Net income (loss)			$	(152.2	)	$	(22.5	)	$	(7.2	)	$	(107.3	)	$	137.0		$	(152.2	)

For the six months ended June 29, 2001




Revenues			$	—		$	398.1		$	25.8			821.4		$	(574.1	)	$	671.2




Cost of sales				—			324.0			21.9			744.8			(561.2	)		529.5

Gross profit				—			74.1			3.9			76.6			(12.9	)		141.7

Research and development				—			14.8			9.1			34.8			(12.9	)		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				—			124.3			29.9			165.1			(12.9	)		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				—			(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 joint ventures and other			—			—			—			(0.5	)		—			(0.5	)




	Acquisition of minority interests in consolidated subsidiaries			—			—			—			—			(0.1	)		(0.1	)




	Proceeds from sale of investment in joint venture			—			20.4			—			—			—			20.4




	Loans to 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	)		—			(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		$	—		$	175.7

(1)		For purposes of this presentation, the senior subordinated notes and senior secured 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.




(2)		Represents the effects of an intercompany loan write-off in connection with the closure of the Company’s Guadalajara, Mexico facility.

Note 9: Commitments and Contingencies

The Company is involved in a variety of legal matters that arise 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 following paragraph, will have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

During the period July 5, 2001 through July 27, 2001, the Company was named as a defendant in three shareholder class action lawsuits that were filed in federal court in New York City against it and certain of its current and former officers, current directors and the underwriters for its initial public offering (“IPO”). The lawsuits allege violations of the federal securities laws and have been docketed in the U.S. District Court for the Southern District of New York as: Abrams v. ON Semiconductor Corp., et al., C.A. No. 01-CV-6114; Breuer v. ON Semiconductor Corp., et al., C.A. No. 01-CV-6287; and Cohen v. ON Semiconductor Corp., et al., C.A. No. 01-CV-6942. On April 19, 2002, the plaintiffs filed a single consolidated amended complaint that supersedes the individual complaints originally filed. The amended complaint alleges, among other things, that the underwriters of the Company’s IPO improperly required their customers to pay the underwriters excessive commissions and agree to buy additional shares of the Company’s common stock in the aftermarket as conditions of receiving shares in the Company’s IPO. The amended complaint further states that these alleged practices of the underwriters should have been disclosed in the Company’s IPO prospectus and registration statement. The amended complaint alleges violations of both the registration and antifraud provisions of the federal securities laws and seeks rescission of the plaintiffs’ alleged purchases of the Company’s common stock as well as unspecified damages. The Company understands that various other plaintiffs have filed substantially similar class action cases against over 300 other publicly traded companies and their IPO underwriters in New York City, which along with the cases against the Company have all been transferred to a single federal district judge for purposes of coordinated case management. The Company believes that the claims against it are without merit, and intends to defend the litigation vigorously. In that regard, on July 15, 2002, the Company, together with the other issuers named as defendants in these coordinated proceedings, filed a collective motion to dismiss the consolidated amended complaints against them on various legal grounds common to all or most of the issuer defendants. This motion is currently pending. While the Company can make no promises or guarantees as to the outcome of these actions, the Company believes that the final result of these actions will have no material effect on its consolidated financial condition or results of operations.

Note 10: Related Party Transactions

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


	Quarter Ended				Six Months Ended

	June 28,		June 29,		June 28,		June 29,
	2002		2001		2002		2001

Purchases of manufacturing services from Motorola	$	4.3	$	30.0	$	7.5	$	55.5

Cost of other services, rent and equipment purchased from Motorola	$	0.4	$	3.1	$	0.9	$	15.7

On April 8, 2002, the Company and Motorola, Inc. reached agreement regarding certain post-closing payments to be made under agreements entered into in connection with the August 1999 Recapitalization. Pursuant to the agreement, Motorola paid the Company $10.6 million during the second quarter of 2002. As a result, the Company has recognized a related gain of $12.4 million, which is included in Restructuring and Other Charges in the Consolidated Statement of Operations and Comprehensive Loss. Motorola is a related party of the Company, continuing to own less than 7% of the Company’s total common stock at June 28, 2002.

Note 11: Recently Issued and Recently Adopted Accounting Pronouncements

Effective January 1, 2002, the Company adopted the provisions of SFAS 141, “Business Combinations” and SFAS 142, “Goodwill and Other Intangible Assets”. The provisions of SFAS 141 require that the purchase method of accounting be used for all business combinations initiated after June 30, 2001; provide specific criteria for the initial recognition and measurement of intangible assets apart from goodwill; and require that unamortized negative goodwill be written off immediately as an extraordinary gain instead of being deferred and amortized. SFAS 141 also requires that upon adoption of SFAS 142, the Company reclassify the carrying amounts of certain intangible assets into or out of goodwill based on certain criteria. SFAS 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their initial recognition. The provisions of SFAS 142 prohibit the amortization of goodwill and indefinite-lived intangible assets and require that such assets be tested annually for impairment (and in interim periods if certain events occur indicating that the carrying value of goodwill and/or indefinite-lived intangible assets may be impaired); require that reporting units be identified for the purpose of assessing potential future impairments of goodwill; and remove the forty-year limitation on the amortization period of intangible assets that have finite lives. The Company no longer records amortization with respect to goodwill resulting from the April 2000 acquisition of Cherry Semiconductor Corporation (“Cherry”). Such amortization expense totaled $10.7 million in 2001.

During the first quarter of 2002, the Company identified its various reporting units and allocated its assets (including goodwill) and liabilities to such reporting units. During the second quarter of 2002, the Company compared the book value of the reporting unit containing the Cherry goodwill to the related fair value of that reporting unit and determined that a goodwill impairment write-down was not required. Pursuant to the provisions of SFAS 142, the Company will evaluate the need for a goodwill impairment writedown on an annual basis or whenever events or circumstances indicate that an impairment may have occurred.

The Company adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” as of January 1, 2002. SFAS 144 requires that all long-lived assets (including discontinued operations) that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. Additionally, SFAS 144 expands the scope of discontinued operations to include all components of an entity with operations that can be distinguished from the rest of the entity and will be eliminated from the ongoing operations of the entity in a disposal transaction. The Company’s adoption of SFAS 144 did not impact its financial condition or results of operations.

The Company adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” which establishes standards for the accounting and reporting for derivative instruments, including derivative instruments embedded in other contracts, and hedging activities 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 consisted 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 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 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 underlying assets or liabilities. The adoption of SFAS 133 did not impact the Company’s accounting and reporting for these derivative instruments.

In April 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 145, “Rescission of FAS Nos. 4, 44, and 64, Amendment of FAS 13, and Technical Corrections as of April 2002”. SFAS No. 145 rescinds SFAS No. 4, “Reporting Gains and Losses from Extinguishment of Debt”, and an amendment of that Statement, SFAS No. 64, “Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements” and excludes extraordinary item treatment for gains and losses associated with the extinguishment of debt that do not meet the Accounting Principles Board (“APB”) Opinion No. 30, “Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” criteria. Any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior periods presented that does not meet the criteria in APB No. 30 for classification as an extraordinary item shall be reclassified. SFAS No. 145 also amends FASB

Statement No. 13, Accounting for Leases” and amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The Company is required to adopt SFAS No. 145 effective January 1, 2003. The Company has not yet determined the impact of SFAS No.145 on its financial condition or results of operations.

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities”. SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)”. SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under EITF No. 94-3, a liability for an exit cost as defined in EITF No. 94-3 was recognized at the date of an entity’s commitment to an exit plan. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated by the Company after December 31, 2002.

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, 2001 included in our Annual Report on Form 10-K filed with the SEC on March 29, 2002. 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.

We are a leading global supplier of power and data management semiconductors and standard semiconductor components. We design, manufacture and market an extensive portfolio of semiconductor components that addresses the design needs of sophisticated electronic systems and products. Our power management semiconductor components distribute and monitor the supply of power to the different elements within a wide variety of electronic devices. Our data management semiconductor components provide high-performance clock management and data flow management for precision computing and communications systems. Our standard semiconductor components serve as “building block” components within virtually all electronic devices.

We serve a broad base of end-user markets including wireless communications, consumer electronics, automotive and industrial electronics, plus networking and computing markets. Applications for our products in these markets include portable electronics, computers, game stations, servers, automotive and industrial automation control systems, routers, switches, storage-area networks and automated test equipment.

We have four main product lines: power management and standard analog devices, metal oxide semiconductor (MOS) power devices, high frequency clock and data management devices, and standard components. Our extensive portfolio of devices enables us to offer advanced integrated circuits and the complementary parts that deliver system level functionality and design solutions. We are an industry leader in micro packages, which offer increased performance characteristics while reducing the critical board space inside today’s ever shrinking electronic devices. We believe that our ability to offer a broad range of products provides our customers with single source purchasing on a cost-effective and timely basis. This has become increasingly important to our customers as they seek to reduce the number of suppliers with which they conduct business.

Recent developments. After over two years of extremely positive industry fundamentals, the semiconductor industry began to experience a severe slowdown in demand in the last quarter of 2000, which continued into 2001 as customers delayed or cancelled bookings in order to manage their inventories in line with incoming business. However, in the third and fourth quarters of 2001 and continuing into the second quarter of 2002, demand for our products began to show signs of stabilization as customer orders across all of our product families were up from the second quarter of 2001. On a sequential basis, the Company’s 13-week backlog grew for the second consecutive quarter with a book-to-bill ratio above 1.0.

Our total revenues were $277.7 million in the second quarter of 2002, compared to $310.7 million in the second quarter of 2001 and $269.1 million in the first quarter of 2002. We currently expect our total revenues for the third quarter of 2002 to be flat to slightly up with gross margins increasing 100-300 basis points and operating expenses remaining flat to slightly down from the second quarter. This includes further realization of cost savings from our restructuring programs. While longer-term visibility remains poor, it is currently our expectation that with market conditions continuing to improve we would achieve break-even from an earnings perspective and return to profitability before the third quarter of 2003. See “Trends, Risks, Uncertainties and Forward-Looking Statements” below in this Form 10-Q.

On April 24, 2002, we filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission to register 40,000,000 shares of our common stock. We may sell the registered shares in one or more offerings depending on market and general business conditions.

On May 6, 2002, we issued $300.0 million of 12% Senior Secured Notes (the “Notes”) pursuant to a Rule 144A/Regulation S offering that was exempt from the registration requirements of the federal securities laws. The Notes mature on May 15, 2008 and are non-callable for four years. The Notes were issued at a discount of 96.902% and generated net cash proceeds of $279.3 million after such discount and the payment of issuance costs. The proceeds (excluding $0.6 million withheld for remaining closing costs) were used to prepay a portion of our senior bank facilities. In connection with this debt prepayment, we wrote off $6.5 million of debt issuance costs. The Notes will accrue interest at the rate of 12% per annum from May 6, 2002. Commencing on February 6, 2003, the Notes will accrue interest at a rate of 13% per annum unless prior thereto we have issued common stock or certain convertible preferred stock to financial sponsors generating at least $100 million in gross cash proceeds and have used the net cash proceeds to repay indebtedness under our senior bank facilities or under any other credit facility secured by a first-priority lien and have permanently reduced the related loan commitment equal to the amount prepaid. Such increase in interest rate, if any, will remain effective until such time as we have completed such a stock issuance and repayment, unless such stock issuance and repayment occurs after August 6, 2003, in which case such increase in interest rate will remain in effect. We will pay interest on the Notes semi-

annually on May 15 and November 15, commencing November 15, 2002.

The Notes are jointly and severally guaranteed on a senior basis by our domestic restricted subsidiaries that are guarantors under our senior subordinated notes. In addition, the Notes and the guarantees are secured on a second priority basis by the capital stock or other equity interest of domestic subsidiaries, 65% of the capital stock or other equity interests of first-tier foreign subsidiaries and substantially all other assets, in each case that are held by us or any of the guarantors, but only to the extent that obligations under our senior bank facilities are secured by a first-priority lien thereon.

We have agreed to file an exchange offer registration statement or, under certain circumstances, a shelf registration statement, pursuant to a registration rights agreement. If we fail to comply with certain obligations under the registration rights agreement, we will incur additional interest up to a maximum of 2.0%.

On April 17, 2002, our senior bank facilities were amended to permit the issuance of the Notes, to permit the second-priority liens securing the Notes and to provide that, subject to specified conditions:

•		minimum interest expense coverage ratio and maximum leverage ratio requirements will not apply until periods beginning after December 31, 2003;

•		from January 1, 2004 to June 30, 2006, the minimum required interest expense coverage ratio will be lower and the maximum permitted leverage ratio will be higher, in each case as compared to the ratios previously required under the credit agreement;

•		minimum EBITDA levels will apply until December 31, 2003 and minimum cash levels will apply until certain minimum interest coverage ratio and maximum leverage ratio requirements are met;

•		sales of property, plant and equipment in connection with specified restructuring activities will be permitted; and

•		borrowings of up to $100.0 million by or for the benefit of the Company’s joint venture in Leshan, China will be permitted, the proceeds of which would be used to prepay loans under the senior bank facilities.

Restructuring Program. As a response to the downturn in the semiconductor industry, in 2001 we initiated a worldwide restructuring program to better align our cost structure with our revenues. The principal elements of this program are (1) implementing a manufacturing rationalization plan that involves, among other things, plant closures and efficient reallocation of capacity among other facilities, the relocation or outsourcing of related operations to take advantage of lower cost labor markets and the rationalization of our product portfolio; (2) reducing non-manufacturing personnel and implementing other cost controls, in connection with which we have relocated certain of our order entry, finance, quality assurance and information technology functions to lower cost locations and simplified our overall corporate structure and our regional infrastructure; and (3) improving our liquidity by reducing capital expenditures, actively managing working capital and reducing our cost structure through various measures, including reducing some employees compensation and spending on information technology and outside consultants.

We expect that the elements of this program that we completed during 2001 and thus far in 2002, which resulted in restructuring and other charges of $150.4 and $22.6 million (excluding the effects of the Motorola settlement discussed in Note 10 “Related Party Transactions” in our Notes to Consolidated Financial Statements included in this Form 10-Q), respectively and the further elements we intend to complete during the remainder of 2002 will generate annualized cost savings of approximately $360 million starting in the fourth quarter of 2002, as compared to our cost structure during the first quarter of 2001. As of the end of the second quarter of 2002, we had completed actions to achieve an estimated $340 million of these savings, which were the result of the rationalization of manufacturing operations, personnel reductions and other cost reductions.

Waiver and Amendment to Senior Bank Facilities. At June 29, 2001 we were not in compliance with minimum interest expense coverage ratio and leverage ratio covenants under our senior bank facilities. On August 13, 2001, we received a waiver in respect of this noncompliance at June 29, 2001. In connection with this waiver, our senior bank facilities were amended. As a condition to the waiver and amendment, we were required to obtain $100.0 million through an equity investment from an affiliate of Texas Pacific Group (“TPG”), our majority stockholder. We satisfied this requirement on September 7, 2001, when we issued 10,000 shares of Series A Cumulative Convertible Redeemable Preferred Stock to an affiliate of TPG for $100.0 million ($99.2 million net of issuance costs). The key terms of this amendment, as described in our Annual Report on Form 10-K for the year ended December 31, 2001, were further amended in April 2002, as discussed above. At June 28, 2002, we were in compliance with the required amended covenants, and our forecasts for the next twelve months indicate continued compliance.

Recently Issued and Recently Adopted Accounting Policies and Accounting Changes. Effective January 1, 2002, we adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) 141, “Business Combinations” and SFAS 142, “Goodwill and Other Intangible Assets”. The provisions of SFAS 141 require that the purchase method of accounting be used for all business

combinations initiated after June 30, 2001; provide specific criteria for the initial recognition and measurement of intangible assets apart from goodwill; and require that unamortized negative goodwill be written off immediately as an extraordinary gain instead of being deferred and amortized. SFAS 141 also requires that upon adoption of SFAS 142, we reclassify the carrying amounts of certain intangible assets into or out of goodwill based on certain criteria. SFAS 142 primarily addresses the accounting for goodwill and intangible assets subsequent to their initial recognition. The provisions of SFAS 142 prohibit the amortization of goodwill and indefinite-lived intangible assets and require that such assets be tested annually for impairment (and in interim periods if certain events occur indicating that the carrying value of goodwill and/or indefinite-lived intangible assets may be impaired); require that reporting units be identified for the purpose of assessing potential future impairments of goodwill; and remove the forty-year limitation on the amortization period of intangible assets that have finite lives. We no longer record amortization with respect to goodwill resulting from the April 2000 acquisition of Cherry Semiconductor Corporation (“Cherry”). Such amortization expense totaled $10.7 million in 2001.

During the first quarter of 2002, we identified our various reporting units and allocated our assets (including goodwill) and liabilities to such reporting units. During the second quarter of 2002, we compared the book value of the reporting unit containing the Cherry goodwill to the related fair value of that reporting unit and determined that a goodwill impairment write-down was not required. Pursuant to the provisions of SFAS 142, we will evaluate the need for a goodwill impairment writedown on an annual basis or whenever events or circumstances indicate that an impairment may have occurred.

Also as of January 1, 2002, we adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. SFAS 144 requires that all long-lived assets (including discontinued operations) that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. Additionally, SFAS 144 expands the scope of discontinued operations to include all components of an entity with operations that can be distinguished from the rest of the entity and will be eliminated from the ongoing operations of the entity in a disposal transaction. The implementation of SFAS 144 did not impact our financial condition or results of operations.

On January 1, 2001, we adopted SFAS 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.

Our interest rate swaps in effect at January 1, 2001 were designated as cash flow hedges, were 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 our 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 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 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 value 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.

Also 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. We believe that this accounting change is 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, as the timing of our revenue recognition is not influenced by our distributors’ stocking decisions. This revenue recognition policy is commonly used in the semiconductor market. The cumulative effect prior to 2001 of the accounting change was a charge of $155.2 million ($116.4 million, or $0.67 per share, net of income taxes) for the six months ended June 29, 2001. The accounting change resulted in a reduction of the Company’s net loss for the quarter and six months ended June 29, 2001 of $12.2 million, or $0.07 per share, and $26.4 million, or $0.15 per share, respectively.

Sinking-Fund Requirements” and excludes extraordinary item treatment for gains and losses associated with the extinguishment of debt that do not meet the Accounting Principles Board (“APB”) Opinion No. 30, “Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” criteria. Any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior periods presented that does not meet the criteria in APB No. 30 for classification as an extraordinary item shall be reclassified. SFAS No. 145 also amends FASB Statement No. 13, “Accounting for Leases” and amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. We are required to adopt SFAS No. 145 effective January 1, 2003. We have not yet determined the impact of SFAS No.145 on its financial condition or results of operations.

Joint venture. The terms of our joint venture agreement with Philips Semiconductors International B.V. SMP (“Philips”) relating to a back-end assembly facility located in Malaysia provided Philips with the right to purchase our interest between January 2001 and July 2002. On February 1, 2001, Philips exercised its purchase right, acquiring full ownership of this joint venture as of December 31, 2000. This transaction resulted in proceeds of approximately $20.4 million and a pretax gain of approximately $3.1 million. The acquisition of the joint venture by Philips did not have a material impact on our financial condition or results of operations.

Critical Accounting Policies

The accompanying discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America. We believe certain of our accounting policies are critical to understanding our financial position and results of operations. We utilize the following critical accounting policies in the preparation of our financial statements.

Revenue. We generate revenue from the sales of our semiconductor products to original equipment manufacturers, distributors and electronic manufacturing service providers. We also generate revenue, although to a much lesser extent, from foundry services provided to Motorola pursuant to agreements signed in connection with our Recapitalization.

Prior to January 1, 2001, we recognized revenue on distributor sales when title passed to the distributor. Provisions were also recorded at that time for estimated sales returns from our distributors as well as for other related sales costs and allowances. Effective January 1, 2001, we changed our revenue recognition policy for distributor sales so that the related revenues are now deferred until the distributor resells the product to the end user. This change also eliminated the need to provide for estimated sales returns from distributors. Deferred income on sales to distributors as reflected in our consolidated balance sheet represents the net margin (deferred revenue less associated costs of sales) on inventory on hand at our distributors at the end of the period. We continue to recognize revenue on sales to original equipment manufacturers and electronic manufacturing service providers when title passes to the customer net of provisions for related sales costs and allowances.

We believe that this change better aligns our reported results with, focuses us on, and enables investors to better understand, end user demand for the products we sell through distributors as our revenue is not influenced by our distributors’ stocking decisions.

Inventories. We carry our inventories at the lower of standard cost (which approximates cost on a first-in, first-out basis) or market and record provisions for slow moving inventories based upon a regular analysis of inventory on hand compared to historical and projected end user demand. Projected end user demand is generally based on sales during the prior twelve months. These provisions can influence our results from operations. For example, when demand falls for a given part, all or a portion of the related inventory is reserved, impacting our cost of sales and gross profit. If demand recovers and the parts previously reserved are sold, we will generally recognize a higher than normal margin. Obsolete inventories are charged against the previously established reserves when the Company determines that products cannot be sold.

Deferred tax valuation allowance. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. In determining the amount of the valuation allowance, we consider estimated future taxable income as well as feasible tax planning strategies in each taxing jurisdiction in which we operate. If we determine that we will not realize all or a portion of our remaining deferred tax assets, we will increase our valuation allowance with a charge to income tax expense. Conversely, if we determine that we will ultimately be able to utilize all or a portion of the deferred tax assets for which a valuation allowance has been provided, the related portion of the valuation allowance will be released to income as a credit to income tax expense. In the fourth quarter of 2001, we established a valuation allowance for the majority of our deferred tax assets and through the first half of 2002, we have not recognized any incremental deferred tax benefits. We monitor our ability to utilize our deferred tax assets and the continuing need for a related valuation allowance on an ongoing basis.

Property, Plant & Equipment Impairment. We periodically evaluate the recoverability of the carrying amount of our property, plant and equipment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. Impairment is assessed when the undiscounted expected cash flows derived for an asset are less than its carrying amount. Impairment losses are measured as the amount by which the carrying value of an asset exceeds its fair value and are recognized in operating results. We continually apply our best judgement when applying these impairment rules to determine the timing of the impairment test, the undiscounted cash flows used to assess impairments and the fair value of an impaired asset. The dynamic economic environment in which we operate and the resulting assumptions used to estimate future cash flows impact the outcome of our impairment tests.

Defined Benefit Plans. We maintain pension plans covering certain of our employees. For financial reporting purposes, net periodic pension costs are calculated based upon a number of actuarial assumptions, including a discount rate for plan obligations, assumed rate of return on pension plan assets and assumed rate of compensation increase for plan employees. All of these assumptions are based upon management’s judgement, considering all known trends and uncertainties. Actual results that differ from these assumptions would impact the future expense recognition and cash funding requirements of our pension plans. We have assumed rates of return of 8.5% for our U.S. pension plan and 6.6% for our foreign pension plans in our actuarial assumptions. We estimate that each 0.5% change in the assumed rate of return would cause a $0.2 million change in pension expense for the next fiscal year. We have also assumed discount rates of 7.40% and 5.08% for our U.S. pension plan liability and foreign pension plan liability, respectively. We estimate that each 0.5% change in this assumed rate would cause a $0.5 million change in pension expense for the next fiscal year.

Results of Operations

Quarter Ended June 28, 2002 Compared To Quarter Ended June 29, 2001

Operating results for the quarters ended June 28, 2002 and June 29, 2001 follow.


			Quarter Ended

						% of Net						% of Net
			June 28,			Product			June 29,			Product
			2002			Revenues(1)			2001			Revenues(1)

			(in millions)
Revenues:




	Net product revenues		$	277.5			100.0	%	$	307.3			100.0	%




	Foundry revenues from Motorola			0.2			0.1	%		3.4			1.1	%

		Total revenues		277.7			100.1	%		310.7			101.1	%




Cost of sales				201.7			72.7	%		255.6			83.2	%

Gross profit				76.0			27.4	%		55.1			17.9	%

Operating expenses:




	Research and development			16.2			5.8	%		22.9			7.5	%




	Selling and marketing			15.2			5.5	%		20.8			6.8	%




	General and administrative			26.7			9.6	%		34.0			11.1	%




	Amortization of goodwill and other intangibles			3.0			1.1	%		5.6			1.8	%




	Restructuring and other charges			3.1			1.1	%		95.8			31.2	%





		Total operating expenses		64.2			23.1	%		179.1			58.3	%

Operating loss				11.8			4.3	%		(124.0	)		-40.4	%

Other income (expenses), net:




	Interest expense			(36.3	)		(13.1	%)		(29.7	)		(9.7	%)




	Equity in earnings of joint ventures			2.5			0.9	%		1.5			0.5	%





		Other income (expenses), net		(33.8	)		(12.2	%)		(28.2	)		(9.2	%)

Loss before income taxes, minority interests and extraordinary loss				(22.0	)		(7.9	%)		(152.2	)		(49.5	%)




Income tax provision				(3.3	)		(1.2	%)		—			0.0	%




Minority interests				—			0.0	%		—			0.0	%

Net loss before extraordinary loss				(25.3	)		(9.1	%)		(152.2	)		(49.5	%)




Extraordinary loss on debt prepayment				(6.5	)		(2.3	%)		—			0.0	%

Net loss				(31.8	)		(11.5	%)		(152.2	)		(49.5	%)




Less: Redeemable preferred stock dividends				(2.1	)		(0.8	%)		—			0.0	%

Net loss applicable to common stock			$	(33.9	)		(12.2	%)	$	(152.2	)		(49.5	%)

_____________

(1)

Certain amounts may not total due to rounding of individual components.

Total revenues. Total revenues decreased $33.0 million, or 10.6%, to $277.7 million in the second quarter of 2002 from $310.7 million in the second quarter of 2001, due primarily to pricing declines and a reduction in foundry revenues, partially offset by volume and mix changes.

Net product revenues. Net product revenues decreased $29.8 million, or 9.7%, to $277.5 million in the second quarter of 2002 from $307.3 million in the second quarter of 2001. Of the 9.7% decline, approximately 12% was due to pricing declines, with offsetting volume and mix changes.

The net product revenues by product line for the quarters ended June 28, 2002 and June 29, 2001 are as follows:


				As a %					As a %
		Quarter Ended		Net Product			Quarter Ended		Net Product			Dollar
		June 28, 2002		Revenue			June 29,2001		Revenue			Change			% Change

Power Management and Standard Analog		$	93.4		33.7	%	$	88.9		28.9	%	$	4.5			5.1	%




MOS Power			35.7		12.9	%		38.3		12.5	%		(2.6	)		(6.8	%)




High Frequency Clock and Data Management			17.0		6.1	%		31.6		10.3	%		(14.6	)		(46.2	%)




Standard Components			131.4		47.4	%		148.5		48.3	%		(17.1	)		(11.5	%)

	Total Net Product Revenues	$	277.5					307.3				$	(29.8	)

Approximately 39%, 44% and 18% of our net product revenues in the second quarter of 2002 were derived from the Americas, Asia/Pacific and Europe (including the Middle East), respectively, compared to 40%, 37% and 23%, respectively, in the second quarter of 2001. The change from prior year reflects the continuing recovery of the Asia/Pacific markets and our growth in the China market.

Foundry revenues. Foundry revenues from Motorola decreased $3.2 million, or 94.1%, to $0.2 million in the second quarter of 2002 from $3.4 million in the second quarter of 2001. 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 $53.9 million, or 21.1%, to $201.7 million in the second quarter of 2002 from $255.6 million in the second quarter of 2001, primarily as a result of the execution of planned cost reduction activities, increased internal capacity utilization, and lower provisions for excess inventories taken during the second quarter of 2002 as compared to the second quarter of 2001. As of the end of the second quarter of 2002, we completed actions to achieve an estimated $240.0 million of annual cost of sales savings as compared to the Company’s benchmark of the first quarter of 2001.

Gross profit. Gross profit (computed as total revenues less cost of sales) increased $20.9 million, or 37.9%, to $76.0 million in the second quarter of 2002 from $55.1 million in the second quarter of 2001. The increase in gross profit was primarily due to improved manufacturing capacity utilization as a result of our restructuring activities and lower provisions for excess inventories recorded during the quarter, offset by pricing declines. As a percentage of total revenues, gross margin increased to 27.4% in the second quarter of 2002 from 17.7% in the second quarter of 2001.

Operating expenses

Research and development. Research and development costs decreased $6.7 million, or 29.3%, to $16.2 million in the second quarter of 2002 from $22.9 million in the second quarter of 2001, primarily as a result of aligning our operating costs with our revenues. As a percentage of net product revenues, research and development costs declined to 5.8% in the second quarter of 2002 from 7.5% in the second quarter of 2001. Our target for research and development costs continues to be 5-6% of revenues. The primary emphasis of our new product development efforts is on power management and standard analog and high frequency clock and data management solutions, the highest margin and fastest potential growth product families within our portfolio, with 80% of our overall research and development investments focused in these areas.

Selling and marketing. Selling and marketing expenses decreased by $5.6 million, or 26.9%, to $15.2 million in the second quarter of 2002 from $20.8 million in the second quarter of 2001. The decrease in selling and marketing expenses from the second quarter of 2001 was attributable to our restructuring program. These actions included the downsizing of our sales force, closing of sales offices as well as our regional sales headquarters and centralizing and relocating our order entry functions to lower cost locations. As a percentage of net product revenues, these costs decreased to 5.5% in the second quarter of 2002 from 6.8% in the second quarter of 2001.

General and administrative. General and administrative expenses decreased by $7.3 million, or 21.5%, to $26.7 million in the second quarter of 2002 from $34.0 million in the second quarter of 2001, as a result of cost reduction actions and lower discretionary spending. As a percentage of net product revenues, these costs decreased to 9.6% in the second quarter of 2002 from 11.1% in the second quarter of 2001.

Amortization of goodwill and other intangibles. Amortization of goodwill and other intangibles decreased $2.6 million to $3.0 million in the second quarter of 2002 from $5.6 million the second quarter of 2001, as a result of the adoption of SFAS 142 effective January 1, 2002, which eliminated the amortization of goodwill (see Note 11 “Recently Issued and Recently Adopted Accounting Pronouncements” in our Notes to Consolidated Financial Statements in this Form 10-Q).

Restructuring and other charges. In June 2002, we recorded a charge of $16.7 million to cover costs associated with a worldwide restructuring program involving manufacturing, selling, general and administrative functions. The charge included $3.9 million to cover employee separation costs associated with the termination of 79 employees, $8.4 million for fixed asset impairments that were charged directly against the related assets, $2.8 million in costs related to termination of certain purchase and supply agreements, and $1.6 million of additional exit costs associated with the shutdown of our Guadalajara, Mexico facility. Employee separation costs included $1.0 million of non-cash charges associated with the modification of stock options for certain terminated employees. As of June 28, 2002, 79 employees had been terminated under this restructuring program. As of June 28, 2002, the remaining liability

related to this restructuring was $5.5 million. We released to income $1.2 million of exit costs previously accrued in connection with a 2001 restructuring program. We also recorded a gain of $12.4 million related to a settlement with Motorola on April 8, 2002, which partially offset the charges discussed above for a net charge of $3.1 million (see Note 10 “Related Party Transactions” in our Notes to Consolidated Financial Statements in this Form 10-Q for a further discussion of the settlement agreement.)

In June 2001, we recorded a $95.8 million charge to cover costs associated with a worldwide restructuring program involving both manufacturing locations, selling, general and administrative functions and other costs. The charge included $43.6 million to cover employee separation costs associated with the termination of approximately 3,200 employees, $42.2 million for asset impairments that were charged directly against the related assets and a $10.0 million of other costs primarily related to facility closures and contract terminations. 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 28, 2002, the remaining liability associated with the June 2001 restructuring charge was $7.3 million and 125 employees remain to be terminated under this restructuring program.

A summary of activity in our restructuring related reserves for the quarter ended June 28, 2002 is as follows (in millions):


Balance, March 29, 2002	$	19.0




Plus: June 2002 charges		7.3




Less: Payments charged against the reserve		(6.6	)




Less: Reserve released to income		(1.2	)

Balance, June 28, 2002	$	18.5

Operating income (loss). Operating income (loss) improved $135.8 million, to $11.8 million income in the second quarter of 2002 compared to $124.0 million loss in the second quarter of 2001. This improvement was due to higher factory utilization rates, a decrease in operating costs as a result of the restructuring program implemented during 2001 and 2002, lower provisions for excess inventories, and lower restructuring and other charges, offset by pricing declines in the second quarter of 2002 as compared to 2001. As of the end of the second quarter of 2002, we completed actions to achieve an estimated $240 million of annual cost of sales savings and $100 million of annual operating expense savings as compared to the Company’s benchmark of the first quarter of 2001. Excluding restructuring and other charges, operating income for the quarter ended June 28, 2002 would have been $14.9 million compared to an operating loss of $28.2 million for the quarter ended June 29, 2001.

Interest expense. Interest expense increased $6.6 million, or 22.2%, to $36.3 million in the second quarter of 2002 from $29.7 million in the second quarter of 2001. The increase was due to interest related to the $125.0 million draw on our revolving line of credit in May 2001, the supplemental interest charges resulting from the August 2001 amendments to our senior bank facilities and the effects of the Debt Refinancing previously discussed in Note 8 “Long-Term Debt” in our Notes to Consolidated Financial Statements included in this Form 10-Q.

Equity in earnings of joint venture. Equity in earnings from our Leshan joint venture increased $1.0 million to $2.5 million of income in the second quarter of 2002 from $1.5 million in the second quarter of 2001, due primarily to increased capacity and manufacturing efficiencies.

Income tax benefit (provision). The income tax provision was $3.3 million in the second quarter of 2002 compared with $0.0 million in the second quarter of 2001. The 2002 provision is attributable to foreign income and withholding taxes. We did not recognize a tax benefit relating to our domestic operating loss in the second quarter of either 2002 or 2001.

Six Months Ended June 28, 2002 Compared To Six Ended June 29, 2001

Operating results for the six months ended June 28, 2002 and June 29, 2001 follow.


			Six Months Ended

						% of Net						% of Net
			June 28,			Product			June 29,			Product
			2002			Revenues(1)			2001			Revenues(1)

			(in millions)
Revenues:




	Net product revenues		$	546.2			100.0	%	$	664.3			100.0	%




	Foundry revenues from Motorola			0.6			0.1	%		6.9			1.0	%

		Total revenues		546.8			100.1	%		671.2			101.0	%




Cost of sales				412.6			75.5	%		529.5			79.7	%

Gross profit				134.2			24.6	%		141.7			21.3	%

Operating expenses:




	Research and development			33.5			6.1	%		45.8			6.9	%




	Selling and marketing			29.8			5.5	%		44.6			6.7	%




	General and administrative			55.9			10.2	%		70.8			10.7	%




	Amortization of goodwill and other intangibles			6.0			1.1	%		11.4			1.7	%




	Restructuring and other charges			10.2			1.9	%		133.8			20.1	%

		Total operating expenses		135.4			24.8	%		306.4			46.1	%

Operating loss				(1.2	)		-0.2	%		(164.7	)		-24.8	%

Other income (expenses), net:




	Interest expense			(71.0	)		(13.0	%)		(58.9	)		(8.9	%)




	Equity in earnings of joint ventures			3.7			0.7	%		2.1			0.3	%




	Gain on sale of investment in joint venture			—			0.0	%		3.1			0.5	%

		Other income (expenses), net		(67.3	)		(12.3	%)		(53.7	)		(8.1	%)

Loss before income taxes, minority interests, extraordinary loss and cumulative effect of accounting change				(68.5	)		(12.5	%)		(218.4	)		(32.9	%)




Income tax benefit (provision)				(7.0	)		(1.3	%)		22.7			3.4	%




Minority interests				0.2			0.0	%		0.5			0.1	%

Net loss before extraordinary loss and cumulative effect of accounting change				(75.3	)		(13.8	%)		(195.2	)		(29.4	%)




Extraordinary loss on debt prepayment				(6.5	)		(1.2	%)		—			0.0	%




Cumulative effect of accounting change (net of income taxes of $38.8)				—						(116.4	)		(17.5	%)

Net loss				(81.8	)		(15.0	%)		(311.6	)		(46.9	%)




Less: Redeemable preferred stock dividends				(4.2	)		(0.8	%)		—			0.0	%

Net loss applicable to common stock			$	(86.0	)		(15.7	%)	$	(311.6	)		(46.9	%)

______________

(1)

Certain amounts may not total due to rounding of individual components.

Total revenues. Total revenues decreased $124.4 million, or 18.5%, to $546.8 million in the first six months of 2002 from $671.2 million in the first six months of 2001, due primarily to pricing declines, volume and mix changes and a reduction in foundry revenues.

Net product revenues. Net product revenues decreased $118.1 million, or 17.8%, to $546.2 million in the first six months of 2002 from $664.3 million in the first six months of 2001. Of the 17.8% decrease, approximately 16% was attributable to pricing declines for these comparable periods with the remainder attributable to volume and mix changes.

The net product revenues by product line for the six months ended June 28, 2002 and June 29, 2001 are as follows:


		Six Months		As a %			Six Months		As a %
		Ended		Net Product			Ended		Net Product			Dollar
		June 28, 2002		Revenue			June 29,2001		Revenue			Change			% Change

Power Management and Standard Analog		$	181.0		33.1	%	$	187.5		28.2	%	$	(6.5	)		(3.5	%)




MOS Power			70.1		12.8	%		81.1		12.2	%		(11.0	)		(13.6	%)




High Frequency Clock and Data Management			38.6		7.1	%		85.1		12.8	%		(46.5	)		(54.6	%)




Standard Components			256.5		47.0	%		310.6		46.8	%		(54.1	)		(17.4	%)

	Total Net Product Revenues	$	546.2				$	664.3				$	(118.1	)

Approximately 38%, 43% and 19% of our net product revenues in the first six months of 2002 were derived from the Americas, Asia/Pacific and Europe (including the Middle East), respectively, compared to 42%, 35% and 23%, respectively, in the first six months of 2001. The change from prior year reflects the continuing recovery of the Asia/Pacific markets and our growth in the China market.

Foundry revenues. Foundry revenues from Motorola decreased $6.3 million, or 91.3%, to $0.6 million in the first six months of 2002 from $6.9 million in the first six months of 2001. 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 $116.9 million, or 22.1%, to $412.6 million in the first six months of 2002 from $529.5 million in the first six months of 2001, primarily as a result of the execution of planned cost reduction activities, and lower provisions for excess inventories, partially offset by lower factory utilization. As of the end of the second quarter of 2002, we completed actions to achieve an estimated $240.0 million of annual cost of sales savings as compared to the Company’s benchmark of the first quarter of 2001.

Gross profit. Gross profit (computed as total revenues less cost of sales) decreased $7.5 million, or 5.3%, to $134.2 million in the first six months of 2002 from $141.7 million in the first six months of 2001. The decrease in gross profit was due to pricing declines and lower manufacturing capacity utilization, offset by the execution of planned cost reduction activities and lower provisions for excess inventories taken during the period. As a percentage of total revenues, gross margin increased to 24.5% in the first six months of 2002 from 21.1% in the first six months of 2001.

Operating expenses

Research and development. Research and development costs decreased $12.3 million, or 26.9%, to $33.5 million in the first six months of 2002 from $45.8 million in the first six months of 2001, primarily as a result of aligning our operating costs with our revenues. As a percentage of net product revenues, research and development costs remained fairly consistent at 6.1% in the first six months of 2002 and 6.9% in the first six months of 2001. The primary emphasis of our new product development efforts is on power management and standard analog and high frequency clock and data management solutions, the highest margin and fastest potential growth product families within our portfolio, with 80% of our overall research and development investments focused in these areas. Our target for research and development costs continues to be 5-6% of revenues.

Selling and marketing. Selling and marketing expenses decreased by $14.8 million, or 33.2%, to $29.8 million in the first six months of 2002 from $44.6 million in the first six months of 2001. The decrease in selling and marketing expenses over the first six months of 2001 was attributable to our restructuring program. These actions included the downsizing of our sales force, closing of sales offices as well as our regional sales headquarters and centralizing and relocating our order entry functions to lower cost locations. As a percentage of net product revenues, these costs decreased to 5.5% in the first six months of 2002 from 6.7% in the first six months of 2001.

General and administrative. General and administrative expenses decreased by $14.9 million, or 21.0%, to $55.9 million in the first six months of 2002 from $70.8 million in the first six months of 2001, as a result of cost reduction actions and lower discretionary spending. As a percentage of net product revenues, these costs decreased slightly to 10.2% in the first six months of 2002 from 10.7% in the first six months of 2001.

Amortization of goodwill and other intangibles. Amortization of goodwill and other intangibles decreased $5.4 million to $6.0 million in first six months of 2002 from $11.4 million the first six months of 2001, as a result of the adoption of SFAS 142 effective January 1, 2002, which eliminated the amortization of goodwill (see Note 11 “Recently Issued and Recently Adopted Accounting Pronouncements” in our Notes to Consolidated Financial Statements in this Form 10-Q).

Restructuring and other charges. Restructuring and other charges decreased $123.6 million, or 92.4%, to $10.2 million in the first six months of 2002 from $133.8 million in the first six months of 2001.

In June 2002, we recorded charges of $16.7 million to cover costs associated with a worldwide restructuring program involving manufacturing, selling, general and administrative functions. The charge includes $3.9 million to cover employee separation costs associated with the termination of 79 employees, $8.4 million for fixed asset impairments that were charged directly against the related assets, $2.8 million in costs related to termination of certain purchase and supply agreements, and $1.6 million of additional exit costs associated with the shutdown of our Guadalajara, Mexico facility. Employee separation costs included $1.0 million of non-cash charges associated with the modification of stock options for certain terminated employees. As of June 28, 2002, 79 employees had been terminated under this restructuring program. As of June 28, 2002, the remaining liability related to this restructuring was $5.5 million. We released to income $1.2 million of exit costs previously accrued in connection with

a 2001 restructuring program. We also recorded a gain of $12.4 million related to a settlement with Motorola on April 8, 2002, which partially offset the charges discussed above for a net charge of $3.1 million (see Note 10 “Related Party Transactions” in our Notes to Consolidated Financial Statements in this Form 10-Q for a further discussion of the settlement agreement.)

In March 2002, we recorded a $7.1 million charge (net of a $0.1 million recovery) to cover costs associated with a worldwide restructuring program involving selling, general and administrative functions. The charge was to cover employee separation costs associated with the termination of 72 employees and included $0.2 of non-cash charges associated with the acceleration of the vesting of stock options for certain terminated employees. As of June 28, 2002, the remaining liability relating to the March 2002 charges to the restructuring program was $4.8 million. As of June 28, 2002, 14 employees have been terminated under the restructuring program.

In March 2001, we recorded a $38.0 million charge to cover costs associated with a worldwide restructuring program involving both manufacturing locations, selling, general and administrative functions and other costs. The charge included $31.3 million to cover employee separation costs associated with the termination of approximately 1,100 employees, $2.9 million for asset impairments that were charged directly against the related assets and a $3.8 million charge to cover costs associated with the separation of our executive officers. As of June 28, 2002, there was no remaining liability relating to the March 2001 charges to the restructuring program.

A summary of activity in our restructuring related reserves for the six months ended June 28, 2002 is as follows (in millions):


Balance, January 1, 2002	$	19.8




Plus: March 2002 charges		7.0




Plus: June 2002 charges		7.3




Less: Payments charged against the reserve		(14.3	)




Less: Reserve released to income		(1.3	)

Balance, June 28, 2002	$	18.5

Operating loss. Operating loss decreased $163.5 million, to $1.2 million in the first six months of 2002 compared to $164.7 million in the first six months of 2001. This decrease was due to a decrease in operating costs as a result of the restructuring program implemented during 2001 and 2002, lower provisions for excess inventories, and lower restructuring and other charges taken in the first six months of 2002 as compared to 2001, offset by pricing declines on our products. As of the end of the second quarter of 2002, we completed actions to achieve an estimated $240.0 million of annual cost of sales savings and $100.0 million of annual operating expense savings as compared to the Company’s benchmark of the first quarter of 2001. Excluding restructuring and other charges, operating income for the six months ended June 28, 2002 would have been $9.0 million operating income compared to an operating loss of $30.9 million for the six months ended June 29, 2001.

Interest expense. Interest expense increased $12.1 million, or 20.5%, to $71.0 million in the first six months of 2002 from $58.9 million in the first six months of 2001. The increase was due to interest related to the $125.0 million draw on our revolving line of credit in May 2001, the supplemental interest charges resulting from the August 2001 amendments to our senior bank facilities and the effects of the Debt Refinancing previously discussed in Note 8 “Long-Term Debt” in our Notes to Consolidated Financial Statements included in this Form 10-Q.

Equity in earnings of joint venture. Equity in earnings from our Leshan joint venture increased $1.6 million to $3.7 million of income in the first six months of 2002 from $2.1 million in the first six months of 2001, due primarily to increased capacity and manufacturing efficiencies.

Gain on sale of investment in joint venture. In 2001, 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, effective December 31, 2000, 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 in the first quarter of 2001.

Minority interests. Minority interests represent the portion of net loss of our two majority-owned Czech subsidiaries attributable to the minority owners of each subsidiary. We consolidate these subsidiaries in our financial statements. Minority interests were $(0.2) million in the first six months of 2002 compared to $(0.5) million in the first six months of 2001 given improvements in the factory utilization.

Income tax benefit (provision). We recognized an income tax provision of $7.0 million in the first six months of 2002 compared with an income tax benefit of $22.7 million in the comparable 2001 period. The 2002 income tax provision related to income and withholding taxes at certain of our foreign operations, while the income tax benefit in 2001 related to the net impact of foreign income and withholding taxes offset by the benefit attributable to our 2001 domestic net operating loss that could be carried back to prior years. We did not recognize a benefit for the domestic net operating loss generated in 2002 as realization of such benefit is not currently assured.

Liquidity and Capital Resources

In this section of the management discussion and analysis segment, we are going to discuss:

	1)		Sources and uses of cash, and significant factors that influence both,

	2)		Our analysis of our cash flows for the second quarter of 2002 and the first half of 2002,

	3)		The recent developments that affect our liquidity, and

	4)		Our commitments and contractual obligations.

All of these factors are important to an understanding of our ability to meet our current obligations, to fund working capital in times of growth, to finance expansion either by internal means or through the acquisition of other businesses, or to pay down existing debt.

Sources and Uses of Cash

We require cash to fund our operating expenses, including working capital requirements and outlays for research and development, to make capital expenditures, strategic acquisitions and investments and to pay debt service, including principal and interest and capital lease payments. Our principal sources of liquidity are cash on hand, cash generated from operations, and funds from external borrowings and equity issuances. In the near term, until we have additional borrowing capacity under our senior bank facilities and can incur additional debt without violation of our existing covenants, we expect to fund our primary cash requirements through cash and cash equivalents on hand, targeted asset sales, and cash generated from operations. We may also raise additional funding through future equity offerings, subject to market conditions.

We believe that the key factors that could affect our internal and external sources of cash include:

	•		factors that affect our results of operations and cash flows, including reduced demand for our products resulting from the recent economic slowdown and actions taken by our customers to manage their inventories in line with incoming business, competitive pricing pressures, the under-utilization of our manufacturing capacity, our ability to achieve significant reductions in operating expenses, the impact of our restructuring program on our productivity, and our ability to make the substantial research and development expenditures required to remain competitive in our business; and

	•		factors that affect our access to bank financing and the debt and equity capital markets or our operational flexibility, including interest rate fluctuations, our ability to maintain compliance with financial covenants and ratios under our existing credit facilities, other limitations imposed by the covenants under our credit facilities or arising from our substantial leverage that could impair our ability to obtain needed financing on acceptable terms or to respond to business opportunities and developments as they arise, and a possible future delisting of our common stock from the Nasdaq National Market or a move to the Nasdaq SmallCap Market, discussed further herein.

As of June 28, 2002, $6.6 million of our $150 million revolving line of credit was available, reflecting borrowings of $125.0 million and outstanding letters of credit of $18.4 million. Under certain circumstances, our senior bank facilities and the indentures relating to the senior subordinated notes and the Notes will allow us to incur additional indebtedness, although there can be no assurances that we would be able to borrow on terms acceptable to us.

Analysis of Cash Flows

Cash flow information for the quarters ended June 28, 2002 and March 29, 2002 and the six months ended June 28, 2002 and June 29, 2001 are as follows:


				Quarter ended			Quarter ended			Six months ended			Six months ended
				June 28, 2002			March 29, 2002			June 28, 2002			June 29, 2001

				(unaudited)			(unaudited)			(unaudited)			(unaudited)
Cash flows from operating activities:




	Net loss			$	(31.8	)	$	(50.0	)	$	(81.8	)	$	(311.6	)




	Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:




		Depreciation and amortization			33.0			34.0			67.0			85.4




		Extraordinary loss on debt prepayment			6.5			—			6.5			—




		Cumulative effect of accounting change			—			—			—			116.4




		Amortization of debt issuance costs and debt discount			2.0			1.6			3.6			2.7




		Provision for excess inventories			4.0			10.7			14.7			32.6




		Non-cash impairment write-down of property, plant and equipment			8.4			—			8.4			45.1




		Non-cash interest on junior subordinated note payable to Motorola			2.9			2.7			5.6			5.3




		Non-cash supplemental interest on senior bank facilities			4.2			7.4			11.6			—




		Undistributed earnings of unconsolidated joint ventures			(2.5	)		(1.2	)		(3.7	)		(2.1	)




		Gain on sale of investment in unconsolidated joint venture			—			—			—			(3.1	)




		Deferred income taxes			3.9			0.7			4.6			(24.2	)




		Non-cash stock compensation charges			1.0			0.3			1.3			3.4




		Other			0.8			(0.3	)		0.5			1.1




	Changes in assets and liabilities:




		Receivables			9.7			(10.2	)		(0.5	)		113.2




		Inventories			6.4			2.9			9.3			(33.1	)




		Other assets			3.4			(1.2	)		2.2			(13.1	)




		Accounts payable			(18.2	)		0.6			(17.6	)		(32.4	)




		Accrued expenses			(4.0	)		4.3			0.3			(7.8	)




		Income taxes payable			(4.5	)		1.8			(2.7	)		(12.9	)




		Accrued interest			13.2			(8.3	)		4.9			6.3




		Deferred income on sales to distributors			(2.8	)		(21.3	)		(24.1	)		(46.1	)




		Other long-term liabilities			(8.1	)		1.1			(7.0	)		3.8

			Net cash provided by (used in) operating activities		27.5			(24.4	)		3.1			(71.1	)

Cash flows from investing activities:




	Purchases of property, plant and equipment				(9.8	)		(5.6	)		(15.4	)		(88.0	)




	Acquisition of minority interest in consolidated subsidiaries				—			—			—			(0.1	)




	Investments in unconsolidated companies and joint ventures				—			—			—			(0.5	)




	Loans to unconsolidated joint venture				—			—			—			(5.0	)




	Proceeds from sale of investment in unconsolidated joint venture				—			—			—			20.4




	Proceeds from sales of property, plant and equipment				2.3			0.2			2.5			2.1

			Net cash used in investing activities		(7.5	)		(5.4	)		(12.9	)		(71.1	)

Cash flows from financing activities:




	Proceeds from senior credit facilities and other borrowings				—			—			—			125.0




	Proceeds from debt issuance, net of discount and offering expenses				279.3			—			279.3			—




	Payments of capital lease obligation				(0.4	)		(0.7	)		(1.1	)		(0.6	)




	Repayment of senior credit facilities and other borrowings				(280.5	)		(2.8	)		(283.3	)		—




	Proceeds from issuance of stock under the employee stock purchase plan				0.4			0.4			0.8			3.4




	Proceeds from exercise of stock options				0.3			0.8			1.1			0.5





			Net cash provided by (used in) financing activities		(0.9	)		(2.3	)		(3.2	)		128.3

Effect of exchange rates on cash and cash equivalents					1.0			(0.1	)		0.9			0.7

Net increase (decrease) in cash and cash equivalents					20.1			(32.2	)		(12.1	)		(13.2	)




Cash and cash equivalents, beginning of period					147.6			179.8			179.8			188.9

Cash and cash equivalents, end of period				$	167.7		$	147.6		$	167.7		$	175.7

Cash Flow Activity For The Quarter Ended June 28, 2002

As of June 28, 2002, we had cash and cash equivalents of $167.7 million, an increase of $20.1 million from the March 29, 2002 balance. During the second quarter of 2002, our operating activities provided $27.5 million of cash, our investing activities showed a use of $7.5 million, financing activities netted a cash usage of $0.9 million and favorable cash exchange rates added $1 million. The $27.5 million of cash provided by operations in the second quarter 2002 was driven primarily from the improvement in operations after adjusting for non-cash items, the timing of certain interest payments, and the receipt of the $10.6 million from Motorola, offset by the funding of our pension plan.

The improvement in operations after adjusting for non-cash items was comprised of a $31.8 million loss, reduced by non-cash charges of $33.0 million in depreciation and amortization, $6.5 million in write-offs of debt issuance costs associated with the debt prepayment, $2.0 million in debt issuance and debt discount amortization, $8.4 million in property plant and equipment write-downs, and $1.0 million in non-cash stock compensation expense for a total of $19.1 million of cash provided. Cash paid for interest for the quarter was $12.8 million compared to $30.0 million in the first quarter of 2002, thus increasing our cash flow for the quarter. The remaining operating activity for the quarter resulted in a net cash usage due primarily to a payment of $9.3 million made to our pension plan, $6.6 million paid in connection with our restructuring initiatives, and other cash uses, offset by the receipt of $10.6 million from the Motorola settlement. We will continue to expend cash in the future related to our $18.5 million of restructuring reserves that were accrued as of June 28, 2002.

We expended cash for property, plant and equipment in the second quarter of $9.8 million and received proceeds from equipment sales of $2.3 million, resulting in a $7.5 million net cash usage for investing activities.

During the second quarter of 2002, we used the net proceeds from the Debt Refinancing of $279.3 million dollars (excluding $0.6 million withheld for remaining closing costs) plus another $1.8 million in cash to repay $280.5 million of our senior bank facilities. Coupled with net cash usage of $0.3 million from other activities, this explains the overall net cash usage of $0.9 million in investing activities for the quarter.

Cash flow provided by operating activities in the second quarter of 2002 of $27.5 million when compared to the prior quarter’s usage of $24.4 million posted a $51.9 million improvement quarter on quarter primarily due to the improvement in the net loss after adjustment for non-cash items, the timing of interest payments, the receipt of the Motorola settlement, offset by the payment on our pension plan. Looking forward, we do not expect to receive another settlement from Motorola, and we do not have any additional scheduled pension plan funding requirements for the remainder of 2002.

Net cash used in investing activities increased from $5.4 million in the first quarter to $7.5 million primarily due to increases in the amount of equipment purchased. Our budgeted capital expenditures for 2002 are $40.0 million, and reflect actions taken to improve our cash flow. Our ability to make capital expenditures is limited by the terms of our senior bank facilities; however, we believe that the expenditures permitted thereunder will be sufficient to allow us to maintain, replace and improve our existing facilities and equipment as necessary.

Net cash used in financing activities did not significantly change from the first to the second quarter; however, the second quarter did contain the Debt Refinancing previously mentioned.

Cash Flow Activity For The Six Months Ended June 28, 2002

For the six months ended June 28, 2002 and June 29, 2001, the Consolidated Statements of Cash Flows indicate we have consumed $12.1 million and $13.2 million in cash, respectively. However, the makeup of the cash flow from operations, investing and financing activities has been quite different in these periods. The first six months of 2002, as compared to the first six months of 2001, show an improvement in cash flows from operations of $74.2 million, a reduction in the net cash used in investing activities of $58.2 million, and a decrease of $131.5 million in cash flows from financing activities.

We generated $3.1 million dollars in cash flow from operations during the first six months of 2002 relative to cash used in operations of $71.1 million in the same period of 2001. This $74.2 million dollar improvement is primarily the result of the

stabilization in revenues, reduced costs resulting from our restructuring program and reduced restructuring payments. Assuming modest increases in revenue, we expect to continue to provide cash flow from operations through the calendar year with the amount varying depending on the timing of interest payments and the need to expand working capital to meet increased production volumes.

We used $12.9 million in net cash from investing activities in the first half of 2002 as compared to $71.1 in the same period of 2001. All of this decline was the result of lower capital equipment spending. Our need for incremental property, plant or equipment has been dramatically reduced given the current level of business. Furthermore, our senior bank facilities restrict the amount of capital equipment we can purchase within certain periods. As a result, we have been selective in purchasing new equipment.

Financing activities during the first six months of 2002 have resulted in net cash used of $3.2 million versus net cash provided in the same period of 2001 of $128.3 million. During the first six months of 2002, we used the net proceeds from the Debt Refinancing of $279.3 million dollars (excluding $0.6 million withheld for remaining closing costs) plus another $4.6 million in cash to repay debt principal of $283.3 million held by the senior creditors. In contrast, we drew on a $125 million dollar credit facility in 2001 to help fund the cash used in operations and equipment purchases needed at the time.

Recent Developments

Due to the Debt Refinancing previously mentioned above, the composition of our debt has changed, including the interest rate and maturity dates. The underlying debt covenants related to the senior bank facilities has also been modified. We believe this Debt Refinancing has given us additional financial flexibility in that financial covenants have been relaxed, debt maturities extended, and our current borrowing costs lowered through June 2003. After June 2003, the effects of our Debt Refinancing would cause our borrowing costs to be higher if the Libor rate remains at current levels.

The Notes bear a rate of 12% per annum beginning on May 6, 2002. Commencing on February 6, 2003 the Notes will accrue interest at a rate of 13% per annum unless prior thereto we have issued common stock or certain convertible preferred stock to financial sponsors generating at least $100 million in gross cash proceeds and have used the net cash proceeds to repay indebtedness under our senior bank facilities or under any other credit facility secured by a first-priority lien and have permanently reduced the related loan commitment equal to the amount prepaid. Such increase in interest rate, if any, will remain effective until such time as we have completed such a stock issuance and repayment, unless such stock issuance and repayment occurs after August 6, 2003, in which case such increase in interest rate will remain in effect.

The Notes are jointly and severally guaranteed on a senior basis by our domestic restricted subsidiaries that are guarantors under our senior bank facilities. In addition, the Notes and the guarantees are secured on a second priority basis by the capital stock or other equity interest of domestic subsidiaries, 65% of the capital stock or other equity interests of first-tier foreign subsidiaries and substantially all other assets, in each case that are held by us or any of the guarantors, but only to the extent that obligations under our senior bank facilities are secured by a first-priority lien thereon.

We have agreed to file an exchange offer registration statement or, under certain circumstances a shelf registration statement, pursuant to a registration rights agreement. If we fail to comply with certain obligations under the registration rights agreement, we will incur additional interest up to a maximum of 2.0%.

In April 2002, our senior bank facilities were amended to permit the issuance of the Notes, to permit the second-priority liens securing the Notes and to provide that, subject to specified conditions:

•		minimum interest expense coverage ratio and maximum leverage ratio requirements will not apply until periods beginning after December 31, 2003;

•		from January 1, 2004 to June 30, 2006, the minimum required interest expense coverage ratio will be lower and the maximum permitted leverage ratio will be higher, in each case as compared to the ratios currently required under the credit agreement;

•		minimum EBITDA levels will apply until December 31, 2003 and minimum cash levels will apply until certain minimum interest coverage ratio and maximum leverage ratio requirements are met;

•		sales of property, plant and equipment in connection with specified restructuring activities will be permitted; and

•		borrowings of up to $100.0 million by or for the benefit of the our joint venture in Leshan, China will be permitted, the proceeds of which would be used to prepay loans under the senior bank facilities.

We were in compliance with the amended covenants as of June 28, 2002. We believe that, pursuant to our current business plans, we will be able to maintain such compliance.

Debt maturities have also been extended due to this Debt Refinancing. The following table details our debt maturities before and after the Debt Refinancing:


	Remainder
	of 2002			2003			2004			2005			2006			Thereafter		Total

Actual	$	3.8		$	9.3		$	11.8		$	236.9		$	280.9		$	857.4	$	1,400.1




Pro Forma (1)		5.7			13.8			18.3			290.1			412.3			646.7		1,386.9

Difference	$	(1.9	)	$	(4.5	)	$	(6.5	)	$	(53.2	)	$	(131.4	)	$	210.7	$	13.2

Cumulative difference	$	(1.9	)	$	(6.4	)	$	(12.9	)	$	(66.1	)	$	(197.5	)	$	13.2

(1)

Pro Forma amounts assume the debt issuance and related prepayment had not occurred during the second quarter of 2002.

On July 9, 2002, we received a delisting notice from the Nasdaq National Market since our stock has traded below $3 per share for 30 consecutive trading days and we do not have a positive equity balance of $10.0 million or more. We have a period of 90 calendar days to cure the situation and are actively exploring our options which include, but are not limited to, a reverse stock split, a recapitalization of our debt, issuance of additional shares of common stock, or the sale of certain assets. In addition, the delisting proceedings would stop if our stock rose to $3 per share or above for 10 consecutive trading days during the cure period that expires on October 7, 2002. If we are unsuccessful in remaining on the Nasdaq National Market, our stock may then be traded on the Nasdaq SmallCap Market. If we began trading on the Nasdaq SmallCap Market and later were able to meet the initial listing requirements of the Nasdaq National Market again, we could apply for reinstatement to the Nasdaq National Market. As the Nasdaq SmallCap Market does not have the same trading volume as the Nasdaq National Market, our stock could become more volatile and there can be no assurances that a ready market would exist. Certain market analysts may elect not to follow us if we are no longer listed on the Nasdaq National Market. Movement from the Nasdaq National Market to the Nasdaq SmallCap Market does not prevent us from issuing additional securities; however, pricing of an offering may be more difficult given the less liquid nature of the Nasdaq SmallCap Market.

Commercial Commitments and Contractual Obligations

Our principal outstanding contractual obligations relate to our senior bank facilities, other long-term debt, operating leases, purchase obligations, our pension obligations and our Series A Cumulative Convertible Redeemable Preferred Stock. The following table summarizes our commercial commitments and contractual obligations at June 28, 2002 and the effect such obligations are expected to have on our liquidity and cash flow in future periods:


			Amount of commitment by expiration period
			per period
	Total
	amounts		Remainder of		2003 -		2005 -		2007 and
Commercial commitments	committed		2002		2004		2006		Beyond

Standby letter of credit	$	18.4	$	6.8	$	10.9	$	0.7	$	—

Total commercial commitments	$	18.4	$	6.8	$	10.9	$	0.7	$	—


			Payments due by period

			Remainder of		2003 -		2005 -		2007 and
Contractual obligations	Total		2002		2004		2006		Beyond

Long-term debt	$	1,400.1	$	3.8	$	21.1	$	517.8	$	857.4




Operating leases		47.0		14.0		26.5		4.9		1.6




Unconditional purchase obligations		98.3		43.4		38.4		16.5		—




Other long-term obligations		28.6		—		8.0		6.8		13.8




Redeemable preferred stock (including future dividends)		188.5		—		—		—		188.5

Total contractual cash obligations	$	1,762.5	$	61.2	$	94.0	$	546.0	$	1,061.3

At June 28, 2002, our long-term debt includes $705.4 million under our senior bank facilities, $290.9 (net of debt discount) of our senior secured notes, $260.0 million of our senior subordinated notes due 2009, $120.8 million under our junior subordinated note payable to Motorola and $23.0 million under a note payable to a Japanese bank.

Our primary future cash needs, both in the short term and in the long term will focus on debt service, capital spending and working capital. Our liquidity needs may also be supplemented with the proceeds from targeted sales of assets. As part of our business strategy, we review acquisition and divestiture opportunities and proposals on a regular basis. Although there can be no assurances, management believes that cash flow from operations coupled with existing cash and cash equivalent balances and proceeds from targeted sales of assets will be adequate to fund our operating and cash flow needs as well as enable us to maintain compliance with our various debt agreements through June 28, 2003. To the extent that actual results or events differ from our financial projections and business plans, our liquidity may be adversely affected.

Trends, Risks, Uncertainties and Forward-Looking Statements

This Report on Form 10-Q includes “forward-looking statements,” as that term is defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included or incorporated in this Form 10-Q are forward-looking statements. 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 this Form 10-Q are made based on management’s current expectations and estimates, which involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in forward-looking statements. Among these factors are our recently incurred substantial operating losses and possible future losses, changes in overall economic conditions, the cyclical nature of the semiconductor industry, changes in demand and average selling prices for our products, changes in inventories at our customers and distributors, technological and product development risks, availability of manufacturing capacity, availability of raw materials, competitors’ actions, loss of key customers, order cancellations or reduced bookings, changes in manufacturing yields, restructuring programs and the impact of such programs, control of costs and expenses, inability to reduce manufacturing and selling, general and administrative costs, litigation, risks associated with acquisitions and dispositions, changes in management, risks associated with our substantial leverage and restrictive

covenants in our debt instruments (including those relating to the increased cost of servicing our debt and complying with the additional restrictions imposed as a result of amendments to our senior credit facilities), possible future delisting of our common stock by Nasdaq or liquidity and other risks associated with trading on the Nasdaq SmallCap Market, risks associated with our international operations and terrorist activities both in the United States and internationally, and risks involving environmental or other governmental regulation. Additional factors that could affect our future results or events are described from time to time in our Securities and Exchange Commission reports. See in particular our Form 10-K for the fiscal year ended December 31, 2001 under the caption “Trends, Risks and Uncertainties” and similar disclosures in subsequently filed reports with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on forward-looking statements. We assume no obligation to update such information.

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 28, 2002, our long-term debt (including current maturities) totaled $1,400.1 million. We have no interest rate exposure due to rate changes for our fixed rate interest bearing debt, which totaled $694.7 million. We do have interest rate exposure with respect to the $705.4 million outstanding balance on our senior bank facilities due to its variable LIBOR pricing; however, from time to time, we have entered into interest rate swaps to reduce this interest rate exposure. As of June 28, 2002, we had four interest rate swaps and one interest rate cap covering exposures on $320 million of our variable interest rate debt. A 50 basis point increase in interest rates would result in increased annual interest expense on our variable rate debt of $3.5 million for the next twelve months (excluding the effects of any hedging activities).

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.

PART II: OTHER INFORMATION

Item 1. Legal Proceedings

We currently are involved in a variety of legal matters that arise 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 our financial condition, results of operations or cash flows.

During the period July 5, 2001 through July 27, 2001, we were named as a defendant in three shareholder class action lawsuits that were filed in federal court in New York City against us and certain of our current and former officers, current directors and the underwriters for our initial public offering. The lawsuits allege violations of the federal securities laws and have been docketed in the U.S. District Court for the Southern District of New York as: Abrams v. ON Semiconductor Corp., et al., C.A. No. 01-CV-6114; Breuer v. ON Semiconductor Corp., et al., C.A. No. 01-CV-6287; and Cohen v. ON Semiconductor Corp., et al., C.A. No. 01-CV-6942. On April 19, 2002, the plaintiffs filed a single consolidated amended complaint which supersedes the individual complaints originally filed. The amended complaint alleges, among other things, that the underwriters of our initial public offering improperly required their customers to pay the underwriters excessive commissions and to agree to buy additional shares of our common stock in the aftermarket as conditions of receiving shares in our initial public offering. The amended complaint further alleges that these supposed practices of the underwriters should have been disclosed in our initial public offering prospectus and registration statement. The amended complaint alleges violations of both the registration and antifraud provisions of the federal securities laws and seeks rescission of the plaintiffs’ alleged purchases of our common stock as well as unspecified damages. We understand that various other plaintiffs have filed substantially similar class action cases against over 300 other publicly traded companies and their public offering underwriters in New York City, which along with the cases against us have all been transferred to a single federal district judge for purposes of coordinated case management. We believe that the claims against us are without merit and intend to defend the litigation vigorously. In that regard, on July 15, 2002, we, together with the other issuers named as defendants in these coordinated proceedings,

filed a collective motion to dismiss the consolidated amended complaints against them on various legal grounds common to all or most of the issuer defendants. This motion is currently pending. While we can make no promises or guarantees as to the outcome of these actions, we believe that the final result of these actions will have no material effect on our consolidated financial condition or results of operations.

Item 2. Changes in Securities and Use of Proceeds

Not Applicable.

Item 3. Defaults Upon Senior Securities

Not Applicable.

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

Set forth below is information concerning each matter submitted to a vote at our 2002 Annual Meeting of Stockholders held on May 23, 2002.

Election of Directors. Each of the following four persons was elected as a Class III Director, to hold office for a three-year term expiring at the 2005 Annual Meeting or until his successor has been duly elected and qualified, or until the earlier of his resignation, removal or disqualification:


Nominee	For		Withheld

Syrus P. Madavi		204,959,050		209,339




Steven P. Hanson		204,405,817		762,572




Jerome N. Gregoire		204,668,736		499,653




John W. Marren		204,996,997		201,392

2002 Executive Incentive Plan. A proposal to approve the 2002 Executive Incentive Plan was approved by the following votes:


For:			204,222,352




Against:			883,901




Abstain:			62,136

Amendment to Certificate of Incorporation. An amendment to the Restated Certificate of Incorporation to increase the authorized number of shares of common stock from 300,000,000 to 500,000,000 was approved by the following votes:


For:			202,956,279




Against:			2,149,720




Abstain:			62,390

Independent Accountants. Appointment of PricewaterhouseCoopers LLP, as our independent accountants, was ratified by the following votes:


For:			204,946,721




Against:			129,544




Abstain:			92,124

Item 5. Other Information

For a discussion of the Motorola settlement see Note 10 “Related Party Transactions” in our Notes to Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operation” elsewhere in this report.

Syrus P. Madavi resigned as our Executive Chairman on July 25, 2002, and resigned as our Chairman and as a member of our Board on August 9, 2002 to dedicate his full time attention to his recently announced positions as President and Chief Operating Officer of JDS Uniphase Corporation. On August 9, 2002, our Board elected J. Daniel McCranie as our Chairman of the Board.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits —


Exhibit 3.1(a)		Amended and Restated Certificate of Incorporation of ON Semiconductor Corporation as of August 1, 2002








Exhibit 3.1(b)		Certificate of Designations relating to the Series A Cumulative Convertible Preferred Stock








Exhibit 4.1		Purchase Agreement, dated May 1, 2002, among ON Semiconductor Corporation, Semiconductor Components Industries, LLC, Credit Suisse First Boston Corporation, Morgan Stanley & Co., Incorporated, J.P. Morgan Securities Inc., and Salomon Smith Barney Inc., relating to the 12% Senior Secured Notes due 2008








Exhibit 4.2		Indenture, dated as of May 6, 2002, among ON Semiconductor Corporation, Semiconductor Components Industries, LLC, SCG (Malaysia SMP) Holding Corporation, SCG (Czech) Holding Corporation, SCG (China) Holding Corporation, Semiconductor Components Industries Puerto Rico, Inc., SCG International Development LLC, Semiconductor Components Industries of Rhode Island, Inc., and Semiconductor Components Industries International of Rhode Island, Inc., and Wells Fargo Bank Minnesota, National Association, as trustee, relating to the 12% Senior Secured Notes due 2008








Exhibit 4.3		Form of 12% Senior Secured Note due 2008 of ON Semiconductor Corporation and Semiconductor Components Industries, LLC (“Initial Note”) (included as Exhibit A and Appendix A to the Indenture filed as Exhibit 4.2)








Exhibit 4.4		Form of 12% Senior Secured Note due 2008 of ON Semiconductor Corporation and Semiconductor Components Industries, LLC (“Exchange Note”) (included as Exhibit B and Appendix A to the Indenture filed as Exhibit 4.2)








Exhibit 4.5		Registration Rights Agreement, dated May 6, 2002, among ON Semiconductor Corporation, Semiconductor Components Industries, LLC, SCG (Malaysia SMP) Holding Corporation, SCG (Czech) Holding Corporation, SCG (China) Holding Corporation, Semiconductor Components Industries Puerto Rico, Inc., SCG International Development LLC, Semiconductor Components Industries of Rhode Island, Inc., and Semiconductor Components Industries International of Rhode Island, Inc., Credit Suisse First Boston Corporation, Morgan Stanley & Co., Incorporated, J.P. Morgan Securities Inc., and Salomon Smith Barney Inc., relating to the 12% Senior Secured Notes due 2008








Exhibit 10.1		ON Semiconductor 2002 Executive Incentive Plan (1)








Exhibit 10.2		Employee Incentive Plan January 2002 (1)








Exhibit 10.3		Amendment to Credit Agreement, dated as of April 17, 2002, among ON Semiconductor Corporation, Semiconductor Components Industries, LLC, JPMorgan Chase Bank, as administrative agent, collateral agent and syndication agent, Credit Lyonnais New York Branch, Credit Suisse First Boston and Lehman Commercial Paper Inc., as co-documentation agents, and the other financial institution parties thereto








Exhibit 10.4		Intercreditor Agreement, dated as of May 6, 2002, among J.P. Morgan Chase Bank, as credit agent, Wells Fargo Bank Minnesota, National Association, as trustee, ON Semiconductor Corporation and Semiconductor Components Industries, LLC








Exhibit 10.5		Security Agreement, dated as of May 6, 2002, among Semiconductor Components Industries, ON Semiconductor Corporation, the subsidiary guarantors of ON Semiconductor Corporation that are signatories thereto, and Wells Fargo Bank Minnesota, National Association, as trustee and collateral agent, relating to the 12% Senior Secured Notes due 2008








Exhibit 10.6		Pledge Agreement, dated as of May 6, 2002, among Semiconductor Components Industries, LLC, ON Semiconductor Corporation, the subsidiary pledgors of ON Semiconductor Corporation that are signatories thereto, and Wells Fargo Bank Minnesota, National Association, as trustee and collateral agent, relating to the 12% Senior










		Secured Notes due 2008








Exhibit 10.7		Collateral Assignment, dated as of May 6, 2002, between Semiconductor Components Industries, LLC and Wells Fargo Bank Minnesota, National Association, as trustee and collateral agent, relating to the 12% Senior Secured Notes due 2008








Exhibit 10.8		Joint Venture Contract for Leshan-Phoenix Semiconductor Company Limited, amended on June 25, 2002, among SCG (China) Holding Corporation, Leshan Radio Company Ltd, and Motorola (China) Investment Limited








Exhibit 99		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1)

Management contract or compensatory plan or arrangement.

(b) Reports in Form 8-K –

During the second quarter of 2002 we filed six reports on Form 8-K (1) dated and filed April 2, 2002, (2) dated April 17, 2002 and filed April 18, 2002, (3) dated April 17, 2002 and filed April 18, 2002, (4) dated April 19, 2002 and filed April 22, 2002, (5) dated April 24, 2002 and filed April 25, 2002, and (6) dated May 6, 2002 and filed May 7, 2002. The April 2, 2002 report was filed pursuant to Items 5 and 7, reported the appointment of Syrus P. Madavi as Executive Chairman and Chairman of the Board, and included as an exhibit a news release dated April 2, 2002 titled “Industry Titan Joins ON Semiconductor.” The first April 17, 2002 report was filed pursuant to Items 5 and 7, reported first quarter results and provided second quarter guidance, and included as an exhibit a news release dated April 17, 2002 titled “ON Semiconductor Announces First Quarter Results and Provides Second Quarter Guidance.” The second April 17, 2002 report was filed pursuant to Items 5 and 7, reported a Rule 144A private offering of senior secured notes, and included as an exhibit a news release dated April 17, 2002 titled “ON Semiconductor Corporation Announces Rule 144A Private Offering of Senior Secured Notes.” The April 19, 2002 report was filed pursuant to Items 5 and 7, reported an agreement to amend senior bank facilities, and included as an exhibit a news release dated April 19, 2002 titled “ON Semiconductor Announces Agreement to Amend Senior Bank Facilities.” The April 24, 2002 report was filed pursuant to Items 5 and 7, reported the filing of shelf registration statement for common stock, and included as an exhibit a news release dated April 24, 2002 titled “ON Semiconductor Files Shelf Registration Statement for Common Stock.” The May 6, 2002 report was filed pursuant to Items 5 and 7, reported completion of a senior secured note offering, and included as an exhibit a news release dated May 6, 2002 titled “ON Semiconductor Completes Senior Secured Note Offering.”

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 9, 2002




	ON SEMICONDUCTOR CORPORATION




	(Registrant)








	/s/ JOHN T. KURTZWEIL

	By: John T. Kurtzweil
	Senior Vice President and Chief
	Financial Officer








	(Duly Authorized Officer and Principal Financial Officer of the Registrant)

EXHIBIT INDEX


Exhibit 3.1(a)		Amended and Restated Certificate of Incorporation of ON Semiconductor Corporation as of August 1, 2002





Exhibit 3.1(b)		Certificate Designations relating to the Series A Cumulative Convertible Preferred Stock









Exhibit 4.1		Purchase Agreement, dated May 1, 2002, among ON Semiconductor Corporation, Semiconductor Components Industries, LLC, Credit Suisse First Boston Corporation, Morgan Stanley & Co., Incorporated, J.P. Morgan Securities Inc., and Salomon Smith Barney Inc., relating to the 12% Senior Secured Notes due 2008









Exhibit 4.2		Indenture, dated as of May 6, 2002, among ON Semiconductor Corporation, Semiconductor Components Industries, LLC, SCG (Malaysia SMP) Holding Corporation, SCG (Czech) Holding Corporation, SCG (China) Holding Corporation, Semiconductor Components Industries Puerto Rico, Inc., SCG International Development LLC, Semiconductor Components Industries of Rhode Island, Inc., and Semiconductor Components Industries International of Rhode Island, Inc., and Wells Fargo Bank Minnesota, National Association, as trustee, relating to the 12% Senior Secured Notes due 2008









Exhibit 4.3		Form of 12% Senior Secured Note due 2008 of ON Semiconductor Corporation and Semiconductor Components Industries, LLC (“Initial Note”) (included as Exhibit A and Appendix A to the Indenture filed as Exhibit 4.2)









Exhibit 4.4		Form of 12% Senior Secured Note due 2008 of ON Semiconductor Corporation and Semiconductor Components Industries, LLC (“Exchange Note”) (included as Exhibit B and Appendix A to the Indenture filed as Exhibit 4.2)









Exhibit 4.5		Registration Rights Agreement, dated May 6, 2002, among ON Semiconductor Corporation, Semiconductor Components Industries, LLC, SCG (Malaysia SMP) Holding Corporation, SCG (Czech) Holding Corporation, SCG (China) Holding Corporation, Semiconductor Components Industries Puerto Rico, Inc., SCG International Development LLC, Semiconductor Components Industries of Rhode Island, Inc., and Semiconductor Components Industries International of Rhode Island, Inc., Credit Suisse First Boston Corporation, Morgan Stanley & Co., Incorporated, J.P. Morgan Securities Inc., and Salomon Smith Barney Inc., relating to the 12% Senior Secured Notes due 2008









Exhibit 10.1		ON Semiconductor 2002 Executive Incentive Plan (1)









Exhibit 10.2		Employee Incentive Plan January 2002 (1)









Exhibit 10.3		Amendment to Credit Agreement, dated as of April 17, 2002, among ON Semiconductor Corporation, Semiconductor Components Industries, LLC, JPMorgan Chase Bank, as administrative agent, collateral agent and syndication agent, Credit Lyonnais New York Branch, Credit Suisse First Boston and Lehman Commercial Paper Inc., as co-documentation agents, and the other financial institution parties thereto









Exhibit 10.4		Intercreditor Agreement, dated as of May 6, 2002, among J.P. Morgan Chase Bank, as credit agent, Wells Fargo Bank Minnesota, National Association, as trustee, ON Semiconductor Corporation and Semiconductor Components Industries, LLC









Exhibit 10.5		Security Agreement, dated as of May 6, 2002, among Semiconductor Components Industries, ON Semiconductor Corporation, the subsidiary guarantors of ON Semiconductor Corporation that are signatories thereto, and Wells Fargo Bank Minnesota, National Association, as trustee and collateral agent, relating to the 12% Senior Secured Notes due 2008









Exhibit 10.6		Pledge Agreement, dated as of May 6, 2002, among Semiconductor Components Industries, LLC, ON Semiconductor Corporation, the subsidiary pledgors of ON Semiconductor Corporation that are signatories thereto, and Wells Fargo Bank Minnesota, National






		Association, as trustee and collateral agent, relating to the 12% Senior Secured Notes due 2008









Exhibit 10.7		Collateral Assignment, dated as of May 6, 2002, between Semiconductor Components Industries, LLC and Wells Fargo Bank Minnesota, National Association, as trustee and collateral agent, relating to the 12% Senior Secured Notes due 2008









Exhibit 10.8		Joint Venture Contract for Leshan-Phoenix Semiconductor Company Limited, amended on June 25, 2002, among SCG (China) Holding Corporation, Leshan Radio Company Ltd, and Motorola (China) Investment Limited




Exhibit 99		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(1)

Management contract or compensatory plan or arrangement.


                                                                  Exhibit 3.1(a)


                              AMENDED AND RESTATED
                          CERTIFICATE OF INCORPORATION
                         OF ON SEMICONDUCTOR CORPORATION
                             (AS OF AUGUST 1, 2002)

      ON Semiconductor Corporation (hereinafter referred to as the
"Corporation"), organized and existing under and by virtue of the Delaware
General Corporation Law, does hereby certify as follows:

1.    The Corporation filed its original Certificate of Incorporation
(hereinafter referred to as the "Certificate of Incorporation") with the
Secretary of State of Delaware on June 18, 1992, and the name of the Corporation
at that time was Motorola Energy Systems, Inc.

2.    By unanimous written consent of the Board of Directors of the Corporation,
a resolution was duly adopted, pursuant to Sections 242 and 245 of the Delaware
General Corporation Law, setting forth the Amended and Restated Certificate of
Incorporation of the Corporation and declaring said Amended and Restated
Certificate of Incorporation of the Corporation advisable. By written consent of
the stockholders of the Corporation, a resolution was duly adopted, pursuant to
Sections 228, 242 and 245 of the Delaware General Corporation Law, setting forth
and approving such Amended and Restated Certificate of Incorporation of the
Corporation.

      RESOLVED: That the Certificate of Incorporation, as amended to date, be
and hereby is amended and restated in its entirety as follows:

FIRST: The name of the corporation is:

  ON Semiconductor Corporation.

SECOND: The registered office of the Corporation is to be located at 1209 Orange
Street, in the City of Wilmington, in the County of New Castle, in the State of
Delaware. The name of its registered agent at that address is The Corporation
Trust Company.

THIRD: The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the Delaware General Corporation
Law.

FOURTH:

(1)   The aggregate number of shares which the Corporation shall have authority
      to issue is 500,100,000 of which 100,000 of said shares shall be par value
      $0.01 and shall be designated Preferred Stock, and 500,000,000 of said
      shares shall be par value $0.01 per share and shall be designated Common
      Stock.


                                                                               1

(2)   Subject to the limitations and in the manner provided by law, shares of
      the Preferred Stock may be issued from time to time in series and the
      Board of Directors of the Corporation (hereinafter referred to as the
      "Board") is hereby authorized to establish and designate series of the
      Preferred Stock, to fix the number of shares constituting each series, and
      to fix the designations and the relative rights, preferences and
      limitations of the shares of each series and the variations in the
      relative rights, preferences and limitations as between series, and to
      increase and to decrease the number of shares constituting each series.
      Subject to the limitations and in the manner provided by law, the
      authority of the Board with respect to each series shall include but shall
      not be limited to the authority to determine the following:

      (a)   The designation of such series.

      (b)   The number of shares initially constituting such series.

      (c)   The increase and the decrease to a number not less than the number
            of the outstanding shares of such series, of the number of shares
            constituting such series theretofore fixed.

      (d)   The rate or rates and the times at which dividends on the shares of
            such series shall be paid, the form in which such dividends shall be
            paid or payable (which may include additional shares of capital
            stock of the Corporation) and whether or not such dividends shall be
            cumulative and, if such dividends shall be cumulative, the date or
            dates from and after which they shall accumulate; provided, however,
            that, if the stated dividends are not paid in full, the shares of
            all series of the Preferred Stock ranking pari passu shall share
            ratably in the payment of dividends, including accumulations, if
            any, in accordance with the sums that would be payable on such
            shares if all dividends were declared and paid in full.

      (e)   Whether or not the shares of such series shall be redeemable and, if
            such shares shall be redeemable, the terms and conditions of such
            redemption, including but not limited to the date or dates upon or
            after which such shares shall be redeemable and the amount per share
            that shall be payable upon such redemption, which amount may vary
            under different conditions and at different redemption dates.

      (f)   The amount payable on the shares of such series in the event of the
            voluntary or involuntary liquidation, dissolution or winding up of
            the Corporation; provided, however, that the holders of such shares
            shall be entitled to be paid, or to have set apart for payment, not
            less than $0.01 per share before the holders of shares of the Common
            Stock or the holders of any other class or series of stock ranking
            junior to the Preferred Stock as to rights on liquidation shall be
            entitled to be paid any amount or to have any amount set apart for
            payment; and provided further, that, if the


                                                                               2

            amounts payable on liquidation are not paid in full, the shares of
            all series of the Preferred Stock ranking pari passu shall share
            ratably in any distribution of assets other than by way of dividends
            in accordance with the sums that would be payable in such
            distribution if all sums payable were discharged in full. A
            liquidation, dissolution or winding up of the Corporation, as such
            terms are used in this paragraph (f), shall not be deemed to be
            occasioned by or to include any consolidation or merger of the
            Corporation with or into any other corporation or other entity or
            corporations or other entities or a sale, lease or conveyance of all
            or a part of its assets.

      (g)   Whether or not the shares of such series shall have voting rights,
            in addition to the voting rights provided by law and, if such shares
            shall have such voting rights, the terms and conditions thereof,
            including but not limited to the right of the holders of such shares
            to vote as a separate class either alone or with the holders of
            shares of one or more other series of Preferred Stock and the right
            to have more than one vote per share.

      (h)   Whether or not a sinking fund shall be provided for the redemption
            of the shares of such series and, if such a sinking fund shall be
            provided, the terms and conditions thereof.

      (i)   Whether or not a purchase fund shall be provided for purchase of the
            shares of such series, and, if such a purchase fund shall be
            provided, the terms and conditions thereof.

      (j)   Whether or not the shares of such series shall have conversion or
            exchange privileges, and, if such shares shall have conversion or
            exchange privileges, the terms and conditions of conversion or
            exchange, including but not limited to any provision for the
            adjustment of the conversion rate or the conversion price and
            whether conversion or exchange can be effected solely by the
            Corporation or the holder.

      (k)   Any other relative rights, preferences and limitations.

(3)   Except as otherwise provided by law or by the resolution or resolutions
      providing for the issuance of any series of Preferred Stock, the holders
      of outstanding shares of Common Stock shall have the exclusive right to
      vote for the election of directors and for all other purposes, each holder
      of record of shares of Common Stock being entitled to one vote for each
      share of Common Stock standing in such holder's name on the books of the
      Corporation.

FIFTH: The name and address of the incorporator is as follows:

Deborah J. Burmeister 1303 East Algonquin Road Schaumburg, Illinois 60196


                                                                               3

SIXTH: Unless and except to the extent that the By-Laws of the Corporation shall
so require, the election of directors of the Corporation need not be by written
ballot.

SEVENTH: In furtherance and not in limitation of the powers conferred by law,
the Board is expressly authorized and empowered to adopt, amend and repeal the
By-Laws of the Corporation by a majority vote at any regular or special meeting
of the Board or by written consent, subject to the power of the stockholders of
the Corporation to amend or repeal any By-Law of the Corporation made by the
Board. Notwithstanding any other provision of this Amended and Restated
Certificate of Incorporation or the By-Laws of the Corporation (and
notwithstanding that a lesser percentage may be specified by law), the
provisions of Article II, Sections 1, 2 and 5, Article III, Section 1, and
Article VI of the By-Laws of the Corporation may not be amended or repealed, nor
may any By-Law provision inconsistent therewith be adopted, by the stockholders
of the Corporation, unless such action is approved by the affirmative vote of
the holders of not less than sixty-six and two thirds percent (66 2/3%) of the
voting power of all of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors, considered
for purposes of this Article SEVENTH as a single class.

EIGHTH: The Corporation reserves the right at any time and from time to time to
amend, alter, change or repeal any provision contained in this Amended and
Restated Certificate of Incorporation, and any other provisions authorized by
the laws of the State of Delaware at the time in force may be added or inserted,
in the manner now or hereafter prescribed by law; and all rights, preferences
and privileges of whatsoever nature conferred upon stockholders, directors or
any other persons whomsoever by and pursuant to this Amended and Restated
Certificate of Incorporation in its present form or as hereafter amended are
granted subject to the right reserved in this Article EIGHTH.

Notwithstanding any other provisions of this Amended and Restated Certificate of
Incorporation or the By-Laws of the Corporation (and notwithstanding that a
lesser percentage may be specified by law), the provisions of this Article
EIGHTH, Article SEVENTH, Article NINTH, Article TENTH, Article ELEVENTH, Article
TWELFTH, Article THIRTEENTH and Article FOURTEENTH hereof may not be amended or
repealed, nor may any Certificate of Incorporation provision inconsistent
therewith be adopted, by the stockholders of the Corporation unless such action
is approved by the affirmative vote of the holders of not less than sixty-six
and two thirds percent (66 2/3%) of the voting power of all of the outstanding
shares of capital stock of the Corporation entitled to vote generally in the
election of directors, considered for purposes of this Article EIGHTH as a
single class.

NINTH: (1) The business and affairs of the Corporation shall be managed by or
under the direction of a Board consisting of not fewer that six (6) nor more
than eleven (11) directors (exclusive of directors referred to in the following
paragraph), the exact number to be determined from time to time by resolution
adopted by affirmative vote of a majority of such directors then in office. Upon
the filing of this Amended and Restated Certificate of Incorporation with the
Secretary of State of the State of Delaware, the directors shall be divided into
three classes, designated Class I, Class II and Class III.


                                                                               4

Each class shall consist, as nearly as may be possible, of one-third of the
total number of directors determined by the Board pursuant to this Section (1).
Class I directors shall serve for an initial term ending at the annual meeting
of stockholders held in 2000, Class II directors for an initial term ending at
the annual meeting of stockholders held in 2001 and Class III directors for an
initial term ending at the annual meeting of stockholders held in 2002. At each
annual meeting of stockholders beginning in 2000, successors to the directors in
the class whose term expires at that annual meeting shall be elected for a
three-year term. If the number of directors is changed, any increase or decrease
shall be apportioned among the classes so as to maintain the number of directors
in each class as nearly equal as possible, and any additional director of any
class elected to fill a vacancy resulting from an increase in such class shall
hold office for the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting for the year in which his or
her term expires and until his or her successor shall be elected and shall
qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office.

Notwithstanding the foregoing, whenever the holders of any one or more classes
or series of Preferred Stock issued by the Corporation shall have the right,
voting separately by class or series, to elect directors at an annual or special
meeting of stockholders, the number of such directors and the election, term of
office, filling of vacancies and other features of such directorships shall be
governed by the provisions of Article FOURTH of this Amended and Restated
Certificate of Incorporation and any resolution or resolutions adopted by the
Board pursuant thereto, and such directors shall not be divided into classes
unless expressly so provided therein.

(2) Subject to the rights of the holders of any one or more classes or series of
Preferred Stock issued by the Corporation, any director, or the entire Board,
may be removed from office at any time, but only for cause and only by the
affirmative vote of the holders of not less than sixty-six and two thirds
percent (66 2/3%) of the voting power of all of the outstanding shares of
capital stock of the Corporation entitled to vote generally in the election of
directors, considered for purposes of this sentence as a single class. Any
vacancy in the Board that results from an increase in the number of directors
may be filled by a majority of the directors then in office, provided that a
quorum is present, and any other vacancy may be filled only by a majority of the
directors then in office, even if less than a quorum, or by a sole remaining
director. Any director elected to fill a vacancy not resulting from an increase
in the number of directors shall hold office for the remaining term of his or
her predecessor.

TENTH: No action required to be taken or that may be taken at any annual or
special meeting of stockholders of the Corporation may be taken by stockholders
of the Corporation except at such a meeting of stockholders.

ELEVENTH: The Corporation shall, to the full extent permitted by Section 145 of
the Delaware General Corporation Law, as amended from time to time, indemnify
all persons whom it may indemnify pursuant thereto.


                                                                               5

TWELFTH: The Board shall have authority to authorize the issuance, from time to
time without any vote or other action by the stockholders, of any or all shares
of stock of the Corporation of any class at any time authorized, any securities
convertible into or exchangeable for any such shares so authorized, and any
warrant, option or right to purchase, subscribe for or otherwise acquire shares
of stock of the Corporation for any such consideration and on such terms as the
Board from time to time in its discretion lawfully may determine, which terms
and conditions may include, without limitation, restrictions or conditions that
preclude or limit the exercise, transfer or receipt thereof or that invalidate
or void any such securities, warrants, options or rights; provided, however,
that the consideration for the issuance of shares of stock of the Corporation
having par value shall not be less than such par value. Stock so issued, for
which the consideration has been paid to the Corporation, shall be fully paid
stock, and the holders of such stock shall not be liable to any further call or
assessments thereon. Nothing in this Article TWELFTH shall be interpreted to
limit the authority of the Board under the Delaware General Corporation Law or
under any other provision of this Amended and Restated Certificate of
Incorporation, to authorize the issuance of shares, warrants, options or rights
or other securities or to take any other action.

THIRTEENTH: The By-Laws of the Corporation may establish procedures regulating
the submission by stockholders of nominations and proposals for consideration at
meetings of stockholders of the Corporation.

FOURTEENTH: The provisions of Section 203 of the Delaware General Corporation
Law shall not apply to or govern the Corporation.

FIFTEENTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of section 279 of Title 8 of the Delaware Code,
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.


                                                                               6

SIXTEENTH: The personal liability of the directors of the Corporation is hereby
eliminated to the fullest extent permitted by paragraph (7) of subsection (b) of
Section 102 of the General Corporation Law of the State of Delaware, as the same
may be amended or supplemented.


                                                                               7


                                                                  Exhibit 3.1(b)


                           CERTIFICATE OF DESIGNATIONS
                                       OF
                 SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
                                       OF
                          ON SEMICONDUCTOR CORPORATION
                         (PURSUANT TO SECTION 151 OF THE
                        DELAWARE GENERAL CORPORATION LAW)

                                 --------------

            ON Semiconductor Corporation, a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
hereby certifies that the following resolutions were adopted by the Board of
Directors of the Corporation (the "Board of Directors") pursuant to authority of
the Board of Directors as required by Section 151 of the General Corporation Law
of the State of Delaware:

            RESOLVED, that pursuant to the authority granted to and vested in
the Board of Directors in accordance with the provisions of the Amended and
Restated Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation"), the Board of Directors hereby creates a series of the
Corporation's previously authorized preferred stock, $0.01 par value (the
"Preferred Stock"), and hereby states the designation and number thereof, and
fixes the voting powers, preferences and relative, participating, optional and
other special rights, and the qualifications, limitations and restrictions
thereof, as follows:

            Series A Cumulative Convertible Preferred Stock:

                            I. Designation and Amount

            The designation of this series of shares shall be "Series A
Cumulative Convertible Preferred Stock" (the "Series A Preferred Stock"); the
stated value per share shall be $10,000 (the "Stated Value"); and the number of
shares constituting such series shall be 10,000. The number of shares of the
Series A Preferred Stock may be decreased from time to time by a resolution or
resolutions of the Board of Directors or a duly authorized committee of the
Board of Directors and by the filing of a certificate pursuant to the provisions
of the General Corporation Law of the State of Delaware stating that such
reduction has been so authorized; provided, however, that such number shall not
be decreased below the aggregate number of shares of the Series A Preferred
Stock then outstanding.

                                    II. Rank

            A. With respect to dividend rights, the Series A Preferred Stock
shall rank (i) junior to each other class or series of Preferred Stock which by
its terms ranks senior to the Series A Preferred Stock as to payment of
dividends, (ii) on a parity with each other class or series of Preferred Stock
which by its terms ranks on a parity with the Series A Preferred Stock as to
payment of dividends, and (iii) prior to the Corporation's Common Stock, par
value $0.01 per share (the "Common Stock"), and, except as specified above, all
other classes and series of capital stock of the Corporation hereafter issued by
the Corporation. With respect to dividends,


                                       1

all equity securities of the Corporation to which the Series A Preferred Stock
ranks senior, including the Common Stock, are collectively referred to herein as
the "Junior Dividend Securities"; all equity securities of the Corporation with
which the Series A Preferred Stock ranks on a parity, if any, are collectively
referred to herein as the "Parity Dividend Securities"; and all equity
securities of the Corporation to which the Series A Preferred Stock ranks
junior, if any, are collectively referred to herein as the "Senior Dividend
Securities."

            B. With respect to the distribution of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the Series A Preferred Stock shall rank (i) junior to each other class or series
of Preferred Stock which by its terms ranks senior to the Series A Preferred
Stock as to distribution of assets upon liquidation, dissolution or winding up,
(ii) on a parity with each other class or series of Preferred Stock which by its
terms ranks on a parity with the Series A Preferred Stock as to distribution of
assets upon liquidation, dissolution or winding up of the Corporation, and (iii)
prior to the Common Stock, and, except as specified above, all other classes and
series of capital stock of the Corporation hereinafter issued by the
Corporation. With respect to the distribution of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
all equity securities of the Corporation to which the Series A Preferred Stock
ranks senior, including the Common Stock, are collectively referred to herein as
"Junior Liquidation Securities" (and together with the Junior Dividend
Securities are referred to herein as the "Junior Securities"); all equity
securities of the Corporation to which the Series A Preferred Stock ranks on
parity, if any, are collectively referred to herein as "Parity Liquidation
Securities" (and together with the Parity Dividend Securities are referred to
herein as the "Parity Securities"); and all equity securities of the Corporation
to which the Series A Preferred Stock ranks junior, if any, are collectively
referred to herein as "Senior Liquidation Securities" (and together with the
Senior Dividend Securities are referred to herein as the "Senior Securities").

            C. The Series A Preferred Stock shall be subject to the creation of
Junior Securities and Parity Securities, but no Senior Securities or additional
Series A Preferred Stock shall be created except in accordance with the terms
hereof, including, without limitation, Article VII, Section E.

                                 III. Dividends

            A. Dividends. Shares of Series A Preferred Stock shall accumulate
dividends, payment of which shall be made in cash except as otherwise provided
in this Article III, at a rate of 8.00% per annum or, if greater in any
quarterly period, in an amount equal to the value of the dividends that would
have been paid with respect to the shares of Common Stock into which such shares
of Series A Preferred Stock could have been converted on the record date for the
payment of such dividends with respect to the Common Stock. Dividends are due
and shall be paid in four equal quarterly installments on the last day of March,
June, September and December of each year (commencing December 31, 2001, it
being understood that dividends shall be deemed to have accumulated from the
Closing Date through December 31, 2001), or if any such date is not a Business
Day, on the Business Day next preceding such day (each such date, regardless of
whether any dividends have been paid or declared and set aside for payment on
such date, a "Dividend Payment Date"), to holders of record (the "Registered
Holders") as they appear on the stock record books of the Corporation on the
fifteenth day prior to the


                                       2

relevant Dividend Payment Date; provided, however, that the Corporation may
elect not to declare or make any dividend payment due hereunder on any Dividend
Payment Date (other than as required in connection with any redemption of shares
of Series A Preferred Stock or any liquidation, dissolution or winding up of the
Corporation), and any such amount then due in respect of dividends shall
constitute an Arrearage (as defined below). Dividends shall be paid only when,
as and if declared by the Board of Directors out of funds at the time legally
available for the payment of dividends. Dividends shall begin to accumulate on
outstanding shares of Series A Preferred Stock from the date of issuance and
shall be deemed to accumulate from day to day whether or not earned or declared
until paid. Dividends shall accumulate on the basis of a 360-day year consisting
of twelve 30-day months (four 90-day quarters) and the actual number of days
elapsed in the period for which payable.

            B. Accumulation. Dividends on the Series A Preferred Stock shall be
cumulative, and from and after any Dividend Payment Date on which any dividend
that has accumulated or been deemed to have accumulated through such date has
not been paid in full or any payment date set for a redemption on which such
redemption payment has not been paid in full, additional dividends shall
accumulate in respect of the amount of such unpaid dividends or unpaid
redemption payment (such amount, the "Arrearage") as provided in Section A of
this Article III (or such lesser rate as may be the maximum rate that is then
permitted by applicable law). Such additional dividends in respect of any
Arrearage shall be deemed to accumulate from day to day whether or not earned or
declared until the Arrearage is paid, shall be calculated as of such successive
Dividend Payment Date and shall constitute an additional Arrearage from and
after any such successive Dividend Payment Date to the extent not paid on such
Dividend Payment Date. References in any Article herein to dividends that have
accumulated or that have been deemed to have accumulated with respect to the
Series A Preferred Stock shall include the amount, if any, of any Arrearage
together with any dividends accumulated or deemed to have accumulated on such
Arrearage pursuant to the immediately preceding two sentences. Additional
dividends in respect of any Arrearage may be declared and paid at any time, in
whole or in part, without reference to any regular Dividend Payment Date, to
Registered Holders as they appear on the stock record books of the Corporation
on such record date as may be fixed by the Board of Directors (which record date
shall be no less than 10 days prior to the corresponding payment date).

            C. Method of Payment. Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of such dividends at the
time accumulated and payable on all outstanding shares of Series A Preferred
Stock shall be allocated pro rata on a share-by-share basis among all such
shares then outstanding. Any such partial payment shall be made in cash.
Dividends that are declared and paid in an amount less than the full amount of
dividends accumulated on the Series A Preferred Stock (and on any Arrearage)
shall be applied first to the earliest dividend which has not theretofore been
paid. All cash payments of dividends on the shares of Series A Preferred Stock
shall be made in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts.

                           IV. Liquidation Preference

            In the event of a liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of then-outstanding
shares of Series A Preferred


                                       3

Stock shall be entitled to receive out of the assets of the Corporation, whether
such assets are capital or surplus of any nature, an amount per share equal to
the greater of (i) the sum of (A) the dividends, if any, accumulated or deemed
to have accumulated thereon to the date of final distribution to such holders,
whether or not such dividends are declared, and (B) the Stated Value thereof,
and (ii) the amount that would be payable to holders of the Series A Preferred
Stock if the shares of Series A Preferred Stock had been converted into shares
of Common Stock immediately prior to such liquidation, dissolution or winding
up, and no more, before any payment shall be made or any assets distributed to
the holders of any Junior Liquidation Securities. After any such payment in
full, the holders of Series A Preferred Stock shall not, as such, be entitled to
any further participation in any distribution of assets of the Corporation. All
the assets of the Corporation available for distribution to stockholders after
the liquidation preferences of any Senior Liquidation Securities, if any, shall
be distributed ratably (in proportion to the full distributable amounts to which
holders of Series A Preferred Stock and Parity Liquidation Securities, if any,
are respectively entitled upon such dissolution, liquidation or winding up)
among the holders of the then-outstanding shares of Series A Preferred Stock and
Parity Liquidation Securities, if any, when such assets are not sufficient to
pay in full the aggregate amounts payable thereon.

            Neither a consolidation or merger of the Corporation with or into
any other Person or Persons, nor a sale, conveyance, lease, exchange or transfer
of all or part of the Corporation's assets for cash, securities or other
property to a Person or Persons shall be deemed to be a liquidation, dissolution
or winding up of the Corporation for purposes of this Article IV entitling the
Series A Preferred Stock to a liquidation preference hereunder, but the holders
of shares of Series A Preferred Stock shall nevertheless be entitled from and
after any such consolidation, merger or sale, conveyance, lease, exchange or
transfer of all or part of the Corporation's assets to the rights in respect of
a liquidation provided by this Article IV following any such transaction. Notice
of any voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, stating the payment date or dates when, and the place or places
where, the amounts distributable to each holder of shares of Series A Preferred
Stock in such circumstances shall be payable, shall be given by first-class
mail, postage prepaid, mailed not less than 45 days prior to any payment date
stated therein, to holders of record as they appear on the stock record books of
the Corporation as of the date such notices are first mailed.

                             V. Mandatory Redemption

            A. Mandatory Redemption. The Series A Preferred Stock shall not be
redeemable except as provided in this Article V. At any time on or after the
eighth anniversary of the original issuance of the Series A Preferred Stock, the
Series A Preferred Stock, shall, to the extent that the Corporation shall have
funds legally available therefore, be redeemable in whole or in part at the
option of the holders of the Series A Preferred Stock at a redemption price per
share in cash (the "Mandatory Redemption Price") equal to the greater of (i)
Stated Value plus all unpaid dividends accumulated thereon to the date of actual
payment of the Mandatory Redemption Price, whether or not such dividends have
been declared and (ii) 50% of the Current Market Price of the Conversion Shares
and other assets and property, if any, into which one share of Series A
Preferred Stock is then convertible, in each case determined as of the Mandatory
Redemption Date.


                                       4

            B. Mandatory Redemption Notice and Redemption Procedures. If any
holder of Series A Preferred Stock desires to exercise such holder's redemption
right pursuant to Section A of this Article V, such holder shall give written
notice to the Corporation stating such holder's election and specifying the
number of shares to be redeemed pursuant to Section A of this Article V (the
"Mandatory Redemption Notice"). Within 10 days after the receipt of such
Mandatory Redemption Notice, the Corporation shall give written notice to such
holder, by first-class mail, postage prepaid, at such holder's address as it
appears on the records of the Company:

            (i)   notifying such holder of the date fixed for redemption (which
      shall not be later than 30 days after the receipt by the Corporation of
      the Mandatory Redemption Notice) (the "Mandatory Redemption Date");

            (ii)  stating that the Series A Preferred Stock may be converted
      until the close of business on the Business Day prior to the Mandatory
      Redemption Date by surrendering to the Corporation or its transfer agent
      for the Series A Preferred Stock the certificate or certificates for the
      shares to be converted, accompanied by written notice specifying the
      number of shares to be converted, and stating the name and address of the
      transfer agent of the Series A Preferred Stock, if any; and

            (iii) stating that dividends shall cease to accrue on the Mandatory
      Redemption Date unless the Corporation defaults in the payment of the
      Mandatory Redemption Price.

            The Corporation shall redeem the number of shares of Series A
Preferred Stock so specified in the Mandatory Redemption Notice on the Mandatory
Redemption Date.

            C. Change of Control. In the event there occurs a Change of Control,
any holder of record of shares of Series A Preferred Stock, in accordance with
the procedures set forth in Section D of this Article V, may require the
Corporation to redeem any or all of the shares of Series A Preferred Stock held
by such holder in an amount per share equal to the sum of (i) the amount, if
any, of all unpaid dividends accumulated thereon to the date of actual payment
thereof, whether or not such dividends have been declared, and (ii) 101% of
Stated Value (the "Change of Control Price").

            D. Change of Control Notice and Redemption Procedures. Notice of any
Change of Control shall be sent to the holders of record of the outstanding
shares of Series A Preferred Stock not more than ten days following a Change of
Control, which notice (a "Change of Control Notice") shall describe the
transaction or transactions constituting such Change of Control and set forth
each holder's right to require the Corporation to redeem any or all shares of
Series A Preferred Stock held by him or her out of funds legally available
therefor, the redemption date, which date shall be not more than 30 days from
the date of such Change of Control Notice (the "Change of Control Redemption
Date"), and the procedures to be followed by such holders in exercising his or
her right to cause such redemption; provided, however, that if shares of Series
A Preferred Stock are owned by more than 50 holders or groups of Affiliated
holders and if the Series A Preferred Stock is listed on any national securities
exchange or quoted on any national quotation system, the Corporation shall give
such Change of Control Notice by publication in a newspaper of general
circulation in the Borough of Manhattan, The City of New York, within 30 days
following such Change of Control and, in any case, a similar notice shall be


                                       5

mailed concurrently to each holder of shares of Series A Preferred Stock.
Failure by the Corporation to give the Change of Control Notice as prescribed by
the preceding sentence, or the formal insufficiency of any such Change of
Control Notice, shall not prejudice the rights of any holder of shares of Series
A Preferred Stock to cause the Corporation to redeem any such shares held by him
or her. In the event a holder of shares of Series A Preferred Stock shall elect
to require the Corporation to redeem any or all such shares of Series A
Preferred Stock pursuant to Section C of this Article V, such holder shall
deliver, prior to the Change of Control Redemption Date as set forth in the
Change of Control Notice, or, if the Change of Control Notice is not given as
required by this Section D, at any time following the last day the Corporation
was required to give the Change of Control Notice in accordance with this
Section D (in which case the Change of Control Redemption Date shall be the date
which is the later of (x) 30 days following the last day the Corporation was
required to give the Change of Control Notice in accordance with this Section D
and (y) 15 days following the delivery of such election by such holder), a
written notice, in the form specified by the Corporation (if the Corporation did
in fact give the notice required by this Section D), to the Corporation so
stating, and specifying the number of shares to be redeemed pursuant to Section
C of this Article V; provided, however, that if all of the shares of the Series
A Preferred Stock are owned by 50 or fewer holders or groups of Affiliated
holders, such holders or groups may deliver a notice or an election to redeem at
any time within 90 days following the occurrence of a Change of Control without
awaiting receipt of a Change of Control Notice or the expiration of the time
allowed for the delivery of a Change of Control Notice hereunder. The
Corporation shall redeem the number of shares so specified on the Change of
Control Redemption Date fixed by the Corporation or as provided in the preceding
sentence. The Corporation shall comply with the requirements of Rules 13e-4 and
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the shares of Series A Preferred Stock as a result of a
Change of Control. From and after the time the Change of Control Redemption
Price is paid in accordance with the terms hereof with respect to any share of
Series A Preferred Stock, all dividends on such share of Series A Preferred
Stock shall cease to accumulate and all rights of the holder thereof as a holder
of Series A Preferred Stock shall cease and terminate.

            E. Deposit of Funds. The Corporation shall, no later than 11:00
a.m., New York City time, on any Mandatory Redemption Date or Change of Control
Redemption Date pursuant to this Article V, deposit with its transfer agent or
other redemption agent in the Borough of Manhattan, The City of New York having
a capital and surplus of at least $500,000,000, as a trust fund for the benefit
of the holders of the shares of Series A Preferred Stock to be redeemed, cash
that is sufficient in amount to redeem the shares to be redeemed in accordance
with the Mandatory Redemption Notice or Change of Control Notice, with
irrevocable instructions and authority to such transfer agent or other
redemption agent to pay to the respective holders of such shares, as evidenced
by a list of such holders certified by an officer of the Corporation, the
Mandatory Redemption Price or Change of Control Redemption Price, as the case
may be, upon surrender of their respective share certificates. Such deposit
shall be deemed to constitute full payment of such shares to the holders, and
from and after the date of such deposit, all rights of the holders of the shares
of Series A Preferred Stock that are to be redeemed as stockholders of the
Corporation with respect to such shares, except the right to receive the
Mandatory Redemption Price or Change of Control Price, as applicable, upon the
surrender of their respective certificates and all rights under Articles VIII
and X, shall cease and terminate. In case


                                       6

holders of any shares of Series A Preferred Stock called for redemption shall
not, within two years after such deposit, claim the cash deposited for
redemption thereof, such transfer agent or other redemption agent shall, upon
demand, pay over to the Corporation the balance so deposited. Thereupon, such
transfer agent or other redemption agent shall be relieved of all responsibility
to the holders thereof and the sole right of such holders, with respect to
shares to be redeemed, shall be to receive the Mandatory Redemption Price or
Change of Control Price, as applicable, as general creditors of the Corporation.
Any interest accrued on any funds so deposited shall belong to the Corporation,
and shall be paid to it from time to time on demand.

                          VI. Restrictions on Dividends

            So long as any shares of the Series A Preferred Stock are
outstanding, the Board of Directors shall not declare, and the Corporation shall
not pay or set apart for payment any dividend on any Junior Securities or Parity
Securities or make any payment on account of, or set apart for payment money for
a sinking or other similar fund for, the repurchase, redemption or other
retirement of, any Junior Securities or Parity Securities or any warrants,
rights or options exercisable for or convertible into any Junior Securities or
Parity Securities (other than the repurchase, redemption or other retirement of
debentures or other debt securities that are convertible or exchangeable into
any Junior Securities or Parity Securities), or make any distribution in respect
of the Junior Securities or Parity Securities, either directly or indirectly,
and whether in cash, obligations or shares of the Corporation or other property
(other than distributions or dividends in Junior Securities to the holders of
Junior Securities), and shall not permit any Person directly or indirectly
controlled by the Corporation to purchase or redeem any Junior Securities or
Parity Securities or any warrants, rights, calls or options exercisable for or
convertible into any Junior Securities or Parity Securities (other than the
repurchase, redemption or other retirement of debentures or other debt
securities that are convertible or exchangeable into any Junior Securities or
Parity Securities) unless prior to or concurrently with such declaration,
payment, setting apart for payment, repurchase, redemption or other retirement
or distribution, as the case may be, all accumulated and unpaid dividends on
shares of the Series A Preferred Stock not paid on the dates provided for in
Section A of Article III (including Arrearages and accumulated dividends thereon
and regardless of whether the Corporation shall have had the right to elect to
defer such payments as provided for in Article III) shall have been paid, except
that when dividends are not paid in full as aforesaid upon the shares of Series
A Preferred Stock, all dividends declared on the Series A Preferred Stock and
any series of Parity Dividend Securities shall be declared and paid pro rata so
that the amount of dividends so declared and paid on Series A Preferred Stock
and such series of Parity Dividend Securities shall in all cases bear to each
other the same ratio that accumulated dividends (including interest accrued on
or additional dividends accumulated in respect of such accumulated dividends) on
the shares of Series A Preferred Stock and such Parity Dividend Securities bear
to each other. Notwithstanding the foregoing, this paragraph shall not prohibit
(i) the acquisition, repurchase, exchange, conversion, redemption or other
retirement for value of shares of Series A Preferred Stock or any Parity
Dividend Security by the Corporation in accordance with the terms of such
securities or (ii) the acquisition, repurchase, exchange, conversion, redemption
or other retirement for value by the Corporation of any Junior Dividend
Securities by the Corporation in accordance with obligations in existence at the
time of original issuance of the Series A Preferred Stock.


                                       7

                               VII. Voting Rights

            A. The holders of shares of Series A Preferred Stock shall have no
voting rights except as set forth below or as otherwise from time to time
required by law.

            B. So long as any shares of the Series A Preferred Stock are
outstanding, each share of Series A Preferred Stock shall entitle the holder
thereof to vote on all matters voted on by holders of Common Stock, and the
shares of Series A Preferred Stock shall vote together with shares of Common
Stock as a single class. With respect to any such vote, each share of Series A
Preferred Stock shall entitle its holder to a number of votes equal to the
number of shares of Common Stock into which such share of Series A Preferred
Stock would be convertible at the time of the record date with respect to such
vote (assuming all conditions precedent to such conversion have been satisfied
and that such conversion had occurred as of the record date for such vote),
assuming for purposes of this Section B only, and without prejudice to any other
provision of this Certificate of Designations, that the Conversion Price for
purposes of determining such number of shares of Common Stock is $3.19, which
price shall be adjusted, mutatis mutandis, as set forth in Section B of Article
VIII.

            C. So long as the Investor or any of its Affiliates Beneficially
Owns, in the aggregate, at least 50% of the Series A Preferred Stock, in the
event that one or more of the Investor Nominees required to be designated for
election to the Board of Directors pursuant to the Investment Agreement are not
so designated or are not elected to the Board of Directors, then the number of
directors constituting the Board of Directors shall, without further action, be
increased by the number of such Investor Nominees not elected to the Board of
Directors pursuant to the Investment Agreement, or if such requisite increase in
the number of directors constituting the Board of Directors would require the
approval of the Corporation's stockholders or is prohibited by the Investment
Agreement, then the number of directors constituting the Board of Directors
shall be increased to the extent the approval of the Corporation's stockholders
is not required and the Investment Agreement would not be breached and a number
of directors (other than Investor Nominees) shall resign from the Board of
Directors, so as to enable the Investor and its Affiliates to designate as
directors the number of Investor Nominees not elected to the Board of Directors
pursuant to the Investment Agreement, and the Investor and its Affiliates shall
have, in addition to the other voting rights set forth herein, the exclusive
right, voting separately as a single class, to elect a number of directors to
the Board of Directors equal to the number of such Investor Nominees not elected
to the Board of Directors. Directors elected pursuant to this Section C shall
continue as directors and such additional voting right shall continue until such
time as the requisite number of Investor Nominees are elected to the Board of
Directors pursuant to the Investment Agreement, at which time the directors
elected by the Investor and its Affiliates pursuant to this Section C shall
cease to be directors (unless elected as Investor Nominees), and such additional
voting rights shall terminate subject to revesting in the event of each and
every subsequent event of the character indicated above.

            D. (a) The foregoing rights of holders of shares of Series A
Preferred Stock to take any action as provided in this Article VII may be
exercised at any annual meeting of stockholders or at a special meeting of
stockholders held for such purpose as hereinafter provided or at any adjournment
thereof, or by the written consent, delivered to the Secretary of the
Corporation, of the holders of the minimum number of shares required to take
such action.


                                       8

So long as such right to vote continues (and unless such right has been
exercised by written consent of the minimum number of shares required to take
such action), the Chairman of the Board of Directors may call, and upon the
written request of holders of record of 20% of the outstanding shares of Series
A Preferred Stock, addressed to the Secretary of the Corporation at the
principal office of the Corporation, shall call, a special meeting of the
holders of shares entitled to vote as provided herein. Such meeting shall be
held as soon as reasonably practicable after delivery of such request to the
Secretary, at the place and upon the notice provided by law and in the By-laws
for the holding of meetings of stockholders.

            (b) Each director elected pursuant to Section C of this Article VII
shall serve until the next annual meeting or until his or her successor shall be
elected and shall qualify, unless the director's term of office shall have
terminated pursuant to the provisions of Section C hereof. In case any vacancy
shall occur among the directors elected pursuant to Section C hereof, such
vacancy shall be filled for the unexpired portion of the term by vote of the
remaining director or directors theretofore elected pursuant to Section C of
this Article VII (or such director's or directors' successor in office), if any.
If any such vacancy is not so filled within 20 days after the creation thereof
or if all of the directors so elected shall cease to serve as directors before
their term shall expire, the holders of the shares of Series A Preferred Stock
then outstanding and entitled to vote for such director pursuant to the
provisions of Section C of this Article VII may elect successors to hold office
for the unexpired terms of any vacant directorships, by written consent as
provided herein, or at a special meeting of such holders called as provided
herein. The holders of a majority of the shares entitled to vote for directors
pursuant to Section C of this Article VII shall have the right to remove with or
without cause at any time and replace any directors such holders have elected
pursuant to such section, by written consent as herein provided, or at a special
meeting of such holders called as provided herein.

            E. Without the consent or affirmative vote of the holders of at
least a majority of the outstanding shares of Series A Preferred Stock, voting
separately as a class, the Corporation shall not: (i) authorize, create or
issue, or increase the authorized amount of, (a) any Senior Securities or
additional Series A Preferred Stock or (b) any class or series of capital stock
or any security convertible into or exercisable for any class or series of
capital stock, that is redeemable mandatorily or redeemable at the option of the
holder thereof at any time on or prior to the redemption of the Series A
Preferred Stock (whether or not only upon the occurrence of a specified event);
(ii) amend, alter or repeal any provision of the Certificate of Incorporation or
the By-laws, if the amendment, alteration or repeal alters or changes the
powers, preferences or special rights of the Series A Preferred Stock so as to
affect them adversely; or (iii) authorize or take any other action if such
action would be inconsistent with the provisions of this Certificate of
Designations.

            F. Other Securities. Subject to Section G of Article X, the
Corporation shall not, from and after the date of the original issuance of the
Series A Preferred Stock, enter into any agreement, amend or modify any existing
agreement or obligation, or issue any security that prohibits, conflicts or is
inconsistent with, or would be breached by, the Corporation's performance of its
obligations hereunder.


                                       9

                                VIII. Conversion

            A. Conversion. (a) At the option and election of the holder thereof,
each share of Series A Preferred Stock, including all unpaid dividends
accumulated thereon to the Conversion Date (as defined below), whether or not
such dividends have been declared, may be converted in the manner provided
herein at any time into fully paid and nonassessable shares of Common Stock. As
of the Conversion Date with respect to a share of Series A Preferred Stock,
subject to subsections (d) and (e) of this Section A, such share shall be
converted into that number of shares of Common Stock equal to the quotient of
(i) the sum of (A) the Stated Value plus (B) all unpaid dividends accumulated on
such share of Series A Preferred Stock to the Conversion Date whether or not
such dividends have been declared, divided by (ii) the Conversion Price in
effect on the Conversion Date.

            (b) Conversion of shares of the Series A Preferred Stock may be
effected by any holder thereof upon the surrender to the Corporation at the
principal office of the Corporation or at the office of any agent or agents of
the Corporation, as may be designated by the Board of Directors of the
Corporation and identified to the holders in writing upon such designation, of
the certificate for such shares of Series A Preferred Stock to be converted
accompanied by a written notice stating that such holder elects to convert all
or a specified whole number of shares represented by such certificate in
accordance with the provisions of this Section A and specifying the name or
names in which such holder wishes the certificate or certificates for shares of
Common Stock to be issued. In case such notice shall specify a name or names
other than that of such holder, such notice shall be accompanied by payment of
all transfer taxes payable upon the issuance of shares of Common Stock in such
name or names. Other than such taxes, the Corporation will pay any and all issue
and other taxes (other than taxes based on income) that may be payable in
respect of any issue or delivery of shares of Common Stock on conversion of
Series A Preferred Stock pursuant hereto. As promptly as practical, and in any
event within three Business Days after the Conversion Date, the Corporation
shall deliver or cause to be delivered as directed by the holder of shares of
Series A Preferred Stock being converted (i) certificates representing the
number of validly issued, fully paid and nonassessable full shares of Common
Stock to which such holder shall be entitled to, (ii) any cash that is required
to be paid pursuant to subsection (d) of this Section A, and (iii) if less than
the full number of shares of Series A Preferred Stock evidenced by the
surrendered certificate or certificates is being converted, a new certificate or
certificates, of like tenor, for the number of shares of Series A Preferred
Stock evidenced by such surrendered certificate or certificates less the number
of shares of Series A Preferred Stock being converted. Such conversion shall be
deemed to have occurred at the close of business on the date (the "Conversion
Date") of the giving of such notice by the holder of the Series A Preferred
Stock to be converted and of such surrender of the certificate or certificates
representing the shares of Series A Preferred Stock to be converted so that as
of such time the rights of the holder thereof as to the shares being converted
shall cease except for the right to receive shares of Common Stock and/or cash
in accordance herewith, and the person entitled to receive the shares of Common
Stock issued as a result of such conversion shall be treated for all purposes as
having become the holder of such shares of Common Stock at such time.

            (c) In the event that the Series A Preferred Stock is to be redeemed
pursuant to Article V, from and after the Mandatory Redemption Date or Change of
Control Redemption


                                       10

Date, as applicable, the right of a holder to convert shares of Series A
Preferred Stock pursuant to this Section A shall cease and terminate, except if
the Corporation shall default in payment of the Mandatory Redemption Price on
the Mandatory Redemption Date or the Change of Control Redemption Price on the
Change of Control Redemption Date, in which case all such rights shall continue
unless and until such shares are redeemed and such price is paid in full in
accordance with the terms hereof. Notwithstanding anything in the foregoing to
the contrary, if the Conversion Date shall occur with respect to any shares of
Series A Preferred Stock on or prior to any Mandatory Redemption Date or Change
of Control Redemption Date, such shares of Series A Preferred Stock shall be
converted by the Corporation into Common Stock in the manner provided in this
Section A.

            (d) In connection with the conversion of any shares of Series A
Preferred Stock, no fractions of shares of Common Stock shall be issued, but in
lieu thereof the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to such fractional interest multiplied by
the Closing Price per share of Common Stock on the Conversion Date (or on the
Trading Day immediately preceding the Conversion Date, if the Conversion Date is
not a Trading Day). If more than one share of Series A Preferred Stock shall be
surrendered for conversion by the same holder on the same Conversion Date, the
number of full shares of Common Stock issuable on conversion thereof shall be
computed on the basis of the total number of shares of Series A Preferred Stock
so surrendered.

            (e) To the extent the Series A Shareholder Approval is required to
be obtained pursuant to applicable rules, interpretations, rulings or
determinations of Nasdaq, then notwithstanding anything to the contrary in this
Section A, in the event that a Conversion Date with respect to a share of Series
A Preferred Stock occurs on a date before which the Series A Shareholder
Approval has been obtained, the number of shares of Common Stock into which such
share of Series A Preferred Stock shall be converted shall not exceed the
quotient of (i) the number of shares of Common Stock that is equal to 19.9% of
the number of shares of Common Stock outstanding on the Closing Date (as
adjusted for any stock split, reverse stock split, stock dividend or similar
event) divided by (ii) 10,000, and upon delivery of such shares of Common Stock
in accordance with the terms hereof, the Corporation shall pay in cash to the
holder of such share of Series A Preferred Stock the amount, if any, equal to
the Closing Price of the Common Stock on the Conversion Date (or, if the
Conversion Date is not a Trading Day, the immediately preceding Trading Day)
multiplied by the number of shares of Common Stock that would have been received
upon conversion pursuant to this Article VIII that is in excess of the actual
number of shares of Common Stock received as a result of the operation of this
subsection (e).

            (f) The Corporation shall at all times reserve and keep available
for issuance upon the conversion of the Series A Preferred Stock in accordance
with the terms hereof, such number of its authorized but unissued shares of
Common Stock as will from time to time be sufficient to permit the conversion of
all outstanding shares of Series A Preferred Stock, and shall take all action
required to increase the authorized number of shares of Common Stock if
necessary to permit the conversion of all outstanding shares of Series A
Preferred Stock.

            B. Adjustment of Conversion Price. Except in connection with an
Organic Change, which shall be subject to Section C below, the Conversion Price
shall be subject to adjustment from time to time as follows:


                                       11

            (a) Stock Dividends. In case the Corporation after the date of the
original issuance of the Series A Preferred Stock shall pay a dividend or make a
distribution to all holders of shares of Common Stock in shares of Common Stock,
then in any such case the Conversion Price in effect at the opening of business
on the day following the record date for the determination of stockholders
entitled to receive such dividend or distribution shall be reduced to a price
obtained by multiplying such Conversion Price by a fraction of which (x) the
numerator shall be the number of shares of Common Stock outstanding at the close
of business on such record date and (y) the denominator shall be the sum of such
number of shares of Common Stock outstanding and the total number of shares of
Common Stock constituting such dividend or distribution, such reduction to
become effective immediately after the opening of business on the day following
such record date. For purposes of this subsection (a), the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Corporation but shall include shares issuable in respect of
scrip certificates issued in lieu of fractions of shares of Common Stock. The
Corporation will not pay any dividend or make any distribution on shares of
Common Stock held in the treasury of the Corporation.

            (b) Stock Splits and Reverse Splits. In case after the date of the
original issuance of the Series A Preferred Stock outstanding shares of Common
Stock shall be subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day following the
day upon which such subdivision becomes effective shall be proportionately
reduced, and, conversely, in case after the original issuance of the Series A
Preferred Stock outstanding shares of Common Stock shall be combined into a
smaller number of shares of Common Stock, the Conversion Price in effect at the
opening of business on the day following the day upon which such combination
becomes effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the opening
of business on the day following the day upon which such subdivision or
combination becomes effective.

            (c) Issuances Below Market. (i) If the Corporation after the date of
the original issuance of the Series A Preferred Stock issues Common Stock
without consideration or at a price per share (such no consideration or price
per share, the "New Price Per Share") less than either (A) the Closing Price of
the Common Stock on the Trading Day immediately preceding the date of such
issuance of Common Stock or (B) the Conversion Price in effect immediately
preceding such issuance of Common Stock, then the Conversion Price shall be
adjusted effective immediately following such issuance of Common Stock to a
price obtained by multiplying such Conversion Price by a fraction of which (x)
the numerator shall be the number of shares of Common Stock outstanding
immediately preceding such issuance of Common Stock plus the number of shares of
Common Stock that the aggregate consideration received from such issuance of
Common Stock would purchase at (1) if the New Price Per Share is less than both
the Closing Price specified in clause (A) and the Conversion Price specified in
clause (B), the higher of such prices or (2) if the New Price Per Share is less
than either the Closing Price specified in clause (A) or the Conversion Price
specified in clause (B) but not both, such price that the New Price Per Share is
lower than, and (y) the denominator shall be the number of shares of Common
Stock outstanding immediately preceding such issuance of Common Stock plus the
number of additional shares of Common Stock so issued; provided, however, that
no adjustment shall be made if such Common Stock is issued to holders of Common
Stock and the Corporation issues or distributes to each holder of Series A
Preferred Stock the Common Stock that each such


                                       12

holder would have been entitled to receive had the Series A Preferred Stock held
by such holder been converted prior to such issuance of such Common Stock. For
the purposes of this subsection (c)(i), the number of shares of Common Stock at
any time outstanding shall not include shares held in treasury of the
Corporation but shall include shares issuable in respect of scrip certificates
issued in lieu of fractional shares of Common Stock.

            (ii) If the Corporation after the date of the original issuance of
the Series A Preferred Stock issues Derivative Securities entitling Persons to
subscribe for or acquire Common Stock, in each case at a New Price Per Share
less than either (A) the Closing Price of the Common Stock on the Trading Day
immediately preceding the date of such issuance of Derivative Securities or (B)
the Conversion Price in effect immediately preceding such issuance of Derivative
Securities, then the Conversion Price shall be adjusted effective immediately
following such issuance of Derivative Securities to a price obtained by
multiplying such Conversion Price by a fraction of which (x) the numerator shall
be the number of shares of Common Stock outstanding immediately preceding such
issuance of Derivative Securities plus the number of shares of Common Stock that
the aggregate consideration received from the exercise, conversion or exchange
of such Derivatives Securities would purchase at (1) if the New Price Per Share
is less than both the Closing Price specified in clause (A) and the Conversion
Price specified in clause (B), the higher of such prices or (2) if the New Price
Per Share is less than either the Closing Price specified in clause (A) or the
Conversion Price specified in clause (B) but not both, such price that the New
Price Per Share is lower than, and (y) the denominator shall be the number of
shares of Common Stock outstanding immediately preceding such issuance of
Derivative Securities plus the number of additional shares of Common Stock for
or into which such Derivative Securities are exercisable, convertible or
exchangeable; provided, however, that no adjustment shall be made if such
Derivative Securities are issued to holders of Common Stock and the Corporation
issues or distributes to each holder of Series A Preferred Stock the Derivative
Securities that each such holder would have been entitled to receive had the
Series A Preferred Stock held by such holder been converted prior to such
issuance of Derivative Securities. For the purposes of this subsection (c)(ii),
the number of shares of Common Stock at any time outstanding shall not include
shares held in treasury of the Corporation but shall include shares issuable in
respect of scrip certificates issued in lieu of fractional shares of Common
Stock. The Corporation shall not issue any Derivative Securities in respect of
shares of Common Stock held in the treasury of the Corporation. Rights or
warrants issued by the Corporation to all holders of Common Stock entitling the
holders thereof to subscribe for or purchase Equity Securities, which rights or
warrants (A) are deemed to be transferred with such shares of Common Stock, (B)
are not exercisable and (C) are also issued in respect of future issuances of
Common Stock, including shares of Common Stock issued upon conversion of shares
of Series A Preferred Stock, in each case in clauses (A) through (C) until the
occurrence of a specified event or events (a "Trigger Event"), shall for
purposes of this subsection (c)(ii) not be deemed issued until the occurrence of
the earliest Trigger Event.

            (iii) If (A) the exercise price provided for in any Derivative
Securities referred to in subsection (c)(ii) above, (B) the additional
consideration, if any, payable upon the conversion or exchange of any Derivative
Securities referred to in subsection (c)(ii) above or (C) the rate at which any
such Derivative Securities referred to in subsection (c)(ii) above are
convertible into or exchangeable for Common Stock shall change at any time
(other than under or by reason of provisions designed to protect against
dilution upon an event which results in a


                                       13

related adjustment pursuant to this Article VIII), the Conversion Price then in
effect shall forthwith be readjusted (effective only with respect to the
conversion of Series A Preferred Stock after such readjustment) to the
Conversion and Price that would then be in effect had the adjustment made upon
the issuance, sale, distribution or granting of such Derivative Securities been
made based upon such changed purchase price, additional consideration or
conversion rate, as the case may be, but only with respect to such Derivative
Securities as then remain outstanding.

            (d) Special Dividends. In case the Corporation after the date of the
original issuance of the Series A Preferred Stock shall distribute to all
holders of shares of Common Stock evidences of its indebtedness or assets
(excluding any regular periodic cash dividend but including any extraordinary
cash dividend), Equity Securities (other than Common Stock) or rights to
subscribe (excluding those referred to in subsection (c) above) for Equity
Securities other than Common Stock, in each such case the Conversion Price in
effect immediately prior to the close of business on the record date for the
determination of stockholders entitled to receive such distribution shall be
adjusted to a price obtained by multiplying such Conversion Price by a fraction
of which (x) the numerator shall be the Closing Price per share of Common Stock
on such record date, less the then-current fair market value as of such record
date (as determined by the Board of Directors in its good faith judgment) of the
portion of assets or evidences of indebtedness or Equity Securities or
subscription rights so distributed applicable to one share of Common Stock, and
(y) the denominator shall be such Closing Price, such adjustment to become
effective immediately prior to the opening of business on the day following such
record date; provided, however, that no adjustment shall be made (1) if the
Corporation issues or distributes to each holder of Series A Preferred Stock the
subscription rights referred to above that each such holder would have been
entitled to receive had the Series A Preferred Stock held by such holder been
converted prior to such record date or (2) if the Corporation grants to each
such holder the right to receive, upon the conversion of the Series A Preferred
Stock held by such holder at any time after the distribution of the evidences of
indebtedness or assets or Equity Securities referred to above, the evidences of
indebtedness or assets or Equity Securities that such holder would have been
entitled to receive had such Series A Preferred Stock been converted prior to
such record date. The Corporation shall provide any holder of Series A Preferred
Stock, upon receipt of a written request therefor, with any indenture or other
instrument defining the rights of the holders of any indebtedness, assets,
subscription rights or Equity Securities referred to in this subsection (d).
Rights or warrants issued by the Corporation to all holders of Common Stock
entitling the holders thereof to subscribe for or purchase Equity Securities,
which rights or warrants (i) are deemed to be transferred with such shares of
Common Stock, (ii) are not exercisable and (iii) are also issued in respect of
future issuances of Common Stock, including shares of Common Stock issued upon
conversion of shares of Series A Preferred Stock, in each case in clauses (i)
through (iii) until the occurrence of a Trigger Event, shall for purposes of
this subsection (d) not be deemed issued until the occurrence of the earliest
Trigger Event.

            (e) Tender or Exchange Offer. In case a tender or exchange offer
made by the Corporation or any subsidiary of the Corporation for all or any
portion of the Common Stock shall be consummated and such tender offer shall
involve an aggregate consideration having a fair market value (as determined by
the Board of Directors in its good faith judgment) at the last time (the "Offer
Time") tenders may be made pursuant to such tender or exchange offer (as it


                                       14

may be amended) that, together with the aggregate of the cash plus the fair
market value (as determined by the Board of Directors in its good faith
judgment), as of the Offer Time, of consideration payable in respect of any
tender or exchange offer by the Corporation or any such subsidiary for all or
any portion of the Common Stock consummated within the 12 months preceding the
Offer Time and in respect of which no Conversion Price adjustment pursuant to
this subsection (e) has been made, exceeds 5% of the product of the Closing
Price of the Common Stock at the Offer Time multiplied by the number of shares
of Common Stock outstanding (including any tendered shares) at the Offer Time,
the Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the Offer Time by a fraction of which (x) the numerator shall be (i) the product
of the Closing Price of the Common Stock at the Offer Time multiplied by the
number of shares of Common Stock outstanding (including any tendered shares) at
the Offer Time minus (ii) the fair market value (determined as aforesaid) of the
aggregate consideration payable to stockholders based on the acceptance (up to
any maximum specified in the terms of the tender or exchange offer) of all
shares validly tendered and not withdrawn as of the Offer Time (the shares
deemed so accepted, up to any such maximum, being referred to as the "Purchased
Shares") and (y) the denominator shall be the product of (i) such Closing Price
at the Offer Time multiplied by (ii) such number of outstanding shares at the
Offer Time minus the number of Purchased Shares, such reduction to become
effective immediately prior to the opening of business on the day following the
Offer Time. For purposes of this subsection (e), the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of
the Corporation but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock.

            (f) Closing Price Determination. For the purpose of any computation
under subsections (c) and (d) of this Section B, the Closing Price of Common
Stock on any date shall be deemed to be the average of the Closing Prices for
the five consecutive Trading Days ending on the day in question (or if such day
is not a Trading Day, the next preceding Trading Day), provided, however, that
(i) if the "ex" date for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the Conversion Price
pursuant to this Section B occurs on or after the 20th Trading Day prior to the
day in question and prior to the "ex" date for the issuance or distribution
requiring such computation, the Closing Price for each Trading Day prior to the
"ex" date for such other event shall be adjusted by multiplying such Closing
Price by the same fraction which the Conversion Price is so required to be
adjusted as a result of such other event, (ii) if the "ex" date for any event
(other than the issuance or distribution requiring such computation) that
requires an adjustment to the Conversion Price pursuant to this Section B occurs
on or after the "ex" date for the issuance or distribution requiring such
computation and on or prior to the day in question, the Closing Price for each
Trading Day on and after the "ex" date for such other event shall be adjusted by
multiplying such Closing Price by the reciprocal of the fraction by which the
Conversion Price is so required to be adjusted as a result of such other event,
and (iii) if the "ex" date for the issuance or distribution requiring such
computation is on or prior to the day in question, after taking into account any
adjustment required pursuant to clause (ii) of this proviso, the Closing Price
for each Trading Day on or after such "ex" date shall be adjusted by adding
thereto the fair market value on the day in question (as determined by the Board
of Directors in a manner consistent with any determination of such value for the
purposes of subsection (d) of this Section B) of the assets, evidences of
indebtedness, Equity Securities or subscription rights being distributed
applicable to


                                       15

one share of Common Stock as of the close of business on the day before such
"ex" date. For the purposes of any computation under subsection (e) of this
Section B, the Closing Price on any date shall be deemed to be the average of
the daily Closing Prices for the five consecutive Trading Days ending at the
Offer Time; provided, however, that if the "ex" date for any event (other than
the tender or exchange offer requiring such computation) that requires an
adjustment to the Conversion Price pursuant to this Section B occurs on or after
the date of commencement of such tender or exchange offer and prior to the Offer
Time for such tender or exchange offer, the Closing Price for each Trading Day
prior to the "ex" date for such other event shall be adjusted by multiplying
such Closing Price by the same fraction by which the Conversion Price is so
required to be adjusted as a result of such other event. For purposes of this
subsection (f), the term "ex" date, (i) when used with respect to any issuance
or distribution, means the first date on which the Common Stock trades regular
way on the Nasdaq or on the relevant exchange or in the relevant market from
which the Closing Price was obtained without the right to receive such issuance
or distribution, (ii) when used with respect to any subdivision or combination
of shares of Common Stock, means the first date on which the Common Stock trades
regular way on the Nasdaq or such exchange or in such market after the time at
which such subdivision or combination becomes effective, and (iii) when used
with respect to any tender or exchange offer means the first date on which the
Common Stock trades regular way on the Nasdaq or such exchange or in such market
after the Offer Time of such tender or exchange offer.

            (g) Other Adjustments. The Corporation may, but shall not be
required to, make such reductions in the Conversion Price, in addition to those
required by clauses (a), (b), (c), (d), (e) and (f) of this Section B, as it
considers to be advisable, including without limitation in order to avoid or
diminish any income tax to holders of Common Stock or rights to purchase Common
Stock resulting from any dividend or distribution of stock, from any event
treated as such for income tax purposes, from any subdivision, reclassification
or combination of stock, from any issuance of rights or warrants or from any
other transaction having an effect similar to any of the above. Whenever the
Conversion Price is reduced pursuant to the preceding sentence, the Corporation
shall mail to the holders of then-outstanding shares of Series A Preferred Stock
a notice of the reduction at least 15 days prior to the date the reduced
Conversion Price takes effect, and such notice shall state the reduced
Conversion Price and the period it will be in effect.

            (h) Minimum Adjustment Requirement. No adjustment shall be required
unless such adjustment would result in an increase or decrease of at least $0.01
in the Conversion Price then subject to adjustment; provided, however, that any
adjustments that are not made by reason of this subsection (h) shall be carried
forward and taken into account in any subsequent adjustment. In case the
Corporation shall at any time issue shares of Common Stock by way of dividend on
any stock of the Corporation or subdivide or combine the outstanding shares of
Corporation Stock, said amount of $0.01 specified in the preceding sentence (as
therefore increased or decreased, if said amount shall have been adjusted in
accordance with the provisions of this subsection (h)) shall forthwith be
proportionately increased in the case of such a combination or decreased in the
case of such a subdivision or stock dividend so as appropriately to reflect the
same.

            (i) Minimum Permissible Conversion Price. Notwithstanding any other
provision of this Section B, no adjustment to the Conversion Price shall reduce
the Conversion Price below $0.01, and any such purported adjustment shall
instead reduce the Conversion Price to $0.01.


                                       16

The Corporation hereby covenants not to take any action that would or does
result in any adjustment in the Conversion Price that, if made without giving
effect to the previous sentence, would cause the Conversion Price to be less
than $0.01.

            (j) Notice. Whenever the Conversion Price is adjusted as herein
provided, a notice stating that the Conversion Price has been adjusted and
setting forth the adjusted Conversion Price shall promptly be mailed by the
Corporation to the holders of the Series A Preferred Stock.

            (k) No Adjustment. Anything to the contrary herein notwithstanding,
no adjustment to the Conversion Price shall be made pursuant to this Section B
as a result of, or in connection with, the issuance of Common Stock or
Derivative Securities (i) to directors, employees or consultants of the
Corporation or its Subsidiaries pursuant to an existing or future stock option,
stock purchase or other similar plan adopted by the Board of Directors, an
employment agreement approved by the Board of Directors, a consulting agreement
or arrangement approved by the Board of Directors, or the modification, renewal
or extension of any such plan, agreement or arrangement if approved by the Board
of Directors; provided, however, that with respect to the issuance of Common
Stock and/or Derivative Securities to consultants other than Bain & Company,
only the issuance of Common Stock and/or Derivative Securities to such
consultants pursuant to such plans, agreements or arrangements in any one
calendar year that would otherwise cause an adjustment to the Conversion Price
pursuant to this Section B and represents in the aggregate 1% or less of the
Corporation's outstanding Common Stock as of the first day of such calendar year
shall be covered by this subsection (k) and any such subsequent issuance after
such 1% threshold has been exceeded shall not be covered by this subsection (k)
and there shall be an adjustment to the Conversion Price as a result of any such
subsequent issuance if otherwise required pursuant to this Section B, (ii) as
consideration for the acquisition of a business or of assets, in each case,
approved by the Board of Directors, (iii) in a firm commitment underwritten
public offering in which both (x) the underwriting discount is less than 7% and
(y) the offering price per share is greater than the Conversion Price in effect
immediately preceding the execution of the underwriting agreement for such
offering, (iv) to the Corporation's joint venture partners in exchange for
interests in the relevant joint venture if such exchange is approved by the
Board of Directors, or (v) upon exercise, conversion or exchange of any
Derivative Securities the issuance of which caused an adjustment hereunder or
the issuance of which did not require adjustment hereunder.

            C. Organic Change.

            (a) Corporation Survives. Upon the consummation of an Organic Change
(other than a transaction in which the Corporation is not the surviving entity),
lawful provision shall be made as part of the terms of such transaction whereby
the terms hereof shall be modified, without payment of any additional
consideration by any holder, so as to provide that upon the conversion of shares
of Series A Preferred Stock following the consummation of such Organic Change,
the holder of Series A Preferred Stock shall have the right to acquire and
receive (in lieu of or in addition to the shares of Common Stock acquirable and
receivable prior to the Organic Change), without payment of additional
consideration therefor, such securities, cash and other property as such holder
would have received if such holder had converted such shares of Series A
Preferred Stock into Common Stock immediately prior to such Organic Change.
Lawful


                                       17

provision also shall be made as part of the terms of the Organic Change so that
all other terms hereof shall remain in full force and effect following such an
Organic Change. The provisions of this subsection (a) shall similarly apply to
successive Organic Changes of the character described in this subsection (a).

            (b) Corporation Does Not Survive. The Corporation shall not enter
into an Organic Change that is a transaction in which the Corporation is not the
surviving entity unless lawful provision shall be made as part of the terms of
such transaction whereby the surviving entity shall issue new securities to each
holder of Series A Preferred Stock, without payment of any additional
consideration by such holder, with terms that provide that upon the conversion
of such securities, the holder of such securities shall have the right to
acquire and receive (in lieu of or in addition to the shares of Common Stock
acquirable and receivable prior to the Organic Change), without payment of
additional consideration therefor, such securities, cash and other property (the
"New Securities") as such holder would have received if such holder had
converted such shares of Series A Preferred Stock into Common Stock immediately
prior to such Organic Change. The certificate or articles of incorporation or
other constituent document of the surviving entity shall provide for such
adjustments which, for events subsequent to the effective date of such
certificate or articles of incorporation or other constituent document, shall be
equivalent to the adjustments provided for in Section B of this Article VIII.
All other terms of such New Securities shall be substantially equivalent to the
terms provided herein. The provisions of this subsection (b) shall similarly
apply to successive Organic Changes of the character described in of this
subsection (b).

            D. Certain Events. If any event similar to or of the type
contemplated by the provisions of Section B or Section C of this Article VIII,
but not expressly provided for by such provisions, occurs, then the Board of
Directors of the Corporation, will make an appropriate and equitable adjustment
in the Conversion Price so as to protect the rights of the holders of Series A
Preferred Stock; provided, however, that no such adjustment will decrease the
number of shares of Common Stock issuable upon conversion of the Series A
Preferred Stock.

                           IX. Additional Definitions

            For the purposes of this Certificate of Designations of Series A
Preferred Stock, the following terms shall have the meanings indicated:

            "Affiliate" has the meaning set forth in Rule 12b-2 under the
Exchange Act as in effect on the date of the Investment Agreement. The term
"Affiliated" has a correlative meaning.

            "Beneficially Own" with respect to any securities means having
"beneficial ownership" of such securities (as determined pursuant to Rule 13d-3
under the Exchange Act as in effect on the date of the Investment Agreement,
except that a Person shall be deemed to Beneficially Own all such securities
that such Person has the right to acquire whether such right is exercisable
immediately or after the passage of time). The terms "Beneficial Ownership" and
"Beneficial Owner" have correlative meanings.


                                       18

            "Business Day" means any day, other than a Saturday, Sunday or a day
on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.

            "By-laws" means the By-laws of the Corporation, as amended from time
to time.

            "Change of Control" shall be deemed to have occurred if (a) any
person or group (within the meaning of Rule 13d-5 under the Exchange Act as in
effect on the date of the Investment Agreement) shall own directly or
indirectly, beneficially or of record, shares representing more than 35% of the
aggregate ordinary voting power represented by the issued and outstanding Equity
Securities of the Corporation, other than any TPG Person or any Person or Group
that owned at least 5% of such Equity Securities on the Closing Date; (b) a
majority of the seats (other than vacant seats) on the board of directors of the
Corporation shall at any time be occupied by persons who were neither (i)
nominated by the board of directors of the Corporation nor (ii) appointed by
directors so nominated; (c) any change in control (or similar event, however
denominated) with respect to the Corporation shall occur under and as defined in
any indenture or agreement in respect of Indebtedness for borrowed money in
excess of the aggregate principal amount of $10,000,000 to which the Corporation
or any Subsidiary thereof is a party; or (d) a "Change in Control" or "Change of
Control" (or similar event) shall have occurred under the Credit Agreement or
the Indenture, unless, in the case of a "Change of Control" under the Indenture,
the aggregate principal amount outstanding under the Senior Subordinated Notes
is less than $10,000,000. Notwithstanding the foregoing, no event described
above shall constitute a "Change of Control" if such event resulted directly
from any action taken by the Investor or any of its Affiliates.

            "Closing" has the meaning set forth in the Investment Agreement.

            "Closing Date" has the meaning set forth in the Investment
Agreement.

            "Closing Price" with respect to a share of Common Stock on any day
means, subject to subsection (f) of Section B of Article VIII if applicable, the
last reported sale price on that day or, in case no such reported sale takes
place on such day, the average of the last reported bid and asked prices,
regular way, on that day, in either case, as reported in the consolidated
transaction reporting system with respect to securities quoted on Nasdaq or, if
the shares of Common Stock are not quoted on Nasdaq, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading or, if the shares of Common Stock
are not quoted on Nasdaq and not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices on such other nationally recognized quotation
system then in use, or, if on any such day the shares of Common Stock are not
quoted on any such quotation system, the average of the closing bid and asked
prices as furnished by a professional market maker selected by the Board of
Directors in good faith making a market in the shares of Common Stock. If the
shares of Common Stock are not publicly held, or so listed, quoted or publicly
traded, the "Closing Price" means the fair market value of a share of Common
Stock, as determined in good faith by the Board of Directors.


                                       19

            "Conversion Price" shall mean $2.82, as adjusted from time to time
pursuant to Section B of Article VIII.

            "Conversion Shares" has the meaning set forth in the Investment
Agreement.

            "Credit Agreement" has the meaning set forth in the Investment
Agreement.

            "Current Market Price" means, in respect of any share of Common
Stock as of any date, the average Closing Price for the 30 Trading Days
immediately preceding the date in question. In case any event that would require
an adjustment to the Conversion Price pursuant to Section B of occurs with an
"ex" date or an effective date occurring during the foregoing 30 Trading Day
period, the Closing Prices used in determining the Current Market Price shall be
appropriately adjusted to take such event into account.

            "Derivative Securities" means any subscriptions, options, conversion
rights, warrants, or other agreements, securities or commitments of any kind
obligating the Company to issue, grant, deliver or sell, or cause to be issued,
granted, delivered or sold, Common Stock.

            "Equity Securities" of any Person, means any and all common stock,
preferred stock and any other class of capital stock of, and any partnership or
limited liability company interests in, such Person or any other similar
interests of any Person that is not a corporation, partnership or limited
liability company.

            "Exchange Act" means the U.S. Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, from time to
time.

            "Governmental Entity" means any government or political subdivision
or department thereof, any governmental or regulatory body (including without
limitation the NASD and the Nasdaq), commission, board, bureau, agency or
instrumentality, or any court or arbitrator or alternative dispute resolution
body, in each case whether federal, state, local or foreign.

            "Group" has the meaning set forth in Rule 13d-5 under the Exchange
Act.

            "Guarantee" means any direct or indirect obligation, contingent or
otherwise, to guarantee (or having the economic effect of guaranteeing)
Indebtedness in any manner, including, without limitation, any monetary
obligation to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness (whether arising by agreement to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise).

            "Indebtedness" means, with respect to any Person, without
duplication, (i) all obligations of such Person for money borrowed, (ii) all
obligations of such Person evidenced by bonds, debentures, notes, or other
similar instruments, (iii) all obligations of such Person upon which interest
charges are customarily paid, (iv) all obligations of such Person under
conditional sale or other title retention agreements relating to property or
assets purchased by such Person, (v) all obligations of such Person issued or
assumed as the deferred purchase price of property or services (excluding (x)
trade accounts payable and accrued obligations incurred in the ordinary


                                       20

course of business and (y) deferred earn-out and other performance-based payment
obligations incurred in connection with any Permitted Acquisition (as such term
is defined in the Credit Agreement as in effect on the date of the Investment
Agreement), (vi) all Indebtedness of others secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property owned or acquired by such Person, whether or
not the obligations secured thereby have been assumed, (vii) all Guarantees by
such Person of Indebtedness of others, (viii) all capital lease obligations of
such Person, (ix) all obligations (determined on the basis of actual, not
notional, obligations) of such Person in respect of interest rate protection
agreements, foreign currency exchange agreements or other interest or exchange
rate hedging arrangements and (x) all obligations of such Person as an account
party in respect of letters of credit and bankers' acceptances issued in support
of obligations that constitute Indebtedness under any other clause of this
definition (unless such obligations are fully cash collateralized), provided,
however, that all obligations in respect of letters of credit shall be deemed
Indebtedness to the extent drawings thereunder are unreimbursed (after any
applicable grace period) regardless of the purpose for which such letter of
credit was issued. The Indebtedness of any Person shall include the recourse
Indebtedness of any partnership in which such Person is a general partner.
Notwithstanding the foregoing, no portion of Indebtedness that becomes the
subject of a defeasance (whether a legal defeasance or a "covenant" or "in
substance" defeasance) shall, at any time that such defeasance remains in
effect, be treated as Indebtedness for purposes hereof.

            "Indenture" has the meaning set forth in the Investment Agreement.

            "Investment Agreement" means the Investment Agreement, dated on or
about the date hereof, by and between the Investor and the Corporation, as
amended, supplemented or otherwise modified from time to time.

            "Investor" has the meaning set forth in the Investment Agreement.

            "Investor Group" means, collectively, the Investor and its
Affiliates.

            "Investor Nominee" means a person designated for election to the
Board of Directors by the Investor pursuant to the Investment Agreement.

            "Law" means any law, treaty, statute, ordinance, code, rule,
regulation, judgment, decree, order, writ, award, injunction or determination of
any Governmental Entity.

            "Lien" means any mortgage, pledge, lien , security interest, claim,
voting agreement, conditional sale agreement, title retention agreement,
restriction, option or encumbrance of any kind, character or description
whatsoever.

            "NASD" means the National Association of Securities Dealers, Inc.

            "Nasdaq" means The Nasdaq Stock Market's National Market.

            "Organic Change" means, with respect to any Person, any transaction
(including without limitation any recapitalization, capital reorganization or
reclassification of any class of capital stock, any consolidation or
amalgamation of such Person with, or merger of such Person


                                       21

into, any other Person, any merger of another Person into such Person (other
than a merger which does not result in a reclassification, conversion, exchange
or cancellation of outstanding shares of capital stock of such Person), any sale
or transfer or lease of all or substantially all of the assets of such Person or
any compulsory share exchange) pursuant to which any class of capital stock of
such Person is converted into the right to receive other securities, cash or
other property.

            "Other Credit Facilities" means, with respect to the Company, such
agreements (other than the Credit Agreement and the Indenture) to which the
Company now is, or hereafter becomes, a party, which agreements evidence
obligations of the Company that are included within clauses (i) or (ii) of the
definition of "Indebtedness", as the same may be amended, restated,
supplemented, extended, renewed or increased from time to time, replaced,
substituted, refunded or refinanced or otherwise modified from time to time, in
whole or in part, and any successive replacements, substitutions, refundings or
refinancings..

            "Person" means any individual, corporation, company, association,
partnership, limited liability company, joint venture, trust or unincorporated
organization, or Governmental Entity.

            "Securities Act" means the U.S. Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder, from time to time.

            "Senior Subordinated Notes" means the Senior Subordinated Notes
issued pursuant to the Indenture.

            "Series A Shareholder Approval" has the meaning set forth in the
Investment Agreement.

            "Subsidiary" means as to any Person, any other Person of which more
than 50% of the shares of the voting stock or other voting interests are owned
or controlled, or the ability to select or elect more than 50% of the directors
or similar managers is held, directly or indirectly, by such first Person or one
or more of its Subsidiaries or by such first Person and one or more of its
Subsidiaries; provided, however, that no Joint Venture (as such term is defined
in the Investment Agreement) shall be considered (i) a "Subsidiary" of the
Corporation or (ii) a "Subsidiary" of any Subsidiary of the Corporation.

            "TPG Person" means the Investor, and each Person controlled by,
controlling or under common control with the Investor.

            "Trading Day" means any day on which the Nasdaq is open for trading,
or if the shares of Common Stock are not quoted on the Nasdaq any day on which
the principal national securities exchange or national quotation system on which
the shares of Common Stock are listed, admitted to trading or quoted is open for
trading, or if the shares of Common Stock are not so listed, admitted to trading
or quoted, any Business Day.


                                       22

                                X. Miscellaneous

            A. Notices. Any notice referred to herein shall be in writing and
shall be deemed to have been duly given (and shall be effective when received),
if delivered personally, by facsimile or sent by overnight courier or by first
class mail, postage prepaid, as follows:

            (i) if to the Corporation, to its office at 5005 East McDowell Road,
      Phoenix, Arizona 85008 (Attention: General Counsel);

            (ii) if to a holder of the Series A Preferred Stock, to such holder
      at the address of such holder as listed in the stock record books of the
      Corporation (which may include the records of any transfer agent for the
      Series A Preferred Stock); or

            (iii) to such other address as the Corporation or such holder, as
      the case may be, shall have designated by notice similarly given.

            B. Reacquired Shares. Any shares of Series A Preferred Stock
redeemed, purchased or otherwise acquired by the Corporation, directly or
indirectly, in any manner whatsoever shall be retired and canceled promptly
after the acquisition thereof (and shall not be deemed to be outstanding for any
purpose) and, if necessary to provide for the lawful redemption or purchase of
such shares, the capital represented by such shares shall be reduced in
accordance with the Delaware General Corporation Law. All such shares of Series
A Preferred Stock shall upon their cancellation and upon the filing of an
appropriate certificate with the Secretary of State of the State of Delaware,
become authorized but unissued shares of Preferred Stock, $0.01 par value, of
the Corporation and may be reissued as part of another series of Preferred
Stock, $0.01 par value, of the Corporation subject to the conditions or
restrictions on issuance set forth herein.

            C. Enforcement. Any registered holder of shares of Series A
Preferred Stock may proceed to protect and enforce its rights and the rights of
such holders by any available remedy by proceeding at law or in equity to
protect and enforce any such rights, whether for the specific enforcement of any
provision in this Certificate of Designations or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.

            D. Transfer Taxes. Except as otherwise agreed upon pursuant to the
terms of this Certificate of Designations, the Corporation shall pay any and all
documentary, stamp or similar issue or transfer taxes and other governmental
charges that may be imposed under the laws of the United States of America or
any political subdivision or taxing authority thereof or therein in respect of
any issue or delivery of Common Stock on conversion, or other securities or
property issued on account of, shares of Series A Preferred Stock pursuant
hereto or certificates representing such shares or securities. The Corporation
shall not, however, be required to pay any such tax or other charge that may be
imposed in connection with any transfer involved in the issue or transfer and
delivery of any certificate for Common Stock or other securities or property in
a name other than that in which the shares of Series A Preferred Stock so
converted, or on account of which such securities were issued, were registered
and no such issue or delivery shall be made unless and until the Person
requesting such issue has paid to the Corporation the amount


                                       23

of any such tax or has established to the satisfaction of the Corporation that
such tax has been paid or is not payable.

            E. Transfer Agent. The Corporation may appoint, and from time to
time discharge and change, a transfer agent for the Series A Preferred Stock.
Upon any such appointment or discharge of a transfer agent, the Corporation
shall send notice thereof by first-class mail, postage prepaid, to each holder
of record of shares of Series A Preferred Stock.

            F. Record Dates. In the event that the Series A Preferred Stock
shall be registered under either the Securities Act or the Exchange Act, the
Corporation shall establish appropriate record dates with respect to payments
and other actions to be made with respect to the Series A Preferred Stock.

            G. Subordination to Credit Agreement and Senior Subordinated Notes.
Notwithstanding anything to the contrary herein, by accepting a share of Series
A Preferred Stock, the holder thereof shall be deemed to have acknowledged and
agreed that (a) such holder's right to receive payments in respect of the Series
A Preferred Stock is subject and subordinated in right of payment to the payment
in full and discharge of all amounts of principal, interest and fees (however
denominated) then outstanding under the Credit Agreement, the Senior
Subordinated Notes and then existing Other Credit Facilities and (b) until (i)
either payment in full of all such amounts (however denominated) under the
Credit Agreement, the Senior Subordinated Notes and then existing Other Credit
Facilities has been made in cash, or (ii) if earlier than such payment, all
necessary waivers and consents have been obtained with respect to the relevant
document as contemplated by the proviso to the last sentence of this Section G,
no payment, whether directly or indirectly, by exercise of any right of set off
or otherwise in respect of the Series A Preferred Stock shall be made by the
Corporation, and no deposit in respect of the Series A Preferred Stock shall be
made pursuant to the terms hereof. In the event that any payment by, or
distribution of the assets of, the Corporation of any kind or character (whether
in cash, property or securities, whether directly or indirectly, by exercise of
any right of set-off or otherwise and whether as a result of a bankruptcy
proceeding with respect to the Corporation or otherwise) shall be received by a
holder of Series A Preferred Stock at any time when such payment is prohibited
by this Section G, such payment shall be held in trust for the benefit of, and
shall be paid over to, the lenders under the Credit Agreement, the holders of
Senior Subordinated Notes and the lenders under Other Credit Facilities, as the
case may be, as their interests may appear. The preceding two sentences address
the relative rights of holders of Series A Preferred Stock, on the one hand, and
the lenders under the Credit Agreement, the holders of Senior Subordinated Notes
and the lenders under Other Credit Facilities, as the case may be, on the other
hand, and nothing in this Certificate of Designations shall impair, as between
the Corporation and the holders of Series A Preferred Stock, the obligation of
the Corporation, which is absolute and unconditional, to pay amounts due in
respect of the Series A Preferred Stock in accordance with their terms. Without
limiting the foregoing, upon a Change of Control, the Corporation shall pay all
amounts outstanding under the Credit Agreement, the Indenture and the Other
Credit Facilities to the extent necessary, but only if permitted under the
relevant document, in order to permit the payment of the Change of Control Price
hereunder or, if such payment is not so permitted under any such document, the
Corporation shall exercise any right of defeasance it has under such document
(provided that all conditions precedent to the exercise of such right of
defeasance have been satisfied, which conditions the Corporation shall


                                       24

use its reasonable best efforts to satisfy) to the extent necessary in order to
permit the payment of the Change of Control Price hereunder; provided, that the
Corporation shall not be required to make such payments or exercise such right
of defeasance under the Credit Agreement, the Indenture or an Other Credit
Facility if the Corporation has received all necessary waivers and consents from
the applicable lenders or holders of notes permitting the Corporation to pay the
Change of Control Price hereunder.


                                       25

            IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Corporation by its Chief Financial Officer and attested by its
Assistant Secretary, this 6th day of September, 2001.

                                             ON SEMICONDUCTOR CORPORATION


                                             By: /s/ Dario Sacomani
                                                 -------------------------------
                                                 Name:  Dario Sacomani
                                                 Title: Chief Financial Officer,
                                                 Senior Vice President:


[Corporate Seal]

ATTEST:


/s/ Judith A. Boyle
- -------------------------------
Name: Judith A. Boyle
Title: Assistant Secretary


                                       26



                                                                     Exhibit 4.1

                                  $300,000,000

                          ON SEMICONDUCTOR CORPORATION
                    SEMICONDUCTOR COMPONENTS INDUSTRIES, LLC

                        12% SENIOR SECURED NOTES DUE 2008

                               PURCHASE AGREEMENT



                                                                     May 1, 2002



CREDIT SUISSE FIRST BOSTON CORPORATION,
Morgan Stanley & Co. Incorporated,
J.P. Morgan Securities Inc., and
Salomon Smith Barney Inc.,
  c/o Credit Suisse First Boston Corporation,
    Eleven Madison Avenue,
      New York, N.Y. 10010-3629



Dear Sirs:

                  1. Introductory. ON Semiconductor Corporation, a Delaware
corporation (the "COMPANY"), and Semiconductor Components Industries, LLC, a
Delaware limited liability company and a wholly owned subsidiary of the Company
("SCI LLC," and together with the Company, the "ISSUERS"), propose, subject to
the terms and conditions stated herein, to issue and sell to the several initial
purchasers named in Schedule A hereto (the "PURCHASERS") U.S.$300,000,000
principal amount of their 12% Senior Secured Notes due 2008 ("OFFERED
SECURITIES"), to be issued under an indenture, dated as of May 6, 2002 (the
"INDENTURE"), among the Issuers, the subsidiaries of the Company listed on the
signature pages hereof, as guarantors (collectively, the "GUARANTORS") and Wells
Fargo Bank Minnesota, National Association, as Trustee. The United States
Securities Act of 1933 is herein referred to as the "SECURITIES ACT."

                  Holders (including subsequent transferees) of the Offered
Securities will have the registration rights set forth in the registration
rights agreement (the "REGISTRATION RIGHTS AGREEMENT"), to be dated the Closing
Date, in substantially the form of Exhibit I hereto, for so long as such Offered
Securities constitute "TRANSFER RESTRICTED SECURITIES" (as defined in the
Registration Rights Agreement). Pursuant to the Registration Rights Agreement,
the Issuers and the Guarantors will agree to file with the Securities and
Exchange Commission (the "COMMISSION") under the circumstances set forth
therein, (i) a registration statement under the Securities Act (the "EXCHANGE
OFFER REGISTRATION STATEMENT") relating to the Issuers' 12% Senior Secured Notes
in a like aggregate principal amount as the Issuers issued under the Indenture,
identical in all material respects to the Offered Securities and registered
under the Securities Act (the "EXCHANGE SECURITIES" ), to be offered in exchange
for the Offered Securities (such offer to exchange being referred to as the
"EXCHANGE OFFER") and the Guarantees (as defined below) thereof and (ii) a shelf
registration statement pursuant to Rule 415 under the Securities Act (the "SHELF
REGISTRATION STATEMENT" and, together with the Exchange

                                                                               2

Offer Registration Statement, the "REGISTRATION STATEMENTS") relating to the
resale by certain holders of the Offered Securities and to use their reasonable
best efforts to cause such Registration Statements to be declared and remain
effective and usable for the periods specified in the Registration Rights
Agreement and to consummate the Exchange Offer. The Offered Securities and
Exchange Securities are referred to collectively as the "SECURITIES".

                  The Offered Securities and the guarantees of the Guarantors
relating to the Offered Securities (the "GUARANTEES") will be, on the Closing
Date (as hereinafter defined) or within a commercially reasonable time
thereafter, secured on a second-priority basis by certain collateral (the
"COLLATERAL") as described in the Offering Circular, and as will be more fully
described in and pursuant to the Intercreditor Agreement (the "INTERCREDITOR
AGREEMENT"), a certain Pledge Agreement (the "PLEDGE AGREEMENT"), a certain
Security Agreement (the "SECURITY AGREEMENT"), a certain Collateral Assignment
(the "COLLATERAL ASSIGNMENT" ), a certain Mortgage with respect to the Company's
Maricopa, Arizona facility (the "AZ MORTGAGE") and a certain Mortgage with
respect to the Company's East Greenwich, Rhode Island facility (the "RI
MORTGAGE," and together with the AZ Mortgage, the "MORTGAGES"), each to be dated
the Closing Date (as hereinafter defined) and delivered to Wells Fargo Bank
Minnesota, National Association, as collateral agent (the "COLLATERAL AGENT"),
granting a second-priority security interest on the Collateral for the benefit
of the holders of the Offered Securities (collectively, the "SECURITY
DOCUMENTS").

                  The offering of the Offered Securities is part of the
refinancing transactions ("REFINANCING TRANSACTIONS") as described in the
Offering Circular, pursuant to which an Amendment dated as of April 17, 2002
(the "CREDIT AGREEMENT AMENDMENT"), to the Credit Agreement, dated as of August
4, 1999, as amended and restated as of April 3, 2000 (as further amended,
supplemented or otherwise modified from time to time, and together with the
Credit Agreement Amendment, the "CREDIT AGREEMENT"), has been entered into by
the Issuers with certain syndicate lenders. Pursuant to the Credit Agreement and
the Credit Agreement Amendment, which will become effective upon the closing of
the sale of the Offered Securities pursuant to this Agreement, and the security
documents relating thereto, such syndicate lenders and certain other lenders
(collectively, the "BANK LENDERS") do or will hold a first-priority security
interest in the Collateral.

                  Each of the Issuers and the Guarantors hereby agrees with the
several Purchasers as follows:

                  2. Representations, Warranties and Agreements of Each of the
Issuers and the Guarantors. Each of the Issuers and the Guarantors represents
and warrants to, and agrees with, the several Purchasers that:

                  (a) A preliminary offering circular and an offering circular
relating to the Offered Securities to be offered by the Purchasers have been
prepared by the Issuers. Such preliminary offering circular (the "PRELIMINARY
OFFERING CIRCULAR") and offering circular (the "OFFERING CIRCULAR"), as
supplemented as of the date of this Agreement, together with the documents
listed in Schedule B hereto and any other document approved by the Company for
use in connection with the contemplated resale of the Offered Securities are
hereinafter collectively referred to as the "OFFERING DOCUMENT." On the date of
this Agreement, the Offering Document does not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in

                                                                               3

the light of the circumstances under which they were made, not misleading. The
preceding sentence does not apply to statements in or omissions from the
Offering Document based upon written information furnished to the Issuers by any
Purchaser through Credit Suisse First Boston Corporation ("CSFBC") specifically
for use therein, it being understood and agreed that the only such information
is that described as such in Section 7(b) hereof. Except as disclosed in the
Offering Document, on the date of this Agreement, the Company's Annual Report on
Form 10-K most recently filed with the Securities and Exchange Commission (the
"COMMISSION") and all subsequent reports (collectively, the "EXCHANGE ACT
REPORTS") which have been filed by the Company with the Commission or sent to
stockholders pursuant to the Securities Exchange Act of 1934 (the "EXCHANGE
ACT") do not include any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Such documents, when
they were filed with the Commission, conformed in all material respects to the
requirements of the Exchange Act and the rules and regulations of the Commission
thereunder.

                  (b) Each of the Issuers has been duly incorporated or formed,
as applicable, and is an existing corporation or limited liability company, as
applicable, in good standing under the laws of the State of Delaware, with power
and authority (corporate and other) to own its properties and conduct its
business as described in the Offering Document; and each of the Issuers is duly
qualified to do business as a foreign corporation or limited liability company,
as applicable, in good standing in all other jurisdictions in which its
ownership or lease of property or the conduct of its business requires such
qualification, except where the failure to so qualify or have such power or
authority would not, individually or in the aggregate, have a material adverse
effect on the condition (financial or other), business, properties or results of
operations of the Company and its subsidiaries taken as a whole ("MATERIAL
ADVERSE EFFECT").

                  (c) Each subsidiary of the Company has been duly incorporated
or formed and is an existing corporation or entity in good standing under the
laws of the jurisdiction of its incorporation or formation, with power and
authority (corporate and other) to own its properties and conduct its business
as described in the Offering Document; and each subsidiary of the Company is
duly qualified to do business as a foreign corporation or limited liability
company, as applicable, in good standing in all other jurisdictions in which its
ownership or lease of property or the conduct of its business requires such
qualification, except where the failure to so qualify or have such power or
authority would not, individually or in the aggregate, have a Material Adverse
Effect; all of the issued and outstanding capital stock or membership interests
of each subsidiary of the Company has been duly authorized and validly issued
and is fully paid and nonassessable; and the capital stock or membership
interests of each subsidiary owned by the Company, directly or through
subsidiaries, is owned free from any security interest, mortgage, pledge, lien
or encumbrance, or defect (collectively, "LIENS"), except for Liens pursuant to
or contemplated by the Credit Agreement or the Indenture ("PERMITTED LIENS").

                  (d) The Indenture has been duly authorized by each of the
Issuers and the Guarantors, as applicable; the Offered Securities have been duly
authorized by each of the Issuers and the Guarantors, as applicable; and when
the Offered Securities are delivered and paid for pursuant to this Agreement on
the Closing Date (as defined below), the Indenture will have been duly executed
and delivered, the Offered Securities will have been duly executed,
authenticated, issued and delivered and will conform to the description thereof
contained in the Offering Document and the Indenture (with respect to

                                                                               4

the Issuers and the Guarantors) and the Offered Securities (with respect to the
Issuers) will constitute valid and legally binding obligations of the Issuers
and the Guarantors, as applicable, enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.

                  (e) No consent, approval, authorization, or order of, or
filing with, any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement, the Security
Documents and the Registration Rights Agreement by the Issuers and the
Guarantors, as applicable, except (i) for the order of the Commission declaring
the Exchange Offer Registration Statement or the Shelf Registration Statement
(each as defined in the Registration Rights Agreement) effective or other such
consents, approvals, authorizations, orders or filings as may be required to be
obtained or made under the Securities Act and applicable state securities laws
as provided in the Registration Rights Agreement, (ii) for such filings or
recordings necessary to perfect the security interests created by the Security
Documents or (iii) where the failure to obtain such consent, approval,
authorization, order or filing would not have a Material Adverse Effect.

                  (f) The execution, delivery and performance of the Indenture,
this Agreement, the Security Documents and the Registration Rights Agreement,
and the issuance and sale of the Offered Securities and compliance with the
terms and provisions thereof will not result in a breach or violation of any of
the terms and provisions of, or constitute a default under, any statute, any
rule, regulation or order of any governmental agency or body or any court,
domestic or foreign, having jurisdiction over the Company or any subsidiary of
the Company or any of their properties, or any agreement or instrument to which
the Company or any such subsidiary is a party or by which the Company or any
such subsidiary is bound or to which any of the properties of the Company or any
such subsidiary is subject, or the charter or by-laws of the Company or any such
subsidiary, and each of the Issuers has full power and authority to authorize,
issue and sell the Offered Securities as contemplated by this Agreement, except
for such breaches, violations or defaults that would not have a Material Adverse
Effect.

                  (g) This Agreement and the Security Documents have been duly
authorized, executed and delivered by each of the Issuers and the Guarantors, as
applicable.

                  (h) Except as disclosed in the Offering Document, the Company
and its subsidiaries have good and marketable title to all real properties and
all other properties and assets owned by them, in each case free from Liens,
except Permitted Liens, that would materially affect the value thereof or
materially interfere with the use made or to be made thereof by them; and except
as disclosed in the Offering Document, the Company and its subsidiaries hold any
leased real or personal property under valid and enforceable leases with no
exceptions that would materially interfere with the use made or to be made
thereof by them.

                  (i) The Company and its subsidiaries possess adequate
certificates, authorities or permits issued by appropriate governmental agencies
or bodies necessary to conduct the business now operated by them and have not
received any notice of proceedings relating to the revocation or modification of
any such certificate, authority or

                                                                               5


permit that, if determined adversely to the Company or any of its subsidiaries,
would have Material Adverse Effect.

                  (j) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Issuers, is imminent that might
have a Material Adverse Effect.

                  (k) The Company and its subsidiaries own, possess or can
acquire on reasonable terms, the trademarks, trade names and other rights to
inventions, know-how, patents, copyrights, confidential information and other
intellectual property (collectively, "INTELLECTUAL PROPERTY RIGHTS") necessary
to conduct the business now operated by them, or presently employed by them, and
have not received any notice of infringement of or conflict with asserted rights
of others with respect to any intellectual property rights that, individually or
in the aggregate, is reasonably likely to result in a Material Adverse Effect.

                  (l) Except as disclosed in the Offering Document, neither the
Company nor any of its subsidiaries is in violation of any statute, any rule,
regulation, decision or order of any governmental agency or body or any court,
domestic or foreign, relating to the use, disposal or release of hazardous or
toxic substances or relating to the protection or restoration of the environment
or human exposure to hazardous or toxic substances (collectively, "ENVIRONMENTAL
LAWS"), owns or operates any real property contaminated with any substance that
is subject to any environmental laws, is liable for any off-site disposal or
contamination pursuant to any environmental laws, or is subject to any claim
relating to any environmental laws, which violation, contamination, liability or
claim would, individually or in the aggregate, have a Material Adverse Effect;
and the Company is not aware of any pending investigation which is reasonably
likely to lead to such a claim.

                  (m) Except as disclosed in the Offering Document, there is no
pending action, suit or proceeding against or affecting the Company, any of its
subsidiaries or any of their respective properties that, individually or in the
aggregate, is reasonably likely to result in a Material Adverse Effect, or would
materially and adversely affect the ability of the Issuers to perform their
obligations under the Indenture, this Agreement, the Security Documents or the
Registration Rights Agreement, or which is otherwise material in the context of
the sale of the Offered Securities; and, to the Company's knowledge, there is no
such action, suit or proceeding threatened.

                  (n) The financial statements included in the Offering Document
present fairly the financial position of the Company and its consolidated
subsidiaries as of the dates shown and their results of operations and cash
flows for the periods shown, and, except as otherwise disclosed in the Offering
Document, such financial statements have been prepared in conformity with the
generally accepted accounting principles in the United States applied on a
consistent basis.

                  (o) Except as disclosed in the Offering Document, since the
date of the latest audited financial statements included in the Offering
Document there has been no material adverse change, nor any development or event
involving a prospective material adverse change, in the condition (financial or
other), business, properties or results of operations of the Company and its
subsidiaries taken as a whole, and, except as disclosed in or contemplated by
the Offering Document, there has been no dividend or distribution of any kind
declared, paid or made by the Issuers on any class of its capital stock.

                                                                               6

                  (p) The Company is subject to the reporting requirements of
either Section 13 or Section 15(d) of the Securities Exchange Act of 1934 and
files reports with the Commission on the Electronic Data Gathering, Analysis,
and Retrieval (EDGAR) system.

                  (q) Neither of the Issuers nor any of the Company's
subsidiaries is an open-end investment company, unit investment trust or
face-amount certificate company that is or is required to be registered under
Section 8 of the United States Investment Company Act of 1940 (the "INVESTMENT
COMPANY ACT"); and neither of the Issuers nor any of the Company's subsidiaries
is and, after giving effect to the offering and sale of the Offered Securities
and the application of the proceeds thereof as described in the Offering
Document, will be an "investment company" as defined in the Investment Company
Act.

                  (r) No securities of the same class (within the meaning of
Rule 144A(d)(3) under the Securities Act) as the Offered Securities are listed
on any national securities exchange registered under Section 6 of the Exchange
Act or quoted in a U.S. automated inter-dealer quotation system.

                  (s) Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 4 hereof and their compliance
with the agreements set forth herein, it is not necessary, in connection with
the issuance and sale of the Offered Securities to the Purchasers and the offer,
resale and delivery of the Offered Securities by the Purchasers in the manner
contemplated by this Agreement and the Offering Circular, to register the
Offered Securities under the Securities Act or to qualify the Indenture under
the United States Trust Indenture Act of 1939, as amended (the "TRUST INDENTURE
ACT").

                  (t) Neither of the Issuers, the Guarantors, nor any of their
affiliates, nor any person acting on their behalf (i) has, within the six-month
period prior to the date hereof, offered or sold in the United States or to any
U.S. person (as such terms are defined in Regulation S under the Securities Act)
the Offered Securities or any security of the same class or series as the
Offered Securities or (ii) has offered or will offer or sell the Offered
Securities (A) in the United States by means of any form of general solicitation
or general advertising within the meaning of Rule 502(c) under the Securities
Act or (B) with respect to any such securities sold in reliance on Rule 903 of
Regulation S, by means of any directed selling efforts within the meaning of
Rule 902(c) of Regulation S. The Issuers, the Guarantors, their affiliates and
any person acting on their behalf have complied and will comply with the
offering restrictions requirement of Regulation S. The Issuers have not entered
and will not enter into any contractual arrangement with respect to the
distribution of the Offered Securities except for this Agreement.

                  (u) PricewaterhouseCoopers LLP are independent public
accountants with respect to the Issuers as required by the Securities Act and
the rules and regulations of the Commission thereunder (the "SECURITIES ACT
REGULATIONS").

                  (v) The Guarantees have been duly and validly authorized by
the Guarantors, and the Guarantees, upon the execution and delivery of the
Indenture by the Issuers, the Guarantors and the Trustee and the due
authorization, execution and delivery of the related Offered Securities, will
constitute valid and binding obligations of the Guarantors, enforceable against
the Guarantors in accordance with their terms, except as such enforcement may be
subject to or limited by (i) bankruptcy, receivership,

                                                                               7

conservatorship, insolvency, reorganization, fraudulent conveyance, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
and remedies generally and (ii) general principles of equity (regardless of
whether such enforcement may be sought in a proceeding in equity or at law). The
Guarantees will conform in all material respects to the description thereof
contained in the Offering Circular.

                  (w) On and as of the Closing Date (as defined below) or within
a commercially reasonable time frame thereafter:

                  (i) The Pledge Agreement will constitute, for the ratable
         benefit of the holders of the Offered Securities a legal, valid and
         binding obligation of the pledgors party thereto, enforceable against
         them in accordance with its terms, except as enforceability may be
         limited by (A) bankruptcy, insolvency, reorganization, moratorium or
         similar laws affecting the enforcement of creditors' rights generally,
         (B) general equitable principles and (C) with respect to the pledge of
         any capital stock of any Foreign Subsidiary (as defined herein),
         applicable local law.

                  (ii) Upon delivery to JPMorgan Chase Bank, as bailee on behalf
         of the Trustee, of the Equity Interests (as defined in the Pledge
         Agreement) of SCI LLC and each subsidiary that is a corporation or
         limited liability company, as the case may be, organized or formed, as
         applicable, under the laws of any jurisdiction within the United States
         (each, a "DOMESTIC SUBSIDIARY") and, with respect to Equity Interests
         not constituting certificated securities or instruments, the filing of
         appropriate Uniform Commercial Code ("UCC") financing statements in the
         appropriate filing offices, the security interests granted pursuant to
         the Pledge Agreement will constitute a valid, perfected second-priority
         security interest on such pledged Equity Interest under New York law,
         for the ratable benefit of the holders of the Offered Securities,
         enforceable as such against all creditors of the respective pledgor and
         to Persons purporting to purchase any such pledged Equity Interest from
         the respective pledgor, except as the priority is subject to Permitted
         Liens.

                  (iii) To the extent U.S. law is applicable, upon delivery to
         JPMorgan Chase Bank, as bailee on behalf of the Trustee, of the Equity
         Interests (as defined in the Pledge Agreement) of any first-tier
         non-domestic subsidiary (each, a "FOREIGN SUBSIDIARY") and, with
         respect to Equity Interests not constituting certificated securities or
         instruments, the filing of appropriate UCC financing statements in the
         appropriate filing offices, the security interests in the Equity
         Interests of each Foreign Subsidiary granted pursuant to the Pledge
         Agreement will constitute a valid, perfected second-priority security
         interest on such pledged Equity Interest, for the ratable benefit of
         the holders of the Offered Securities, enforceable as such against all
         creditors of the respective pledgor and any Persons purporting to
         purchase any such pledged Equity Interest from the respective pledgor,
         except as the priority is subject to Permitted Liens.

                  (iv) Upon delivery to JPMorgan Chase Bank, as bailee on behalf
         of the Trustee, of the Pledged Debt Securities (as defined in the
         Pledge Agreement) the security interests in the Pledged Debt Securities
         granted pursuant to the Pledge Agreement will constitute a valid,
         perfected second-priority security interest on such Pledged Debt
         Securities under New York law, for the ratable benefit of the

                                                                               8


         holders of the Offered Securities, enforceable as such against all
         creditors of the respective pledgor, except as the priority is subject
         to Permitted Liens.

                  (v) Each Security Document will constitute a legal, valid and
         binding obligation of the grantor party thereto, for the ratable
         benefit of the holders of the Offered Securities, enforceable against
         it in accordance with its terms, except as enforceability may be
         limited by (A) bankruptcy, insolvency, reorganization, moratorium or
         similar laws affecting the enforcement of creditors' rights generally
         and (B) general equitable principles.

                  (vi) Except with respect to the Collateral located in any
         facility which is not owned or leased by the Company or any of its
         subsidiaries and upon filing by the Collateral Agent of (A) financing
         statements, (B) any filings required with the United States Patent and
         Trademark Office and (C) any filings required with the United States
         Copyright Office, the security interests granted pursuant to the
         Security Documents will constitute valid, perfected second-priority
         security interests, on such Collateral described therein for the
         ratable benefit of the holders of the Offered Securities, enforceable
         as such against all creditors of any grantor and any Persons purporting
         to purchase any such Collateral from any grantor (except purchasers of
         Inventory (as defined in the Security Documents) in the ordinary course
         of business), except as the priority is subject to Permitted Liens.

                  (vii) The Mortgages will be effective to grant a legal, valid
         and enforceable mortgage lien on all of the mortgagor's right, title
         and interest in the mortgaged properties thereunder. When the Mortgages
         are duly recorded in the proper recorders' offices and the mortgage
         recording fees and taxes in respect thereof are paid and compliance is
         otherwise had with the formal requirements of state law applicable to
         the recording of real estate mortgages generally, each such Mortgage
         shall constitute a validly perfected, second-priority security interest
         in the related mortgaged property, for the ratable benefit of the
         holders of the Offered Securities, subject only to the encumbrances and
         exceptions to title expressly set forth therein and except as (A)
         enforceability may be limited by (i) bankruptcy, insolvency,
         reorganization, moratorium or similar laws affecting the enforcement of
         creditors' rights generally and (ii) general equitable principles and
         (B) the priority is subject to Permitted Liens.

                  (viii) (A) Neither of the Issuers nor any of the Guarantors
         will hold any Accounts (as defined in the Security Agreement) with
         respect to which the Collateral Agent does not hold a perfected,
         second-priority security interest, other than any such Accounts, if
         any, which the Bank Lenders do not or will not hold a first-priority
         security interest in.

                  (B) Neither of the Issuers nor any of the Guarantors maintains
         any Inventory (as defined in the Security Agreement) with respect to
         which the Collateral Agent does not possess a perfected,
         second-priority security interest, other than any such Inventory, if
         any, which the Bank Lenders do not or will not hold a first-priority
         security interest in.

                  (ix) It is the ordinary business practice of each of the
         Issuers and the Guarantors to file with the United States Patent and
         Trademark Office for registration or recordation, as applicable, (A) a
         completed application for the

                                                                               9

         registration of each trademark and patent owned by it which is material
         to the business of such Issuer or Guarantor and (B) an appropriate
         assignment to either of the Issuers or any of the Guarantors of the
         interest acquired by it in any trademark and patent which is material
         to the business of the Company and its subsidiaries taken as a whole.

                  (x) The mortgaged properties under the Mortgages and the
         buildings and improvements thereon comply in all material respects with
         all applicable setback requirements, zoning codes, ordinances, laws and
         regulations, except where non-compliance would not, individually or in
         the aggregate, be likely to have a Material Adverse Effect.

                  (xi) There are no pending or threatened condemnation
         proceedings, lawsuits, or administrative actions relating to the
         mortgaged properties under the Mortgages which would have, individually
         or in the aggregate, a Material Adverse Effect.

                  (x) The entities listed on Schedule C hereto are the only
subsidiaries, direct or indirect, of the Company.

                  (y) On the Closing Date, the Indenture will conform in all
material respects to the requirements of the TIA, and the rules and regulations
of the Commission applicable to an indenture which is qualified thereunder.

                  (z) On the Closing Date, the Exchange Securities will have
been duly authorized by the Issuers; and when the Exchange Securities are
issued, executed and authenticated in accordance with the terms of the Exchange
Offer and the Indenture, the Exchange Securities will be entitled to the
benefits of the Indenture and will be the valid and legally binding obligations
of the Issuers and the Guarantors, enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.

                  (aa) The Guarantee of the Exchange Securities by each
Guarantor has been duly authorized by such Guarantor; and, when issued, will
have been duly executed and delivered by each such Guarantor and will conform to
the description thereof contained in the Offering Document. When the Exchange
Securities have been issued, executed and authenticated in accordance with the
terms of the Exchange Offer and the Indenture, the Guarantee of each Guarantor
will constitute valid and legally binding obligations of such Guarantor,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.

                  (bb) The Registration Rights Agreement has been duly
authorized by each of the Issuers and the Guarantors and, on the Closing Date,
will have been duly executed and delivered by each of the Issuers and the
Guarantors. When the Registration Rights Agreement has been duly executed and
delivered, the Registration Rights Agreement will be a valid and binding
agreement of each of the Issuers and the Guarantors, enforceable against each of
the Issuers and Guarantors in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws

                                                                              10


of general applicability relating to or affecting creditors' rights and to
general equity principles. On the Closing Date, the Registration Rights
Agreement will conform as to legal matters to the description thereof in the
Offering Circular.

                  (cc) Neither the Company nor any of its subsidiaries is in
violation of its respective charter or by-laws or in default in the performance
of any obligation, agreement, covenant or condition contained in any indenture,
loan agreement, mortgage, lease or other agreement or instrument, except for
such defaults that, singularly or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect, to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
their respective property is bound.

                  (dd) There are no contracts, agreements or understandings
between the Issuers or any Guarantor and any person granting such person the
right to require the Issuers or such Guarantor to file a registration statement
under the Securities Act with respect to any debt securities of the Issuers or
such Guarantor or to require the Issuers or such Guarantor to include such
securities with the Securities and Guarantees registered pursuant to any
Registration Statement, other than the Registration Rights Agreement
contemplated hereunder.

                  (ee) Neither the Company nor any of its subsidiaries nor any
agent thereof acting on the behalf of them has taken, and none of them will
take, any action that might cause this Agreement or the issuance or sale of the
Offered Securities to violate Regulation T, Regulation U or Regulation X of the
Board of Governors of the Federal Reserve System.

                  (ff) No "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2) under the
Securities Act (i) has imposed (or has informed the Issuers or any Guarantor
that it is considering imposing) any condition (financial or otherwise) on
either of the Issuers' or any Guarantor's retaining any rating assigned to
either of the Issuers or any Guarantor, any securities of either of the Issuers
or any Guarantor or (ii) has indicated to the Issuers or any Guarantor that it
is considering (A) the downgrading, suspension, or withdrawal of, or any review
for a possible change that does not indicate the direction of the possible
change in, any rating so assigned or (B) any change in the outlook for any
rating of either of the Issuers, any Guarantor or any securities of either of
the Issuers or any Guarantor.

                  (gg) No form of general solicitation or general advertising
(as defined in Regulation D under the Securities Act) was used by the Issuers,
the Guarantors or any of their respective representatives (other than the
Purchasers, as to whom the Issuers and the Guarantors make no representation) in
connection with the offer and sale of the Offered Securities contemplated
hereby, including, but not limited to, articles, notices or other communications
published in any newspaper, magazine, or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising. No securities of the same
class as the Offered Securities have been issued and sold by the Issuers within
the six-month period immediately prior to the date hereof.

                  (hh) The Offered Securities offered and sold in reliance on
Regulation S have been and will be offered and sold only in offshore
transactions.

                                                                              11


                  (ii) The sale of the Offered Securities pursuant to Regulation
S is not part of a plan or scheme to evade the registration provisions of the
Securities Act.

                  3. Purchase, Sale and Delivery of Offered Securities. On the
basis of the representations, warranties and agreements herein contained, but
subject to the terms and conditions herein set forth, the Issuers severally and
jointly agree to sell to the Purchasers, and the Purchasers agree, severally and
not jointly, to purchase from the Issuers, at a purchase price of 94.237195% of
the principal amount thereof plus accrued interest from May 1, 2002 to the
Closing Date (as defined below), the respective principal amounts set forth
opposite the names of the several Purchasers in Schedule A hereto.

                  The Issuers will deliver against payment of the purchase price
the Offered Securities in the form of one or more permanent global Securities in
definitive form (the "GLOBAL SECURITIES") deposited with the Trustee as
custodian for The Depository Trust Company ("DTC") and registered in the name of
Cede & Co., as nominee for DTC. Interests in any permanent global Securities
will be held only in book-entry form through DTC, except in the limited
circumstances described in the Offering Document. Payment for the Offered
Securities shall be made by the Purchasers in Federal (same day) funds by
official check or checks or wire transfer to a bank account drawn to the order
of ON Semiconductor Corporation or as the Company may direct at the office of
Cleary, Gottlieb, Steen & Hamilton ("CGSH"), One Liberty Plaza, New York, NY
10006 at 10:00 A.M. (New York time), on May 6, 2002, or at such other time not
later than seven full business days thereafter as CSFBC and the Company
determine, such time being herein referred to as the "CLOSING DATE," against
delivery to the Trustee as custodian for DTC of the Global Securities
representing all of the Securities. The Global Securities will be made available
for checking at the above office of CGSH at least 24 hours prior to the Closing
Date.

                  4. Representations by Purchasers; Resale by Purchasers. (a)
Each Purchaser severally represents and warrants to the Issuers that it is an
"accredited investor" within the meaning of Regulation D under the Securities
Act.

                  (b) Each Purchaser severally acknowledges that the Offered
Securities have not been registered under the Securities Act and may not be
offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except in accordance with Regulation S or pursuant to an
exemption from the registration requirements of the Securities Act. Each
Purchaser severally represents and agrees that it has offered and sold the
Offered Securities, and will offer and sell the Offered Securities (i) as part
of its distribution at any time and (ii) otherwise until 40 days after the later
of the commencement of the offering and the Closing Date, only in accordance
with Rule 903 or Rule 144A under the Securities Act ("RULE 144A"). Accordingly,
neither such Purchaser nor its affiliates, nor any persons acting on its or
their behalf, have engaged or will engage in any directed selling efforts with
respect to the Offered Securities, and such Purchaser, its affiliates and all
persons acting on its or their behalf have complied and will comply with the
offering restrictions requirement of Regulation S. Each Purchaser severally
agrees that, at or prior to confirmation of sale of the Offered Securities,
other than a sale pursuant to Rule 144A, such Purchaser will have sent to each
distributor, dealer or person receiving a selling concession, fee or other
remuneration that purchases the Offered Securities from it during the restricted
period a confirmation or notice to substantially the following effect:

                                                                              12


         "The Securities covered hereby have not been registered under the U.S.
         Securities Act of 1933 (the "Securities Act") and may not be offered or
         sold within the United States or to, or for the account or benefit of,
         U.S. persons (i) as part of their distribution at any time or (ii)
         otherwise until 40 days after the later of the date of the commencement
         of the offering and the closing date, except in either case in
         accordance with Regulation S (or Rule 144A if available) under the
         Securities Act. Terms used above have the meanings given to them by
         Regulation S."

                  Terms used in this subsection (b) have the meanings given to
them by Regulation S.

                  (c) Each Purchaser severally agrees that it and each of its
affiliates has not entered and will not enter into any contractual arrangement
with respect to the distribution of the Offered Securities except for any such
arrangements with the other Purchasers or affiliates of the other Purchasers or
with the prior written consent of the Issuers.

                  (d) Each Purchaser severally agrees that it and each of its
affiliates will not offer or sell the Offered Securities in the United States by
means of any form of general solicitation or general advertising within the
meaning of Rule 502(c) under the Securities Act, including, but not limited to
(i) any advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or
(ii) any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. Each Purchaser severally agrees, with
respect to resales made in reliance on Rule 144A of any of the Offered
Securities, to deliver either with the confirmation of such resale or otherwise
prior to settlement of such resale a notice to the effect that the resale of
such Offered Securities has been made in reliance upon the exemption from the
registration requirements of the Securities Act provided by Rule 144A.

                  (e) Each of the Purchasers severally represents and agrees
that (i) it has not offered or sold and prior to the expiry of a period of six
months from the Closing Date, will not offer or sell any Offered Securities to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services and Markets Act 2000 ("FSMA")
with respect to anything done by it in relation to the Offered Securities in,
from or otherwise involving the United Kingdom; and (iii) it has only
communicated and caused to be communicated and will only communicate or cause to
be communicated any invitation or inducement to engage in investment activity
(within the meaning of section 21 of the FSMA) received by it in connection with
the issue or sale of any Offered Securities in circumstances in which section
21(1) of the FSMA does not apply to the Issuers or the Guarantors.

                  (f) Each Purchaser, severally and not jointly, agrees that,
prior to or simultaneously with the confirmation of sale by such Purchaser to
any purchaser of any of the Offered Securities purchased by such Purchaser from
the Issuers pursuant hereto, such Purchaser shall furnish to that purchaser a
copy of the Offering Circular (and any amendment or supplement thereto that the
Issuers shall have furnished to such Purchaser

                                                                              13


prior to the date of such confirmation of sale). In addition to the foregoing,
each Purchaser acknowledges and agrees that the Issuers and, for purposes of the
opinions to be delivered to the Purchasers pursuant to Sections 6(c) and (d),
counsel for the Issuers and the Purchasers, respectively, may rely upon the
accuracy of the representations and warranties of the Purchasers and their
compliance with the agreements contained in this Section 4, and each Purchaser
hereby consents to such reliance.

                  5. Certain Agreements of the Issuers and the Guarantors. Each
of the Issuers and the Guarantors agrees with the several Purchasers that:

                  (a) The Issuers will furnish a copy to CSFBC promptly of any
proposal to amend or supplement the Offering Document and will not effect such
amendment or supplementation to which CSFB shall reasonably object by notice to
the Issuers after a reasonable period to review. If, at any time prior to the
completion of the resale of the Offered Securities by the Purchasers, any event
occurs as a result of which the Offering Document as then amended or
supplemented would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading, the
Issuers promptly will notify CSFBC of such event and promptly will prepare, at
their own expense, an amendment or supplement which will correct such statement
or omission. Neither CSFBC's consent to, nor the Purchasers' delivery to
offerees or investors of, any such amendment or supplement shall constitute a
waiver of any of the conditions set forth in Section 6.

                  (b) The Issuers will furnish to CSFBC copies of any
preliminary offering circular, the Offering Document and all amendments and
supplements to such documents, in each case as soon as available and in such
quantities as CSFBC reasonably requests, and the Issuers will furnish to CSFBC
on the date hereof three copies of the Offering Document signed by a duly
authorized officer of each of the Issuers, one of which will include the
independent accountants' reports therein manually signed by such independent
accountants. At any time when the Company is not subject to Section 13 or 15(d)
of the Exchange Act, the Company will promptly furnish or cause to be furnished
to CSFBC (and, upon request, to each of the other Purchasers) and, upon request
of holders and prospective purchasers of the Offered Securities, to such holders
and purchasers, copies of the information required to be delivered to holders
and prospective purchasers of the Offered Securities pursuant to Rule 144A(d)(4)
under the Securities Act (or any successor provision thereto) in order to permit
compliance with Rule 144A in connection with resales by such holders of the
Offered Securities. The Issuers will pay the expenses of printing and
distributing to the Purchasers all such documents.

                  (c) The Issuers will arrange for the qualification of the
Offered Securities for sale and the determination of their eligibility for
investment under the laws of such jurisdictions in the United States and Canada
as CSFBC designates and will continue such qualifications in effect so long as
required for the resale of the Offered Securities by the Purchasers, provided
that neither of the Issuers will be required to qualify as a foreign corporation
or to file a general consent to service of process in any such jurisdiction.

                  (d) During the period of two years after the Closing Date, the
Issuers will, upon request, furnish to CSFBC, each of the other Purchasers and
any holder of Offered Securities a copy of the restrictions on transfer
applicable to the Offered Securities.

                                                                              14


                  (e) During the period of two years after the Closing Date, the
Issuers will not, and will not permit any of their affiliates (as defined in
Rule 144 under the Securities Act) to, resell any of the Offered Securities that
have been reacquired by any of them, except for Offered Securities purchased by
the Issuers or any of their affiliates and resold in a transaction registered
under the Securities Act.

                  (f) During the period of two years after the Closing Date,
neither of the Issuers will be or become, an open-end investment company, unit
investment trust or face-amount certificate company that is or is required to
be registered under Section 8 of the Investment Company Act.

                  (g) The Issuers will pay all expenses incidental to the
performance of their obligations under this Agreement, the Indenture, the
Security Documents and the Registration Rights Agreement, including (i) the fees
and expenses of the Trustee and the Collateral Agent and their professional
advisers; (ii) all expenses in connection with the execution, issue,
authentication, packaging and initial delivery of the Offered Securities and, as
applicable, the Exchange Securities (as defined in the Registration Rights
Agreement), the preparation and printing of this Agreement, the Registration
Rights Agreement, the Offered Securities, the Indenture, the Offering Document
and amendments and supplements thereto, and any other document relating to the
issuance, offer, sale and delivery of the Offered Securities and as applicable,
the Exchange Securities; (iii) the cost of listing the Offered Securities and
qualifying the Offered Securities for trading in The Portal(SM) Market
("PORTAL") and any expenses incidental thereto; (iv) the cost of any advertising
approved by the Issuers in connection with the issue of the Offered Securities
(v) any expenses (including fees and disbursements of counsel) incurred in
connection with qualification of the Offered Securities or the Exchange
Securities for sale under the laws of such jurisdictions in the United States
and Canada as CSFBC designates and the printing of memoranda relating thereto,
(vi) any fees charged by investment rating agencies for the rating of the
Securities or the Exchange Securities, (vii) the costs of preparing the Security
Documents and perfecting the security interests in the Collateral, and (viii)
expenses incurred in distributing preliminary offering circulars and the
Offering Document (including any amendments and supplements thereto) to the
Purchasers. The Issuers will also pay or reimburse the Purchasers (to the extent
incurred by them) for all travel expenses of the Purchasers and the Issuers'
officers and employees and any other expenses of the Purchasers and the Issuers
in connection with attending or hosting meetings with prospective purchasers of
the Offered Securities from the Purchasers; provided, however, that the cost of
the rental of the aircraft used by the Purchasers and the Issuers' officers and
employees in connection with their attendance at such meetings shall be shared
equally between the Issuers and the Purchasers with the Issuers paying half of
such cost and the Purchasers paying the other half of such cost. If this
Agreement is terminated pursuant to Section 8 of this Agreement by reason of the
default of one or more of the Purchasers, the Issuers and the Guarantors shall
not be obligated to reimburse any defaulting Purchaser on account of such
expenses.

                  (h) In connection with the offering, until CSFBC shall have
notified the Issuers and the other Purchasers of the completion of the resale of
the Offered Securities, neither of the Issuers nor any of their affiliates has
or will, either alone or with one or more other persons, bid for or purchase for
any account in which they or any of their affiliates has a beneficial interest
any Offered Securities or attempt to induce any person to purchase any Offered
Securities; and neither of the Issuers nor any of their affiliates will

                                                                              15


make bids or purchases for the purpose of creating actual, or apparent, active
trading in, or of raising the price of, the Offered Securities.

                  (i) For a period of 180 days after the date of the initial
offering of the Offered Securities by the Purchasers, the Issuers will not
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any United States dollar-denominated debt securities issued or
guaranteed by the Company or any of its subsidiaries and having a maturity of
more than one year from the date of issue in the United States in a public
offering or a Rule 144A offering, without the prior written consent of CSFBC;
provided, however, that the foregoing shall not apply to debt securities which
are convertible into equity securities or are equity linked debt securities or
equity securities. Neither the Company nor any of its subsidiaries will at any
time offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any securities under circumstances where such offer, sale, pledge,
contract or disposition would cause the exemption afforded by Section 4(2) of
the Securities Act or the safe harbor of Regulation S thereunder to cease to be
applicable to the offer and sale of the Offered Securities.

                  (j) The Issuers will use the net proceeds received by them
from the sale of the Offered Securities in the manner specified in the Offering
Circular under the heading "Use of Proceeds."

                  (k) The Issuers will use their best efforts to have the
Offered Securities admitted to trading in PORTAL.

                  6. Conditions of the Obligations of the Purchasers. The
obligations of the several Purchasers to purchase and pay for the Offered
Securities will be subject to the accuracy of the representations and warranties
on the part of the Issuers and the Guarantors herein, to the accuracy of the
statements of each of the Issuers and the Guarantors and their respective
officers made pursuant to the provisions hereof, to the performance by each of
the Issuers and the Guarantors of its obligations hereunder and to the following
additional conditions precedent:

                  (a) On the date of this Agreement and on the Closing Date
PricewaterhouseCoopers LLP shall have furnished to the Purchasers, at the
request of the Issuers, letters, dated the respective dates of delivery thereof
and addressed to the Purchasers, in customary form and covering matters of the
type customarily covered in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Preliminary Offering Circular and the Offering Circular as contemplated,
and only if permitted, by Statement of Auditing Standards No. 72.

                  (b) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change, or any development or
event involving a prospective change, in the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as one enterprise which, in the judgment of a majority in
interest of the Purchasers including CSFBC, is material and adverse and makes it
impractical or inadvisable to proceed with completion of the offering or the
sale of and payment for the Offered Securities; (ii) any downgrading in the
rating of any debt securities of the Company by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g) under
the Securities Act), or any public announcement that any such organization has
under surveillance or review its rating of any

                                                                              16


debt securities of the Company (other than an announcement with positive
implications of a possible upgrading, and no implication of a possible
downgrading, of such rating) or any announcement that the Company has been
placed on negative outlook; (iii) any change in U.S. or international financial,
political or economic conditions or currency exchange rates or exchange controls
as would, in the judgment of a majority in interest of the Purchasers including
CSFBC, be likely to prejudice materially the success of the proposed issue, sale
or distribution of the Offered Securities, whether in the primary market or in
respect of dealings in the secondary market, (iv) any material suspension or
material limitation of trading in securities generally on the New York Stock
Exchange, or any material setting of minimum prices for trading on such
exchange, or any suspension of trading of any securities of the Company on any
exchange or in the over-the-counter market; (v) any general banking moratorium
declared by U.S. Federal or, New York authorities; (vi) any major disruption of
settlements of securities or clearance services in the United States or (vii)
any attack on, outbreak or escalation of hostilities or act of terrorism
involving the United States, any declaration of war by Congress or any other
national or international calamity or emergency if, in the judgment of a
majority in interest of the Purchasers including CSFBC, the effect of any such
attack, outbreak, escalation, act, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the offering or sale of
and payment for the Offered Securities.

                  (c) On the Closing Date, each of the following (i) opinion of
CGSH, counsel to the Issuers, (ii) letter of CGSH, (iii) opinion of George H.
Cave, general counsel to the Issuers, (iv) opinion of Gust Rosenfeld, as special
Arizona counsel to the Issuers, and (v) opinion of Hinckley, Allen & Snyder LLP,
as special Rhode Island counsel to the Issuers, shall have been furnished to the
Purchasers, addressed to the Purchasers and dated the Closing Date, each in form
and substance reasonably satisfactory to the Purchasers.

                  (d) The Purchasers shall have received from Cravath, Swaine &
Moore ("CS&M"), counsel for the Purchasers, such opinion or opinions, dated the
Closing Date, with respect to the incorporation of the Company, the validity of
the Offered Securities, the Offering Circular, the exemption from registration
for the offer and sale of the Offered Securities by the Issuers to the several
Purchasers and the resales by the several Purchasers as contemplated hereby and
other related matters as CSFBC may require, and the Issuers shall have furnished
to such counsel such documents as they request for the purpose of enabling them
to pass upon such matters

                  (e) The Purchasers shall have received a certificate, dated
the Closing Date and executed by Steven P. Hanson, as chief executive officer,
and John T. Kurtzweil, as chief financial officer, in which such officers, to
the best of their knowledge after reasonable investigation, shall state that, on
the date hereof and on and as of the Closing Date, the representations and
warranties of each of the Issuers and Guarantors in this Agreement are true and
correct, that each of the Issuers and Guarantors has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date, and that, subsequent to the dates of
the most recent financial statements in the Offering Document there has been no
material adverse change, nor any development or event involving a prospective
material adverse change, in the condition (financial or other), business,
properties or results of operations of the Company and its subsidiaries taken as
a whole.

                                                                              17


                  (f) On the Closing Date, the Purchasers shall have received a
counterpart of the Registration Rights Agreement which shall have been executed
and delivered by duly authorized officers of the Issuers and the Guarantors.

                  (g) On the Closing Date, the Indenture shall have been duly
executed and delivered by the Issuers, the Guarantors and the Trustee, and the
Offered Securities shall have been duly executed and delivered by the Issuers
and duly authenticated by the Trustee.

                  (h) The Offered Securities shall have been approved by the
NASD for trading in the PORTAL market.

                  (i) On the Closing Date or within a commercially reasonable
time frame thereafter, the following documents and instruments relating to the
Collateral shall have been delivered to the Purchasers:

                  (1) a copy of the financing statements and such other
         instruments, including UCC financing statements, necessary to perfect
         the lien of, and the security interests to be created by, the Security
         Documents; and

                  (2) a receipt executed on behalf of JPMorgan Chase Bank as the
         Administrative Agent acknowledging receipt in the State of New York of
         the certificates representing the pledged capital stock or other equity
         interests, as the case may be.

                  (j) The Purchasers shall have received or shall receive within
a commercially reasonable time frame, in respect of the Mortgages, a mortgagee's
title policy of title insurance or marked-up title commitment for such
insurance. Such policy or title commitment shall (i) be in an amount equal to
the amount of title insurance coverage already provided to the Bank Lenders in
respect of their security interest in the properties covered by such Mortgages;
(ii) insure that the Mortgages insured thereby create a valid second lien on the
property covered by such Mortgage, free and clear of all liens, defects and
encumbrances other than Permitted Liens; (iii) provide affirmative mechanic's
lien coverage; (iv) name the Collateral Agent, for the benefit of the holders of
the Offered Securities, as the insured thereunder; (v) be in the form of ALTA
Loan Policy-1992; and (vi) contain revolving endorsements and such applicable
endorsements and effective coverage as contained in the title insurance policies
delivered in connection with the Credit Agreement.

                  (k) On or prior to the Closing Date, CSFBC shall have received
the results of lien searches, conducted by a search service reasonably
satisfactory to CSFBC, and CSFBC shall be satisfied that no liens are
outstanding on the property or assets of the Issuers and the Guarantors, other
than any such Liens (i) which constitute Permitted Liens or (ii) as to which
CSFBC has received documentation reasonably satisfactory to it evidencing the
termination of such Liens.

                  (l) On or prior to the Closing Date, the Credit Agreement
Amendment shall be effective on the terms described in the Offering Document.

                  (m) On or prior to the Closing Date, a copy of each of the
duly executed Security Documents shall have been delivered to the Purchasers.

                                                                              18


                  Documents described as being "in the agreed form" are
documents which are in the forms which have been initialed for the purpose of
identification by CS&M, copies of which are held by the Company and CSFBC, with
such changes as the Company and CSFBC may approve.

                  The Issuers will furnish the Purchasers with such conformed
copies of such opinions, certificates, letters and documents as the Purchasers
reasonably request. CSFBC may in its sole discretion waive on behalf of the
Purchasers compliance with any conditions to the obligations of the Purchasers
hereunder.

                  7. Indemnification and Contribution. (a) Each of the Issuers
and Guarantors will jointly and severally indemnify and hold harmless each
Purchaser, its partners, directors and officers and each person, if any, who
controls such Purchaser within the meaning of Section 15 of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to which
such Purchaser may become subject, under the Securities Act or the Exchange Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Offering
Document, or any amendment or supplement thereto, or any related preliminary
offering circular or the Exchange Act Reports, or arise out of or are based upon
the omission or alleged omission to state therein a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, including any losses, claims, damages or
liabilities arising out of or based upon the Issuers' failure to perform their
obligations under Section 5(a) of this Agreement, and will reimburse each
Purchaser for any legal or other expenses reasonably incurred by such Purchaser
in connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, that the
Issuers and Guarantors will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement in or omission or alleged omission
from any of such documents in reliance upon and in conformity with written
information furnished to the Issuers by any Purchaser through CSFBC specifically
for use therein, it being understood and agreed that the only such information
consists of the information described as such in subsection (b) below.

                  (b) Each Purchaser will severally and not jointly indemnify
and hold harmless each of the Issuers, their directors and officers and each
person, if any, who controls the Issuers within the meaning of Section 15 of the
Securities Act, against any losses, claims, damages or liabilities to which
either of the Issuers may become subject, under the Securities Act or the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Offering Document, or any amendment or supplement thereto, or any related
preliminary offering circular, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Issuers by such Purchaser through CSFBC specifically for use
therein, and will reimburse any legal or other expenses reasonably incurred by
the Issuers in connection with investigating or defending any such loss, claim,
damage, liability or action as such

                                                                              19


expenses are incurred, it being understood and agreed that the only such
information furnished by any Purchaser consists of the following information in
the Offering Circular furnished on behalf of each Purchaser: under the caption
"Plan of Distribution" paragraphs 3, 6, 10 and 11, and the third sentence of
paragraph 9 and the second and third sentences of paragraph 13; provided,
however, that the Purchasers shall not be liable for any losses, claims, damages
or liabilities arising out of or based upon the Issuers' failure to perform its
obligations under Section 5(a) of this Agreement.

                  (c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under subsection (a) or (b) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under subsection (a) or (b) above. In case any such action is
brought against any indemnified party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation unless (i) the indemnifying
party has failed within a reasonable amount of time to retain counsel reasonably
satisfactory to the indemnified party; (ii) the indemnified party shall have
reasonably concluded that there may be legal defenses available to it that are
different from or in addition to those available to the indemnifying party; or
(iii) the named parties in any such proceeding (included any impleaded parties)
include both the indemnifying party and the indemnified party and
representations of both parties by the same counsel would be inappropriate due
to actual or potential differing interests between them. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes (i)
an unconditional release of such indemnified party from all liability on any
claims that are the subject matter of such action and (ii) does not include a
statement as to or an admission of fault, culpability or failure to act by or on
behalf of any indemnified party.

                  (d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Issuers and Guarantors on the one hand and the Purchasers on the other from
the offering of the Offered Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Issuers and the Guarantors on the one
hand and the Purchasers on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities as well
as any other relevant equitable considerations. The relative benefits received
by the Issuers and the Guarantors on the one hand and the Purchasers on

                                                                              20


the other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Issuers and the
Guarantors bear to the total discounts and commissions received by the
Purchasers from the Issuers under this Agreement. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Issuers and Guarantors or
the Purchasers and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The amount paid by an indemnified party as a result of the losses,
claims, damages or liabilities referred to in the first sentence of this
subsection (d) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any action or claim which is the subject of this subsection (d). Notwithstanding
the provisions of this subsection (d), no Purchaser shall be required to
contribute any amount in excess of the amount by which the total discounts, fees
and commissions received by such Purchaser exceeds the amount of any damages
which such Purchaser has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. The Purchasers'
obligations in this subsection (d) to contribute are several in proportion to
their respective purchase obligations and not joint.

                  (e) The obligations of the Issuers and Guarantors under this
Section shall be in addition to any liability which the Issuers and Guarantors
may otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls any Purchaser within the meaning of the Securities
Act or the Exchange Act; and the obligations of the Purchasers under this
Section shall be in addition to any liability which the respective Purchasers
may otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls the Issuers within the meaning of the Securities
Act or the Exchange Act.

                  8. Default of Purchasers. If any Purchaser or Purchasers
default in their obligations to purchase Offered Securities hereunder and the
aggregate principal amount of Offered Securities that such defaulting Purchaser
or Purchasers agreed but failed to purchase does not exceed 10% of the total
principal amount of Offered Securities, CSFBC may make arrangements satisfactory
to the Issuers for the purchase of such Offered Securities by other persons,
including any of the Purchasers, but if no such arrangements are made by the
Closing Date, the non-defaulting Purchasers shall be obligated severally, in
proportion to their respective commitments hereunder, to purchase the Offered
Securities that such defaulting Purchasers agreed but failed to purchase. If any
Purchaser or Purchasers so default and the aggregate principal amount of Offered
Securities with respect to which such default or defaults occur exceeds 10% of
the total principal amount of Offered Securities and arrangements satisfactory
to CSFBC and the Company for the purchase of such Offered Securities by other
persons are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Purchaser or the
Issuers, except as provided in Section 9. As used in this Agreement, the term
"Purchaser" includes any person substituted for a Purchaser under this Section.
Nothing herein will relieve a defaulting Purchaser from liability for its
default.

                  9. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties and other
statements of the Issuers and Guarantors or their officers and of the several
Purchasers set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any

                                                                              21


investigation, or statement as to the results thereof, made by or on behalf of
any Purchaser, either of the Issuers and any Guarantors or any of their
respective representatives, officers or directors or any controlling person, and
will survive delivery of and payment for the Offered Securities. If for any
reason the purchase of the Offered Securities by the Purchasers is not
consummated, the Issuers and the Guarantors shall remain responsible for the
expenses to be paid or reimbursed by it pursuant to Section 5 and the respective
obligations of the Issuers and Guarantors and the Purchasers pursuant to Section
7 shall remain in effect. If the purchase of the Offered Securities by the
Purchasers is not consummated for any reason other than solely because of the
occurrence of any event specified in clause (iii), (iv), (v), (vi) or (vii) of
Section 6(b), the Issuers and the Guarantors will reimburse the Purchasers for
all out-of-pocket expenses (including fees and disbursements of counsel)
reasonably incurred by them in connection with the offering of the Offered
Securities.

                  10. Notices. All communications hereunder will be in writing
and, if sent to the Purchasers will be mailed, delivered or telegraphed and
confirmed to the Purchasers, c/o Credit Suisse First Boston Corporation, Eleven
Madison Avenue, New York, N.Y. 10010-3629, Attention: Transactions Advisory
Group, or, if sent to the Issuers, will be mailed, delivered or telegraphed and
confirmed to it at ON Semiconductor Corporation, 5005 East McDowell Road,
Phoenix, Arizona 85005, Attention: General Counsel; provided, however, that any
notice to a Purchaser pursuant to Section 7 will be mailed, delivered or
telegraphed and confirmed to such Purchaser.

                  11. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
controlling persons referred to in Section 7, and no other person will have any
right or obligation hereunder, except that holders of Offered Securities shall
be entitled to enforce the agreements for their benefit contained in the second
and third sentences of Section 5(b) hereof against the Issuers as if such
holders were parties thereto.

                  12. Representation of Purchasers. You will act for the several
Purchasers in connection with this purchase, and any action under this Agreement
taken by you will be binding upon all the Purchasers.

                  13. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.

                  14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS.

                  The Issuers hereby submit to the non-exclusive jurisdiction of
the Federal and state courts in the Borough of Manhattan in The City of New York
in any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby, as its authorized agent in the Borough of
Manhattan in The City of New York upon which process may be served in any such
suit or proceeding, and agrees that service of process upon such agent, and
written notice of said service to the Issuers, by the person serving the same to
the address provided in Section 10, shall be deemed in every respect effective
service of process upon the Issuers in any such suit or proceeding. The Issuers
further agree to take any and all action as may be necessary to maintain such
designation

                                                                              22


and appointment of such agent in full force and effect for a period of seven
years from the date of this Agreement.

                                                                              23


                  If the foregoing is in accordance with the Purchasers'
understanding of our agreement, kindly sign and return to us one of the
counterparts hereof, whereupon it will become a binding agreement between the
Issuers and the several Purchasers in accordance with its terms.

                                      Very truly yours,

                                      ON SEMICONDUCTOR CORPORATION,
                                      SEMICONDUCTOR COMPONENTS INDUSTRY, LLC,
                                      SCG (MALAYSIA SMP) HOLDING CORPORATION,
                                      SCG (CZECH) HOLDING CORPORATION,
                                      SCG (CHINA) HOLDING CORPORATION,
                                      SEMICONDUCTOR COMPONENTS INDUSTRIES
                                        PUERTO RICO, INC.,
                                      SCG INTERNATIONAL DEVELOPMENT LLC,
                                      SEMICONDUCTOR COMPONENTS INDUSTRIES OF
                                        RHODE ISLAND, INC.,
                                      SEMICONDUCTOR COMPONENTS INDUSTRIES
                                        INTERNATIONAL OF RHODE ISLAND, INC.



                                      By /s/ John T. Kurtzweil
                                         --------------------------------------
                                         Name: John T. Kurtzweil
                                         Title: Chief Financial Officer






The foregoing Purchase Agreement
  is hereby confirmed and accepted
  as of the date first above written.



CREDIT SUISSE FIRST BOSTON CORPORATION


       By /s/ Ted Iantuono
          ----------------------------
          Title: Director

       Acting on behalf of itself
       and as the Representative
       of the several Purchasers

                                   SCHEDULE A




                                         PRINCIPAL AMOUNT OF
                MANAGER                  OFFERED SECURITIES
                -------                  ------------------
                                      
Credit Suisse First Boston Corporation      $127,500,000

Morgan Stanley & Co  Incorporated             97,500,000

J.P. Morgan Securities Inc.                   37,500,000

Salomon Smith Barney Inc.                     37,500,000
                                            ------------
                          Total             $300,000,000
                                            ============


                                   SCHEDULE B


                                      NONE

                                   SCHEDULE C


SCG (CZECH) HOLDING CORPORATION {DELAWARE}
        Terosil a.s. [JV] {Czech Republic}
        Tesla Sezam a.s. [JV] {Czech Republic}
SCG (CHINA) HOLDING CORPORATION {DELAWARE}
         Leshan-Phoenix Semiconductor Company Limited [JV] {Leshan, China}
SCG (MALAYSIA SMP) HOLDING CORPORATION {DELAWARE}
SEMICONDUCTOR COMPONENTS INDUSTRIES, LLC {DELAWARE}
        Semiconductor Components Industries of Rhode Island, Inc. {Rhode Island}
                 Semiconductor Components Industries International of Rhode
                          Island, Inc. {Rhode Island}
        Semiconductor Components Industries Puerto Rico, Inc. {Delaware}
        Slovakia Electronics Industries, a.s. {Slovak Republic}
        SCG International Development, LLC {Delaware}
        SCG Malaysia Holdings Sdn. Bhd. {Malaysia}
                 SCG Industries Malaysia Sdn. Bhd. {Malaysia}
                 ON Semiconductor Technology Malaysia Sdn. Bhd. {Malaysia}
        Semiconductor Components Industries (Thailand) Limited {Thailand}
        SCG Mexico, S.A. de C.V. {Mexico}
        ON Semiconductor Technology Japan Ltd. {Japan}
        SCG Philippines, Incorporated {Philippines}
        SCG Asia Capital Pte. Ltd. {Malaysia}
        SCG Czech Design Center s.r.o. {Czech Republic}
        ON Semiconductor Hong Kong Design Limited {Hong Kong, China}
        ON Semiconductor Japan Ltd. {Japan}
        ON Semiconductor Design (Shanghai) Limited {China}
        ON Semiconductor Trading Ltd. {Bermuda}
                 ON Semiconductor Denmark ApS {Denmark}
                          ON Semiconductor Hong Kong Logistics Limited {Hong
                                   Kong, China}
                          SCG Hong Kong SAR Limited {Hong Kong, China}
                          Semiconductor Components Industries Singapore Pte Ltd
                                   {Singapore}
                          SCG Korea Ltd. {Korea}
                          ON Semiconductor Canada Trading Corporation {Canada}
                          SCG do Brasil Ltda. {Brazil}
                          SCG Holding (Netherlands) B.V. {Netherlands}
                                   ON Semiconductor Germany GmbH {Germany}
                                   SCG France SAS {France}
                                   ON Semiconductor AB {Sweden}
                          ON Semiconductor Mexico Trading S. de R. L. de C. V.
                                   {Mexico}
                                   SCG Italy S.r.l. {Italy}
                                   ON Semiconductor Limited {United Kingdom}
                                            Semiconductor Components Industries
                                                     UK Limited {United Kingdom}

{ } Denotes jurisdiction


                                                                     Exhibit 4.2


================================================================================




                          ON SEMICONDUCTOR CORPORATION
                    SEMICONDUCTOR COMPONENTS INDUSTRIES, LLC

                        12% Senior Secured Notes due 2008




                               -----------------


                                    INDENTURE



                             Dated as of May 6, 2002




                               -----------------




                Wells Fargo Bank Minnesota, National Association,

                                   as Trustee









================================================================================

                                TABLE OF CONTENTS



                                                                            Page
                                                                            ----
                                                                        
                                    ARTICLE I

                  DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.01. Definitions ...............................................    1
SECTION 1.02. Other Definitions .........................................   23
SECTION 1.03. Incorporation by Reference of Trust Indenture Act .........   24
SECTION 1.04. Rules of Construction .....................................   24
SECTION 1.05. Designated Senior Indebtedness ............................   25

                                   ARTICLE II

                                    THE NOTES

SECTION 2.01. Amount of Notes; Issuable in Series .......................   25
SECTION 2.02. Form and Dating ...........................................   26
SECTION 2.03. Execution and Authentication ..............................   26
SECTION 2.04. Registrar and Paying Agent ................................   27
SECTION 2.05. Paying Agent to Hold Money in Trust .......................   27
SECTION 2.06. Holder Lists ..............................................   28
SECTION 2.07. Transfer and Exchange .....................................   28
SECTION 2.08. Replacement Notes .........................................   28
SECTION 2.09. Outstanding Notes .........................................   29
SECTION 2.10. Temporary Notes ...........................................   29
SECTION 2.11. Cancelation ...............................................   29
SECTION 2.12. Defaulted Interest ........................................   30
SECTION 2.13. CUSIP and "ISIN" Numbers ..................................   30
SECTION 2.14. Computation of Interest ...................................   30

                                   ARTICLE III

                                   REDEMPTION

SECTION 3.01. Notices to Trustee ........................................   30
SECTION 3.02. Selection of Notes To Be Redeemed .........................   30
SECTION 3.03. Notice of Redemption ......................................   31
SECTION 3.04. Effect of Notice of Redemption ............................   32
SECTION 3.05. Deposit of Redemption Price ...............................   32
SECTION 3.06. Notes Redeemed in Part ....................................   32

                                   ARTICLE IV

                                    COVENANTS

SECTION 4.01. Payment of Notes ..........................................   32


                                                                        
SECTION 4.02. Commission Reports ........................................   33
SECTION 4.03. Limitation on Incurrence of Additional Indebtedness .......   33
SECTION 4.04. Limitation on Restricted Payments .........................   36
SECTION 4.05. Limitation on Restrictions on Distributions from Restricted
               Subsidiaries .............................................   40
SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock ........   41
SECTION 4.07. Limitation on Transactions with Affiliates ................   44
SECTION 4.08. Repurchase of Notes at the Option of the Holder Upon a
               Change of Control ........................................   45
SECTION 4.09. Compliance Certificate ....................................   46
SECTION 4.10. Further Instruments and Acts ..............................   47
SECTION 4.11. Additional Note Guarantees and Liens ......................   47
SECTION 4.12. Limitation on Lines of Business ...........................   48
SECTION 4.13. Limitation on the Sale or Issuance of Capital Stock of
               Restricted Subsidiaries ..................................   48
SECTION 4.14. Limitation on Liens .......................................   49
SECTION 4.15. Sale/Leaseback Transactions ...............................   49

                                    ARTICLE V

                                SUCCESSOR COMPANY

SECTION 5.01. When Company May Merge or Transfer Assets .................   49

                                   ARTICLE VI

                         EVENTS OF DEFAULTS AND REMEDIES

SECTION 6.01. Events of Default .........................................   51
SECTION 6.02. Acceleration ..............................................   53
SECTION 6.03. Other Remedies ............................................   53
SECTION 6.04. Waiver of Past Defaults ...................................   54
SECTION 6.05. Control by Majority .......................................   54
SECTION 6.06. Limitation on Suits .......................................   54
SECTION 6.07. Rights of Holders to Receive Payment ......................   55
SECTION 6.08. Collection Suit by Trustee ................................   55
SECTION 6.09. Trustee May File Proofs of Claim ..........................   55
SECTION 6.10. Priorities ................................................   55
SECTION 6.11. Undertaking for Costs .....................................   55
SECTION 6.12. Waiver of Stay or Extension Laws ..........................   56

                                   ARTICLE VII

                                     TRUSTEE

SECTION 7.01. Duties of Trustee .........................................   56
SECTION 7.02. Rights of Trustee .........................................   57
SECTION 7.03. Individual Rights of Trustee ..............................   58



                                                                        
SECTION 7.04. Trustee's Disclaimer ......................................   58
SECTION 7.05. Notice of Defaults ........................................   58
SECTION 7.06. Reports by Trustee to Holders .............................   58
SECTION 7.07. Compensation and Indemnity ................................   58
SECTION 7.08. Replacement of Trustee ....................................   59
SECTION 7.09. Successor Trustee by Merger ...............................   60
SECTION 7.10. Eligibility; Disqualification .............................   60
SECTION 7.11. Preferential Collection of Claims Against the Issuers .....   60

                                  ARTICLE VIII

                       DISCHARGE OF INDENTURE; DEFEASANCE

SECTION 8.01. Discharge of Liability on Notes; Defeasance ...............   61
SECTION 8.02. Conditions to Defeasance ..................................   62
SECTION 8.03. Application of Trust Money ................................   63
SECTION 8.04. Repayment to the Issuers ..................................   63
SECTION 8.05. Indemnity for Government Obligations ......................   63
SECTION 8.06. Reinstatement .............................................   63

                                   ARTICLE IX

                                   AMENDMENTS

SECTION 9.01. Without Consent of Holders ................................   64
SECTION 9.02. With Consent of Holders ...................................   65
SECTION 9.03. Compliance with Trust Indenture Act .......................   66
SECTION 9.04. Revocation and Effect of Consents and Waivers .............   66
SECTION 9.05. Notation on or Exchange of Notes ..........................   66
SECTION 9.06. Trustee to Sign Amendments ................................   66
SECTION 9.07. Payment for Consent .......................................   67

                                    ARTICLE X

                             COLLATERAL AND SECURITY

SECTION 10.01. Security Documents .......................................   67
SECTION 10.02. Recording and Opinions ...................................   67
SECTION 10.03. Release of Collateral ....................................   68
SECTION 10.04. Certificates and Opinions of Counsel .....................   69
SECTION 10.05. Certificates of the Trustee ..............................   70
SECTION 10.06. Authorization of Actions to Be Taken by the Trustee Under
               the Security Documents ...................................   70
SECTION 10.07. Authorization of Receipt of Funds by the Trustee Under the
               Security Documents .......................................   70
SECTION 10.08. Termination of Security Interest .........................   70
SECTION 10.09. Collateral Agent .........................................   71



                                                                        
SECTION 10.10. Designations .............................................   72

                                   ARTICLE XI

                                 NOTE GUARANTEES

SECTION 11.01. Note Guarantees ..........................................   72
SECTION 11.02. Limitation on Liability ..................................   74
SECTION 11.03. Releases of Note Guarantees ..............................   74
SECTION 11.04. Successors and Assigns ...................................   75
SECTION 11.05. No Waiver ................................................   75
SECTION 11.06. Modification .............................................   75
SECTION 11.07. Execution of Supplemental Indenture for Future Guarantors.   75
SECTION 11.08. Non-Impairment ...........................................   75

                                   ARTICLE XII

                                  MISCELLANEOUS

SECTION 12.01. Trust Indenture Act Controls .............................   76
SECTION 12.02. Notices ..................................................   76
SECTION 12.03. Communication by Holders with Other Holders ..............   77
SECTION 12.04. Certificate and Opinion as to Conditions Precedent .......   77
SECTION 12.05. Statements Required in Certificate or Opinion ............   77
SECTION 12.06. When Notes Disregarded ...................................   77
SECTION 12.07. Rules by Trustee, Paying Agent and Registrar .............   78
SECTION 12.08. Legal Holidays ...........................................   78
SECTION 12.09. GOVERNING LAW ............................................   78
SECTION 12.10. No Recourse Against Others ...............................   78
SECTION 12.11. Successors ...............................................   78
SECTION 12.12. Multiple Originals .......................................   78
SECTION 12.13. Table of Contents; Headings ..............................   78
SECTION 12.14. Tax Treatment of the Notes ...............................   78




Appendix A    - Provisions Relating to Original Notes, Additional Notes,
                Private Exchange Notes and Exchange Notes
Exhibit A     - Form of Initial Note and Private Exchange Note
Exhibit B     - Form of Exchange Note
Exhibit C     - Form of Supplemental Indenture

                        INDENTURE dated as of May 6, 2002, among ON
                  SEMICONDUCTOR CORPORATION, a Delaware corporation (the
                  "Company"), SEMICONDUCTOR COMPONENTS INDUSTRIES, LLC, a
                  Delaware limited liability company and a wholly-owned
                  subsidiary of the Company ("SCI LLC" and, together with the
                  Company, the "Issuers"), SCG (MALAYSIA SMP) HOLDING
                  CORPORATION, SCG (CZECH) HOLDING CORPORATION, SCG (CHINA)
                  HOLDING CORPORATION, SEMICONDUCTOR COMPONENTS INDUSTRIES
                  PUERTO RICO, INC., SCG INTERNATIONAL DEVELOPMENT LLC,
                  SEMICONDUCTOR COMPONENTS INDUSTRIES OF RHODE ISLAND, INC. and
                  SEMICONDUCTOR COMPONENTS INDUSTRIES INTERNATIONAL OF RHODE
                  ISLAND, INC., as guarantors (collectively, the "Guarantors"),
                  and WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, a
                  national banking association, as trustee (the "Trustee").


            Each party agrees as follows for the benefit of the other parties
and for the equal and ratable benefit of the Holders of (a) the Issuers' 12%
Senior Secured Notes due 2008 issued on the date hereof (the "Original Notes"),
(b) any Additional Notes (as defined herein) that may be issued on any Issue
Date (all such Notes in clauses (a) and (b) being referred to collectively as
the "Initial Notes"), (c) if and when issued as provided in a Registration
Rights Agreement (as defined in Appendix A hereto (the "Appendix")), the
Issuers' 12% Senior Secured Notes due 2008 (the "Exchange Notes") issued in an
Exchange Offer in exchange for any Initial Notes and (d) if and when issued as
provided in a Registration Rights Agreement, the Private Exchange Notes (such
term and each other term used but not defined herein has the meaning assigned to
such term in Sections 1.01 and 1.02; the Private Exchange Notes, together with
the Initial Notes and any Exchange Notes issued hereunder, the "Notes") issued
in a Private Exchange. On the date hereof, $300,000,000 in aggregate principal
amount of Notes will be initially issued. Subject to the conditions and in
compliance with the covenants set forth herein, the Issuers may issue an
unlimited aggregate principal amount of Additional Notes from time to time.


                                    ARTICLE I

                  Definitions and Incorporation by Reference

            SECTION 1.01. Definitions.

            "Acquired Debt" means, with respect to any specified Person, (a)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including Indebtedness Incurred in connection with, or in contemplation of, such
other Person merging with or into or becoming a Restricted Subsidiary of such
specified Person and (b) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person.

            "Additional Assets" means (a) any property or assets (other than
Indebtedness and Capital Stock) to be used by the Company or a Restricted
Subsidiary in a Permitted Business; (b) the Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such Capital
Stock by the Company or another Restricted Subsidiary; or (c) Capital Stock
constituting a minority interest in any Person that at such time is a Restricted
Subsidiary; provided, however, that any such Restricted Subsidiary described in
clauses (b) or (c) above is primarily engaged in a Permitted Business.

            "Additional Interest" means any additional interest payable under a
Registration Rights Agreement.

            "Additional Notes" means any 12% Senior Secured Notes due 2008,
issued under the terms of this Indenture subsequent to the Closing Date.

            "Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of Sections 4.06 and 4.07 only, "Affiliate" shall also mean any
beneficial owner of shares representing more than 10% of the total voting power
of the Voting Stock (on a fully diluted basis) of the Company or of rights or
warrants to purchase such Voting Stock (whether or not currently exercisable)
and any Person who would be an Affiliate of any such beneficial owner pursuant
to the first sentence hereof.

            "Asset Disposition" means any sale, lease (other than an operating
lease), transfer or other disposition (or series of related sales, leases,
transfers or dispositions) by the Company or any Restricted Subsidiary,
including any disposition by means of a merger, consolidation or similar
transaction (each referred to for the purposes of this definition as a
"disposition"), of (a) any shares of Capital Stock of a Restricted Subsidiary
(other than directors' qualifying shares or shares required by applicable law to
be held by a Person other than the Company or a Restricted Subsidiary) that have
a Fair Market Value in excess of $5 million, (b) all or substantially all the
assets of any division or line of business of the Company or any Restricted
Subsidiary or (c) any other assets of the Company or any Restricted Subsidiary
outside of the ordinary course of business of the Company or such Restricted
Subsidiary (other than, in the case of (a), (b) and (c) above, (i) a disposition
by the Company to a Restricted Subsidiary or by a Restricted Subsidiary to the
Company or to another Restricted Subsidiary, (ii) an issuance of Capital Stock
by a Subsidiary to the Company or to a Restricted Subsidiary, (iii) for purposes
of Section 4.06 only, a disposition that constitutes a Restricted Payment
permitted by Section 4.04, (iv) a disposition of assets with a Fair Market Value
of less than $5 million, (v) a Sale/Leaseback Transaction with respect to any
assets within 90 days of the acquisition of such assets, (vi) a disposition of
Temporary Cash Investments, the proceeds of which are used within five business
days to make another Permitted Investment, (vii) a disposition of obsolete,
uneconomical, negligible, worn out or surplus property or equipment in the
ordinary course of business and the periodic clearance of aged inventory, (viii)
any exchange of like-kind property of the type described in Section 1031 of the
Code for use in a Permitted Business, (ix) the sale or disposition

of any assets or property received as a result of a foreclosure by the Company
or any of its Restricted Subsidiaries of any secured Investment or any other
transfer of title with respect to any secured Investment in default, (x) the
licensing of intellectual property in the ordinary course of business or in
accordance with industry practice, (xi) the sale or discount, in each case
without recourse, of accounts receivable arising in the ordinary course of
business, but only in connection with the compromise or collection thereof and
(xii) a sale of accounts receivable and related assets pursuant to a Receivables
Facility. Notwithstanding the foregoing, the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole will be governed by the provisions of Sections
4.08 and 5.01 and not by the provisions of Section 4.06.

            "Attributable Debt" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate implicit in such transaction, determined in accordance with GAAP)
of the total obligations of the lessee for net rental payments during the
remaining term of the lease included in such Sale/Leaseback Transaction
(including any period for which such lease has been extended or may be, at the
option of the lessor, extended).

            "Average Life" means, as of the date of determination, with respect
to any Indebtedness or Preferred Stock, the number of years obtained by dividing
(a) the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal payment of
such Indebtedness or scheduled redemption or similar payment with respect to
such Preferred Stock multiplied by the amount of such payment by (b) the then
outstanding sum of all such payments.

            "Bank Indebtedness" means any and all amounts payable under or in
respect of the Credit Agreement and any Refinancing Indebtedness with respect
thereto, as amended from time to time, including principal, premium (if any),
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company or SCI LLC whether or
not a claim for post-filing interest is allowed in such proceedings), fees,
charges, expenses, reimbursement obligations, guarantees and all other amounts
payable thereunder or in respect thereof. It is understood and agreed that
Refinancing Indebtedness in respect of the Credit Agreement may be Incurred from
time to time after termination of the Credit Agreement.

            "Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of the Board of Directors
of the Company.

            "Business Day" means each day which is not a Legal Holiday.

            "Capitalized Lease Obligations" means an obligation that is required
to be classified and accounted for as a capitalized lease for financial
reporting purposes in accordance with GAAP, and the amount of Indebtedness
represented by such obligation shall be the capitalized amount of such
obligation determined in accordance with GAAP; and the Stated Maturity thereof
shall be the date of the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be prepaid by the lessee
without payment of a penalty.

            "Capital Stock" of any Person means any and all shares, partnership,
membership or other interests, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock (but excluding any debt securities convertible into such equity) and any
rights to purchase, warrants, options or similar interests with respect to the
foregoing.

            "Cash Management Obligations" means, with respect to any Person, all
obligations of such Person in respect of overdrafts and related liabilities owed
to any other Person that arise from treasury, depositary or cash management
services in connection with automated clearing house transfers of funds or any
similar transactions.

            "Change of Control" means the occurrence of any of the following
events:

            (a) (i) any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act), other than one or more Permitted Holders, becomes the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a person shall be deemed to have "beneficial ownership" of all
shares that any such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 40% of the total voting power of the Voting Stock of
the Company or SCI LLC, whether as a result of issuance of securities of the
Company or SCI LLC, any merger, consolidation, liquidation or dissolution of the
Company or SCI LLC, any direct or indirect transfer of securities by any
Permitted Holder or otherwise, and (ii) the Permitted Holders "beneficially own"
(as defined in clause (i) above), directly or indirectly, in the aggregate a
lesser percentage of the total voting power of the Voting Stock of the Company
or SCI LLC, than such other person and do not have the right or ability by
voting power, contract or otherwise to elect or designate for election a
majority of the board of directors of the Company or the similar governing body
of SCI LLC, as the case may be;

            (b) during any period of two consecutive years, individuals who at
the beginning of such period constituted the board of directors of the Company
or the similar governing body of SCI LLC, as the case may be (together with any
new directors or members of such governing body, as the case may be, whose
election by such board of directors of the Company or governing body of SCI LLC,
as the case may be, or whose nomination for election by the shareholders of the
Company or the members of SCI LLC, as the case may be, was approved by a vote of
a majority of the directors of the Company or a majority of the members of the
governing body of SCI LLC, as the case may be, then still in office who were
either directors or members of such governing body, as the case may be, at the
beginning of such period or whose election or nomination for election was
previously so approved), cease for any reason to constitute a majority of the
board of directors of the Company or a majority of the members of the governing
body of SCI LLC, as the case may be, then in office;

            (c) the adoption of a plan relating to the liquidation or
dissolution of the Company or SCI LLC (other than a plan with respect to SCI LLC
adopted solely for the purpose of reorganizing SCI LLC as a corporation); or

            (d) the merger or consolidation of the Company or SCI LLC with or
into another Person or the merger of another Person with or into the Company or
SCI LLC, or the sale of all

or substantially all the assets of the Company or SCI LLC to another Person
(other than a Person that is controlled by the Permitted Holders), and, in the
case of any such merger or consolidation, the securities of the Company or SCI
LLC that are outstanding immediately prior to such transaction and which
represent 100% of the aggregate voting power of the Voting Stock of the Company
or SCI LLC are changed into or exchanged for cash, securities or property,
unless pursuant to such transaction such securities are changed into or
exchanged for, in addition to any other consideration, securities of the
surviving Person or transferee that represent immediately after such
transaction, at least a majority of the aggregate voting power of the Voting
Stock of the surviving Person or transferee or a Person controlling such
surviving Person or transferee.

            "China JV" means the Company's joint venture in Leshan, China.

            "Closing Date" means the date of this Indenture.

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

            "Collateral" means all property and assets of any Issuer or
Guarantor with respect to which from time to time a Lien is granted as security
for the Notes pursuant to the applicable Security Documents.

            "Collateral Agent" means the Trustee in its capacity as the
"Collateral Agent" under and as defined in the Security Documents and any
successor thereto in such capacity.

            "Collateral Assignment" means the Collateral Assignment dated as of
May 6, 2002, between SCI LLC and the Collateral Agent.

            "Commission" means the Securities and Exchange Commission.

            "Commodity Hedge Obligations" means with respect to any Person any
commodity price protection agreement or other commodity price hedging
arrangement or other similar agreement or arrangement as to which such Person is
party.

            "Common Collateral Agent" means a bank or trust company authorized
to exercise corporate trust powers that has been appointed by the Issuers, and
has agreed, to act as collateral agent for the equal and ratable benefit of both
the holders of obligations secured by the Liens Securing Note Obligations and
the holders of all other obligations secured by Liens Securing Other Second-Lien
Obligations, in its capacity as such collateral agent.

            "Company" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the indenture securities.

            "Consolidated Coverage Ratio" as of any date of determination means
the ratio of (a) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters for which internal financial statements
are available prior to the date of such determination to (b) Consolidated
Interest Expense for such four fiscal quarters; provided, however, that (i) if
the Company or any Restricted Subsidiary has Incurred any Indebtedness since the
beginning of such period that remains outstanding on such date of determination
or if

the transaction giving rise to the need to calculate the Consolidated Coverage
Ratio is an Incurrence of Indebtedness, EBITDA and Consolidated Interest Expense
for such period shall be calculated after giving effect on a pro forma basis to
such Indebtedness as if such Indebtedness had been Incurred on the first day of
such period (in each case other than Indebtedness Incurred under any revolving
credit facility, in which case interest expense shall be computed based upon the
average daily balance of such Indebtedness during the applicable period) and the
discharge of any other Indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such period, (ii) if the Company or any Restricted
Subsidiary has repaid, repurchased, defeased or otherwise discharged any
Indebtedness since the beginning of such period or if any Indebtedness is to be
repaid, repurchased, defeased or otherwise discharged (in each case if such
Indebtedness has been permanently repaid and has not been replaced, other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness is permanently reduced, in which case interest expense shall be
computed based upon the average daily balance of such Indebtedness during the
applicable period) on the date of the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio, EBITDA and Consolidated Interest
Expense for such period shall be calculated on a pro forma basis as if such
discharge had occurred on the first day of such period and as if the Company or
such Restricted Subsidiary has not earned any interest income actually earned
during such period in respect of cash or Temporary Cash Investments used to
repay, repurchase, defease or otherwise discharge such Indebtedness, (iii) if
since the beginning of such period the Company or any Restricted Subsidiary
shall have made any Asset Disposition, EBITDA for such period shall be reduced
by an amount equal to EBITDA (if positive) directly attributable to the assets
that are the subject of such Asset Disposition for such period or increased by
an amount equal to EBITDA (if negative) directly attributable thereto for such
period and Consolidated Interest Expense for such period shall be reduced by an
amount equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to the Company and its continuing
Restricted Subsidiaries in connection with such Asset Disposition for such
period (or, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (iv) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an Investment in
any Restricted Subsidiary (or any Person that becomes a Restricted Subsidiary)
or an acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a business, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any Indebtedness)
as if such Investment or acquisition occurred on the first day of such period
and (v) if since the beginning of such period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into the Company or any
Restricted Subsidiary since the beginning of such period) shall have made any
Asset Disposition or any Investment or acquisition of assets that would have
required an adjustment pursuant to clause (iii) or (iv) above if made by the
Company or a Restricted Subsidiary during such period, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto as if such Asset Disposition, Investment or acquisition of assets
occurred on the first day

of such period. For purposes of this definition, whenever pro forma effect is to
be given to an acquisition of assets, the amount of income or earnings relating
thereto and the amount of Consolidated Interest Expense associated with any
Indebtedness Incurred in connection therewith, the pro forma calculations shall
be determined in good faith by a responsible financial or accounting Officer of
the Company. Any such pro forma calculations shall reflect any pro forma expense
and cost reductions attributable to such acquisitions, to the extent such
expense and cost reduction would be permitted by the Commission to be reflected
in pro forma financial statements included in a registration statement filed
with the Commission. If any Indebtedness bears a floating rate of interest and
is being given pro forma effect, the interest expense on such Indebtedness shall
be calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any Interest Rate
Agreement applicable to such Indebtedness if such Interest Rate Agreement has a
remaining term as at the date of determination in excess of 12 months).

            "Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its Consolidated Restricted Subsidiaries,
plus, to the extent Incurred by the Company or its Restricted Subsidiaries in
such period but not included in such interest expense, without duplication (a)
interest expense attributable to Capitalized Lease Obligations and the imputed
interest with respect to Attributable Debt, (b) amortization of debt discount,
(c) amortization of debt issuance costs (other than any such costs associated
with the Bank Indebtedness, the Initial Notes, the Exchange Notes, the Senior
Subordinated Notes, the Junior Subordinated Note or otherwise associated with
the Refinancing), (d) capitalized interest, (e) noncash interest expense other
than any noncash interest expense in connection with the Junior Subordinated
Note, (f) commissions, discounts and other fees and charges attributable to
letters of credit and bankers' acceptance financing, (g) interest accruing on
any Indebtedness of any other Person to the extent such Indebtedness is
Guaranteed by the Company or any Restricted Subsidiary, (h) net costs associated
with Hedging Obligations (including amortization of fees) (other than any such
costs associated with the Bank Indebtedness, the Initial Notes, the Exchange
Notes, the Senior Subordinated Notes, the Junior Subordinated Note or otherwise
associated with the Refinancing), (i) dividends in respect of all Disqualified
Stock of the Company and all Preferred Stock of any of the Restricted
Subsidiaries of the Company, to the extent held by Persons other than the
Company or another Restricted Subsidiary, other than accumulated but unpaid
dividends on the TPG Preferred Stock, (j) interest Incurred in connection with
investments in discontinued operations and (k) the cash contributions to any
employee stock ownership plan or similar trust to the extent such contributions
are used by such plan or trust to pay interest or fees to any Person (other than
the Company) in connection with Indebtedness Incurred by such plan or trust.
Notwithstanding anything to the contrary contained herein, commissions,
discounts, yield and other fees and charges Incurred in connection with any
transaction (including in connection with a Receivables Facility) pursuant to
which the Company or any Subsidiary of the Company may sell, convey or otherwise
transfer or grant a security interest in any accounts receivable or related
assets as contemplated by the definition of "Receivables Facility" shall be
included in Consolidated Interest Expense.

            "Consolidated Net Income" means, for any period, the net income of
the Company and its Consolidated Subsidiaries for such period determined in
accordance with GAAP; provided, however, that:

            (a) any net income of any Person (other than the Company), if such
Person is not a Restricted Subsidiary, shall be excluded from such Consolidated
Net Income, except that (i) subject to the limitations contained in clause (d)
below, the Company's equity in the net income of any such Person for such period
shall be included in such Consolidated Net Income up to the aggregate amount of
cash actually distributed by such Person during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution (subject, in the case
of a dividend or other distribution made to a Restricted Subsidiary, to the
limitations contained in clause (c) below) and (ii) the Company's equity in a
net loss of any such Person for such period shall be included in determining
such Consolidated Net Income;

            (b) any net income (or loss) of any Person acquired by the Company
or a Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded from such Consolidated Net
Income;

            (c) any net income (or loss) of any Restricted Subsidiary, to the
extent that the declaration of dividends or similar distributions by such
Restricted Subsidiary of that income is not at the date of determination
permitted without any prior governmental approval (that has not been obtained)
or is, directly or indirectly, restricted by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Restricted Subsidiary or its
stockholders or other holders of its equity, shall be excluded from such
Consolidated Net Income, except that (i) subject to the limitations contained in
clause (d) below, the Company's equity in the net income of any such Restricted
Subsidiary for such period shall be included in such Consolidated Net Income up
to the aggregate amount of cash actually distributed by such Restricted
Subsidiary during such period to the Company or another Restricted Subsidiary as
a dividend or other distribution (subject, in the case of a dividend or other
distribution made to another Restricted Subsidiary, to the limitation contained
in this clause) and (ii) the Company's equity in a net loss of any such
Restricted Subsidiary for such period shall be included in determining such
Consolidated Net Income;

            (d) any gain (or loss) realized upon the sale or other disposition
of any asset of the Company or its Consolidated Subsidiaries (including pursuant
to any Sale/Leaseback Transaction) that is not sold or otherwise disposed of in
the ordinary course of business and any gain (or loss) realized upon the sale or
other disposition of any Capital Stock of any Person shall be excluded from such
Consolidated Net Income (without regard to abandonments or reserves related
thereto);

            (e) any extraordinary gain or loss shall be excluded from such
Consolidated Net Income;

            (f) the cumulative effect of a change in accounting principles shall
be excluded from such Consolidated Net Income;

            (g) gains or losses due solely to fluctuations in currency values
and the related tax effects according to GAAP shall be excluded from such
Consolidated Net Income;

            (h) only for the purposes of the definition of EBITDA, one-time cash
charges recorded in accordance with GAAP resulting from any merger,
recapitalization or acquisition transaction shall be excluded from such
Consolidated Net Income; and

            (i) the amortization of any premiums, fees or expenses incurred in
connection with the Refinancing or any amounts required or permitted by
Accounting Principles Board Opinions Nos. 16 (including noncash write-ups and
noncash charges relating to inventory and fixed assets, in each case arising in
connection with the Refinancing) and 17, in each case in connection with the
Refinancing, shall be excluded from such Consolidated Net Income.

            "Consolidation" means the consolidation of the amounts of each of
the Restricted Subsidiaries with those of the Company in accordance with GAAP
consistently applied; provided, however, that "Consolidation" shall not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary shall
be accounted for as an investment. The term "Consolidated" has a correlative
meaning.

            "Credit Agent" means JPMorgan Chase Bank, in its capacity as
administrative and collateral agent for the lenders party to the Credit
Agreement or any successor thereto, or any Person otherwise designated the
"Credit Agent" pursuant to the Intercreditor Agreement.

            "Credit Agreement" means the credit agreement dated as of August 4,
1999, as amended and restated as of April 3, 2000, and as subsequently amended,
among SCI LLC, the Company, the lenders named therein and JPMorgan Chase 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, including any guarantees, collateral
documents, instruments and agreements executed in connection therewith, and any
amendments, supplements, modifications, extensions, renewals, restatements or
refundings thereof (except to the extent that any such amendment, supplement,
modification, extension, renewal, restatement or refunding would be prohibited
by the terms of this Indenture, unless otherwise agreed to by the Holders of at
least a majority in aggregate principal amount of Notes at the time outstanding)
and any indentures or credit facilities or commercial paper facilities with
banks or other institutional lenders that replace, refund or refinance any part
of the loans, notes, other credit facilities or commitments thereunder,
including any such replacement, refunding or refinancing facility or indenture
that increases the amount borrowable thereunder or alters the maturity thereof.

            "Credit Agreement Obligations" means (a) all Bank Indebtedness and
all other Indebtedness outstanding under one or more of any other First-Lien
Credit Facilities that constitutes Permitted Debt or is otherwise permitted
under Section 4.03 and that is designated by the Issuers as "Credit Agreement
Obligations" for purposes of this Indenture and is secured by a Permitted Lien
described in clause (a) of the definition thereof, (b) all other obligations
(not constituting Indebtedness) of an Issuer or Guarantor under the Credit
Agreement or any such other First-Lien Credit Facility and (c) all other
obligations of an Issuer or any Guarantor in

respect of Hedging Obligations, Commodity Hedge Obligations or Cash Management
Obligations that are designated by the Issuers to be "Credit Agreement
Obligations" for purposes of this Indenture.

            "Credit Facilities" means one or more debt facilities (including the
Credit Agreement) or commercial paper facilities, providing for revolving credit
loans, term loans, receivables financing (including through the sale of
receivables to lenders or to special purpose entities formed to borrow from
lenders against such receivables) or letters of credit, or any debt securities
or other form of debt financing (including convertible or exchangeable debt
instruments), in each case, as amended, supplemented, modified, extended,
renewed, restated or refunded in whole or in part from time to time.

            "Currency Agreement" means with respect to any Person any foreign
exchange contract, currency swap agreements or other similar agreement or
arrangement to which such Person is a party.

            "Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.

            "Discharge of Credit Agreement Obligations" means payment in full in
cash of the principal of and interest and premium, if any, on all Indebtedness
outstanding under the First-Lien Credit Facilities or, with respect to Hedging
Obligations, Commodity Hedge Obligations or letters of credit outstanding
thereunder, delivery of cash collateral or backstop letters of credit in respect
thereof in compliance with such First-Lien Credit Facility, in each case after
or concurrently with termination of all commitments to extend credit thereunder,
and payment in full of any other Credit Agreement Obligations that are due and
payable or otherwise accrued and owing at or prior to the time such principal,
interest and premium, if any, are paid.

            "Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable) or upon the
happening of any event (a) matures or is mandatorily redeemable pursuant to a
sinking fund obligation or otherwise, (b) is convertible or exchangeable for
Indebtedness or Disqualified Stock or (c) is redeemable at the option of the
holder thereof, in whole or in part, in the case of clauses (a), (b) and (c) on
or prior to 90 days after the Stated Maturity of the Notes (or the Senior
Subordinated Notes, but only as the term "Disqualified Stock" is used in the
definition of the term "Qualified Preferred Stock"); provided, however, that
only the portion of Capital Stock that so matures or is mandatorily redeemable,
is so convertible or exchangeable or is so redeemable at the option of the
holder thereof prior to the Stated Maturity of the Notes shall be deemed
Disqualified Stock; provided further, however, that (i) any Capital Stock that
would not constitute Disqualified Stock but for provisions thereof giving
holders thereof the right to require such Person to repurchase or redeem such
Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to 90 days after the Stated Maturity of the Notes (or the Senior
Subordinated Notes, but only as the term "Disqualified Stock" is used in the
definition of the term "Qualified Preferred Stock") shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are not more favorable to the holders of such
Capital Stock than the provisions of Sections 4.06 and 4.08, (ii) a class of
Capital Stock shall not be Disqualified Stock

hereunder solely as a result of any maturity or redemption that is conditioned
upon, and subject to, compliance with the Section 4.04 and (iii) Capital Stock
issued to any plan for the benefit of employees shall not constitute
Disqualified Stock solely because it may be required to be repurchased by the
Company in order to satisfy applicable statutory or regulatory obligations.

            "Domestic Subsidiary" means any Restricted Subsidiary of the Company
other than a Foreign Subsidiary.

            "EBITDA" for any period means the Consolidated Net Income for such
period, plus, without duplication, the following to the extent deducted in
calculating such Consolidated Net Income: (a) provision for taxes based on
income or profits of the Company and its Consolidated Restricted Subsidiaries,
(b) Consolidated Interest Expense, (c) depreciation expense of the Company and
its Consolidated Restricted Subsidiaries, (d) amortization expense (including
amortization of goodwill and other intangibles) of the Company and its
Consolidated Restricted Subsidiaries (excluding amortization expense
attributable to a prepaid cash item that was paid in a prior period), (e) all
other noncash expenses or losses of the Company and its Consolidated Restricted
Subsidiaries for such period (including but not limited to, such expenses or
losses in connection with restructuring activities, whether incurred before or
after the Closing Date), determined on a consolidated basis in accordance with
GAAP (excluding any such charge that constitutes an accrual of or a reserve for
cash charges for any future period), (f) any non-recurring fees, expenses or
charges realized by the Company and its Restricted Subsidiaries for such period
related to (i) any offering of Capital Stock or Incurrence of Indebtedness
permitted to be Incurred under this Indenture, or (ii) during 2001 and the first
six months of 2002, the Profitability Enhancement Program, provided the fees,
expenses and charges referred to in this clause (ii) shall not exceed $150.4
million in 2001 or $20.0 million in the first six months of 2002, and (g)
noncash dividends on TPG Preferred Stock; and minus all noncash items increasing
Consolidated Net Income of such Person for such Period (excluding any items
which represent the reversal of any accrual of, or cash reserve for, anticipated
cash charges in any prior period). Notwithstanding the foregoing, the provision
for taxes based on the income or profits of, and the depreciation and
amortization and noncash charges of, a Restricted Subsidiary of the Company
shall be added to Consolidated Net Income to compute EBITDA only to the extent
(and in the same proportion) that the net income of such Restricted Subsidiary
was included in calculating Consolidated Net Income and only if a corresponding
amount would be permitted at the date of determination to be dividended or
similarly distributed to the Company by such Restricted Subsidiary without prior
governmental approval (that has not been obtained) or is not, directly or
indirectly, restricted by operation of the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Restricted Subsidiary or its
stockholders or other holders of its equity.

            "Equity Offering" means a primary offering of common stock of the
Company, other than public offerings with respect to the Company's common stock
registered on Form S-8.

            "Exchange Act" means the Securities Exchange Act of 1934.

             "Fair Market Value" means, with respect to any asset or property,
the price which could be negotiated in an arm's-length, free market transaction,
for cash, between a willing seller and a willing and able buyer, neither of whom
is under undue pressure or compulsion to

complete the transaction. For all purposes of this Indenture, Fair Market Value
will be determined in good faith by the Board of Directors, whose determination
will be conclusive and evidenced by a resolution of the Board of Directors.

            "First Lien Credit Facilities" means (a) the Credit Facilities
provided pursuant to the Credit Agreement and (b) any other Credit Facility
that, in the case of both clauses (a) and (b), is secured by a Permitted Lien
described in clause (a) of the definition thereof and, except for the Credit
Facilities provided pursuant to the Credit Agreement, is designated by the
Issuers as a "First-Lien Credit Facility" for the purposes of this Indenture.

            "Foreign Subsidiary" means any Restricted Subsidiary of the Company
that is not organized under the laws of the United States of America or any
State thereof or the District of Columbia.

            "GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, including those set forth in
(a) the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (b) statements and
pronouncements of the Financial Accounting Standards Board, (c) such other
statements by such other entities as approved by a significant segment of the
accounting profession and (d) the rules and regulations of the Commission
governing the inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the
Commission. All ratios and computations based on GAAP contained in this
Indenture shall be computed in conformity with GAAP.

            "Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any other Person
and any obligation, direct or indirect, contingent or otherwise, of such Person
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness of such other Person (whether arising by virtue of
partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (b) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness of the payment thereof or
to protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.

            "Guarantor" means any Subsidiary that has issued a Note Guarantee.

            "Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.

            "Holder" means the Person in whose name a Note is registered on the
Registrar's books.

            "Incur" means, with respect to any Indebtedness or other obligation
of any Person, to issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any

Indebtedness or Capital Stock of a Person existing immediately after the time
such Person becomes a Subsidiary (whether by merger, consolidation, acquisition
or otherwise) shall be deemed to be Incurred by such Person at the time it
becomes a Subsidiary. The term "Incurrence" when used as a noun shall have a
correlative meaning. The accretion of principal of a non-interest bearing or
other discount security shall not be deemed the Incurrence of Indebtedness.

            "Indebtedness" means, with respect to any Person on any date of
determination, without duplication, the following items if and to the extent
that any of them (other than items specified under clauses (c), (h), (i) and (j)
below) would appear as a liability or, in the case of clause (f) only, Preferred
Stock on the balance sheet of such Person, prepared in accordance with GAAP, on
such date:

            (a) the principal amount of and premium (if any) in respect of
indebtedness of such Person for borrowed money;

            (b) the principal amount of and premium (if any) in respect of
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;

            (c) all obligations of such Person in respect of letters of credit
or other similar instruments (including reimbursement obligations with respect
thereto but excluding obligations in respect of letters of credit issued in
respect of Trade Payables);

            (d) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables), which purchase
price is due more than twelve months after the date of placing such property in
service or taking delivery and title thereto or the completion of such services;

            (e) all Capitalized Lease Obligations and all Attributable Debt of
such Person;

            (f) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or, with
respect to any Subsidiary of such Person, any Preferred Stock (but excluding, in
each case, any accrued dividends);

            (g) all Indebtedness of other Persons secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person;
provided, however, that the amount of Indebtedness of such Person shall be the
lesser of (i) the Fair Market Value of such asset at such date of determination
and (ii) the amount of such Indebtedness of such other Persons;

            (h) Hedging Obligations of such Person;

            (i) all obligations of such Person in respect of a Receivables
Facility; and

            (j) all obligations of the type referred to in clauses (a) through
(i) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Guarantee.

            The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations described above, at such
date; provided, however, that the amount outstanding at any time of any
Indebtedness issued with original issue discount will be deemed to be the face
amount of such Indebtedness less the remaining unaccreted portion of the
original issue discount of such Indebtedness at such time, as determined in
accordance with GAAP.

            "Indenture" means this Indenture as amended or supplemented from
time to time.

            "Indenture Documents" means (a) the Indenture, the Notes and the
Security Documents and (b) any other related document or instrument executed and
delivered pursuant to any Indenture Document described in clause (a) of this
definition evidencing or governing Obligations.

            "Intercreditor Agreement" means (a) the intercreditor agreement,
dated as of the date of this Indenture, among the Issuers, the Credit Agent and
the Trustee, as amended (including any amendment and restatement thereof),
supplemented or otherwise modified from time to time, and (b) any substantially
identical agreement hereafter entered into pursuant to Section 10.09(c).

            "Interest Rate Agreement" means with respect to any Person any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement as to which such Person is party.

            "Investment" in any Person means any direct or indirect advance,
loan (other than advances to customers in the ordinary course of business that
are recorded as accounts receivable on the balance sheet of the lender) or other
extension of credit (including by way of Guarantee or similar arrangement but
excluding commission, travel and similar advances to officers, consultants and
employees made in the ordinary course of business) or capital contribution to
(by means of any transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any purchase or
acquisition of Capital Stock, Indebtedness or other similar instruments issued
by such Person. For purposes of the definition of "Unrestricted Subsidiary" and
Section 4.04, (a) "Investment" shall include the portion (proportionate to the
Company's equity interest in such Subsidiary) of the Fair Market Value of the
net assets of any Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary in an amount (if positive) equal to (i) the Company's "Investment" in
such Subsidiary at the time of such redesignation less (ii) the portion
(proportionate to the Company's equity interest in such Subsidiary) of the Fair
Market Value of the net assets of such Subsidiary at the time of such
redesignation; and (b) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its Fair Market Value at the time of such
transfer.

            "Issue Date" means the date on which the Original Notes are
originally issued.

            "Junior Subordinated Note" means the 10% junior subordinated note
due 2011 issued by SCI LLC on August 4, 1999.

            "Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).

            "Mortgaged Property" means, initially, the parcel of real property
located at 5005 East McDowell Road, Phoenix, Arizona 85018 and the improvements
thereto owned by SCI LLC and the parcel of real property located at 2000 South
County Trail, East Greenwich, Rhode Island 02818 owned by Semiconductor
Components Industries of Rhode Island, Inc., and includes each other parcel of
real property and the improvements thereto with respect to which a Mortgage is
granted pursuant to Section 4.11.

            "Mortgages" means a mortgage, deed of trust, assignment of leases
and rents, leasehold mortgage or other security document granting a Lien on any
Mortgaged Property to secure the Obligations.

            "Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise and proceeds
from the sale or other disposition of any securities received as consideration,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring Person of Indebtedness or other
obligations relating to the properties or assets that are the subject of such
Asset Disposition or received in any other noncash form) therefrom, in each case
net of (a) all direct costs relating to such Asset Disposition, including all
legal, title, accounting and investment banking fees, and recording tax
expenses, sales and other commissions and other fees and relocation expenses
incurred, and all Federal, state, provincial, foreign and local taxes required
to be paid or accrued as a liability under GAAP, (b) all payments made on any
Indebtedness that (i) is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon or other security
agreement of any kind with respect to such assets, or (ii) must, by its terms,
or in order to obtain a necessary consent to such Asset Disposition, or by
applicable law, be repaid out of the proceeds from such Asset Disposition, (c)
all distributions and other payments required to be made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset Disposition
and (d) appropriate amounts to be provided by the seller as a reserve, in
accordance with GAAP, against any liabilities associated with the property or
other assets disposed of in such Asset Disposition and retained by the Company
or any Restricted Subsidiary after such Asset Disposition.

            "Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.

            "Note Guarantee" means each Guarantee of the obligations with
respect to the Notes issued by a Subsidiary of the Company pursuant to the terms
of this Indenture.

            "Notes" means the Notes issued under this Indenture.

            "Obligations" means all obligations of the Issuers and the
Guarantors under the Indenture, the Notes and the other Indenture Documents,
including obligations to the Trustee and the Collateral Agent, whether for
payment of principal of, interest, including Additional Interest, if any, on the
Notes and all other monetary obligations of the Issuers and the Guarantors under
the Indenture, the Notes and the other Indenture Documents, whether for fees,
expenses, indemnification or otherwise.

            "Offering Circular" means the offering circular relating to the
issuance of the Original Notes dated May 1, 2002.

            "Officer" means the Chairman of the Board, the Chief Executive
Officer, the Chief Financial Officer, the President, any Vice President, the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of
the Company. "Officer" of SCI LLC and of a Guarantor has a correlative meaning.

            "Officers' Certificate" means a certificate signed by two Officers
of each Person issuing such certificate. For the avoidance of doubt, any
Officers' Certificate to be delivered by the Issuers pursuant to this Indenture
shall be signed by two Officers of each Issuer.

            "Opinion of Counsel" means a written opinion (subject to customary
assumptions and exclusions) from legal counsel who is reasonably acceptable to
the Trustee. The counsel may be an employee of or counsel to the Company, SCI
LLC, a Guarantor or the Trustee.

            "Other Second-Lien Obligations" means any Indebtedness of any Issuer
or Restricted Subsidiary, other than the Notes, that is secured by a Permitted
Lien described in clause (a) of the definition thereof, which is secured equally
and ratably with the Notes by a second-priority security interest in the
Collateral, granted to a Common Collateral Agent and designated by the Issuers
as "Other Second-Lien Obligations" for the purposes of this Indenture.

            "Permitted Business" means any business engaged in by the Issuers or
any Restricted Subsidiary on the Closing Date and any Related Business.

            "Permitted Holders" means TPG Partners II, L.P. and its Affiliates
and any Person acting in the capacity of an underwriter in connection with a
public or private offering of the Company's or SCI LLC's Capital Stock.

            "Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary (a) in the Company, a Restricted Subsidiary or a Person
that will, upon the making of such Investment, become a Restricted Subsidiary;
provided, however, that the primary business of such Restricted Subsidiary is a
Permitted Business; (b) in another Person if as a result of such Investment such
other Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Permitted Business;
(c) in Temporary Cash Investments; (d) in receivables owing to the Company or
any Restricted Subsidiary if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms;
provided, however, that such trade terms may include such concessionary trade
terms as

the Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (e) in payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(f) in loans or advances to employees made in the ordinary course of business
consistent with prudent business practice and not exceeding $5 million in the
aggregate outstanding at any one time; (g) in stock, obligations or securities
received in settlement of debts created in the ordinary course of business and
owing to the Company or any Restricted Subsidiary or in satisfaction of
judgments; (h) in any Person to the extent such Investment represents the
noncash portion of the consideration received for an Asset Disposition that was
made pursuant to and in compliance with Section 4.06 or a transaction not
constituting an Asset Disposition by reason of the $1 million threshold
contained in the definition thereof; (i) that constitutes a Hedging Obligation
or commodity hedging arrangement entered into for bona fide hedging purposes of
the Company in the ordinary course of business and otherwise in accordance with
this Indenture; (j) in securities of any trade creditor or customer received in
settlement of obligations or pursuant to any plan of reorganization or similar
arrangement upon the bankruptcy or insolvency of such trade creditor or
customer; (k) acquired as a result of a foreclosure by the Company or such
Restricted Subsidiary with respect to any secured Investment or other transfer
of title with respect to any secured Investment in default; (l) existing as of
the Closing Date or an Investment consisting of any extension, modification or
renewal of any Investment existing as of the Closing Date (excluding any such
extension, modification or renewal involving additional advances, contributions
or other investments of cash or property or other increases thereof unless it is
a result of the accrual or accretion of interest or original issue discount or
payment-in-kind pursuant to the terms, as of the Closing Date, of the original
Investment so extended, modified or renewed); (m) consisting of purchases and
acquisitions of inventory, supplies, materials and equipment or licenses or
leases of intellectual property, in any case, in the ordinary course of business
and otherwise in accordance with this Indenture; (n) in a trust, limited
liability company, special purpose entity or other similar entity in connection
with a Receivables Facility permitted under Section 4.03; provided that, in the
good faith determination of the Board of Directors, such Investment is necessary
or advisable to effect such Receivables Facility; (o) consisting of intercompany
Indebtedness permitted under Section 4.03; (p) the consideration for which
consists solely of shares of common stock of the Company; and (q) so long as no
Default shall have occurred and be continuing (or result therefrom), in any
Person engaged in a Permitted Business having an aggregate Fair Market Value
(measured on the date made and without giving effect to subsequent changes in
value), when taken together with all other Investments made pursuant to this
clause (q) that are at the time outstanding (and measured on the date made and
without giving effect to subsequent changes in value), not to exceed $15
million.

            "Permitted Liens" means any of the following Liens: (a) Liens upon
any property of any Issuer or Restricted Subsidiary securing any Indebtedness
permitted under Sections 4.03(a), 4.03(b)(i) or 4.03(b)(xiv) hereof and all
other obligations of any Issuer or Restricted Subsidiary in respect of such
Indebtedness not constituting Indebtedness; (b) Liens securing the Notes and the
Note Guarantees; (c) Liens in favor of the Company or any Restricted Subsidiary;
(d) Liens on property of a Person existing at the time such Person is merged
with or into or consolidated with or acquired by the Company or any Restricted
Subsidiary; provided that such Liens were in existence prior to the
contemplation of such merger or consolidation or acquisition and do not extend
to any assets other than those of the Person merged into or consolidated with

or acquired by the Company or the Restricted Subsidiary; (e) Liens on property
existing at the time of acquisition of the property by the Company of any
Restricted Subsidiary; provided that such Liens were in existence prior to the
contemplation of such acquisition; (f) Liens to secure Indebtedness (including
Capitalized Lease Obligations) permitted under Section 4.03(b)(x) hereof
covering only the assets acquired with such Indebtedness or additions or
improvements to such assets; (g) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded; provided that any reserve or other appropriate provision as is
required in conformity with GAAP has been made therefor; (h) Liens incurred in
the ordinary course of business including judgment and attachment liens of the
Company or any Restricted Subsidiary of the Company with respect to obligations
that do not exceed in the aggregate $25.0 million at any one time outstanding
and that are not incurred in connection with the borrowing of money or the
obtaining of advances of credit (other than trade credit in the ordinary course
of business, not evidenced by a note and not past due); (i) Liens in favor of
the Trustee; (j) Liens incurred in connection with Refinancing Indebtedness, but
only if such Liens extend to no more assets than the Liens securing the
Indebtedness being refinanced; (k) Liens securing Hedging Obligations; (l)
statutory Liens of landlords and carriers', warehousemen's, mechanics',
suppliers', materialmen's, repairmen's, or other like Liens (including
contractual landlords liens) arising in the ordinary course of business and with
respect to amounts not yet delinquent by more than 30 days or being contested in
good faith by appropriate proceedings, if a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor; (m) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security; (n) Liens to secure Indebtedness of any
Restricted Subsidiary that is a Foreign Subsidiary, provided that such
Indebtedness is used by such Restricted Subsidiary to finance operations of such
Foreign Subsidiary outside the United States; (o) easements, zoning
restrictions, rights-of-way, restrictions, minor defects or irregularities in
title and other similar charges or encumbrances not interfering in any material
respect with the business of the Company or any of its Restricted Subsidiaries;
(p) Liens on specific items of inventory or other goods and proceeds thereof of
any Person securing such Person's obligations in respect of bankers' acceptances
issued or created for the account of such Person to facilitate the purchase,
shipment or storage of such inventory or other goods; (q) Liens securing
reimbursement obligations with respect to commercial letters of credit which
encumber documents and the property relating to such letters of credit and
products and proceeds thereof; (r) any interest or title of a lessor in the
property subject to any lease or arising from filing UCC financing statements
regarding leases; (s) judgment Liens in respect of judgments that do not
constitute an Event of Default; (t) Liens existing on the date hereof; (u) Liens
incurred or deposits made to secure the performance of tenders, bids, leases,
statutory obligations, surety and appeal bonds, government contracts,
performance and return of money bonds and other obligation of a like nature
incurred in the ordinary course of business; (v) Liens securing obligations in
respect of Cash Management Obligations; (w) ground leases in respect of real
property on which facilities owned or leased by the Company or any of its
Restricted Subsidiaries are located; (x) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of customs duties in
connection with the importation of goods; (y) leases or subleases granted to
other Persons and not interfering in any material respect with the business of
the Company and its Restricted Subsidiaries, taken as a whole; (z) Liens in
connection with a Receivables Facility

incurred in compliance with Sections 4.03(b)(i) and 4.03(b)(ii) hereof; (aa)
Liens arising solely by virtue of any statutory or common law provision relating
to banker's liens, rights of setoff or similar rights; and (bb) Liens on the
assets of the China JV securing Indebtedness incurred in compliance with Section
4.03 hereof.

            "Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.

            "Pledge Agreement" means the Pledge Agreement dated as of May 6,
2002, among the Issuers, the Grantors (as defined therein) and the Collateral
Agent.

            "Preferred Stock", as applied to the Capital Stock of any Person,
means Capital Stock of any class or classes (however designated) that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such Person,
over shares of Capital Stock of any other class of such Person.

            "Profitability Enhancement Program" means the Profitability
Enhancement Program described in the Offering Circular.

            "Purchase Money Indebtedness" means Indebtedness (a) consisting of
the deferred purchase price of an asset, conditional sale obligations,
obligations under any title retention agreement and other purchase money
obligations, in each case where the maturity of such Indebtedness does not
exceed the anticipated useful life of the asset being financed, and (b) Incurred
to finance the acquisition by the Company or a Restricted Subsidiary of all or a
portion of such asset, including additions and improvements; provided, however,
that such Indebtedness is Incurred within 180 days after the acquisition by the
Company or such Restricted Subsidiary of such asset or the relevant addition or
improvement.

            "Qualified Preferred Stock" means any preferred stock that (i) is
not Disqualified Stock, (ii) does not entitle the holder to receive cash
dividends prior to November 1, 2009 (prior to such date, dividends may accrue or
be paid in kind), (iii) is convertible into common stock and (iv) is issued to
one or more financial sponsors, such as Texas Pacific Group or any other private
equity firm or similar entity.

            "Qualified Proceeds" means any of the following or any combination
of the following: (a) cash, (b) Temporary Cash Investments, (c) the Fair Market
Value of assets that are used or useful in the Permitted Business and (d) the
Fair Market Value of the Capital Stock of any Person engaged primarily in a
Permitted Business if, in connection with the receipt by the Company or any
Restricted Subsidiary of the Company of such Capital Stock, (i) such Person
becomes a Restricted Subsidiary or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or any Restricted Subsidiary.

            "Receivables Facility" means one or more receivables financing
facilities, as amended from time to time, pursuant to which the Company and/or
any of its Restricted Subsidiaries sells its accounts receivable to a Person
that is not a Restricted Subsidiary pursuant to arrangements customary in the
industry.

            "Refinance" means, in respect of any Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such Indebtedness.

            "Refinancing" means the Company's offering and sale of the Original
Notes and the application of the proceeds therefrom as described in the Offering
Circular.

            "Refinancing Indebtedness" means Indebtedness that is Incurred to
refund, refinance, replace, renew, repay or extend (including pursuant to any
defeasance or discharge mechanism) any Indebtedness of the Company or any
Restricted Subsidiary (including Indebtedness of the Company that Refinances
Refinancing Indebtedness); provided, however, that (a) the Refinancing
Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the
Indebtedness being Refinanced, (b) the Refinancing Indebtedness has an Average
Life at the time such Refinancing Indebtedness is Incurred that is equal to or
greater than the Average Life of the Indebtedness being refinanced, (c) such
Refinancing Indebtedness is Incurred in an aggregate principal amount (or if
issued with original issue discount, an aggregate issue price) that is equal to
or less than the aggregate principal amount (or if issued with original issue
discount, the aggregate accreted value) then outstanding of the Indebtedness
being Refinanced and (d) if the Indebtedness being refinanced is subordinated in
right of payment to the Notes, such Refinancing Indebtedness is subordinated in
right of payment to the Notes at least to the same extent as the Indebtedness
being Refinanced; provided further, however, that Refinancing Indebtedness shall
not include (i) Indebtedness of a Restricted Subsidiary that Refinances
Indebtedness of the Company or (ii) Indebtedness of the Company or a Restricted
Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary.

            "Related Business" means any business related, ancillary or
complementary to any of the businesses of the Company and the Restricted
Subsidiaries on the Closing Date.

            "Restricted Subsidiary" means any Subsidiary of the Company
(including SCI LLC) other than an Unrestricted Subsidiary.

            "Sale/Leaseback Transaction" means an arrangement relating to
property now owned or hereafter acquired by the Company or a Restricted
Subsidiary whereby the Company or a Restricted Subsidiary transfers such
property to a Person and the Company or such Restricted Subsidiary leases it
from such Person, other than leases between the Company and a Wholly-Owned
Subsidiary or between Wholly-Owned Subsidiaries.

            "SCI LLC" means Semiconductor Components Industries, LLC until a
successor replaces it and, thereafter, means the successor.

            "Securities Act" means the Securities Act of 1933.

            "Security Agreement" means the Security Agreement dated as of May 6,
2002, among the Issuers, the Grantors (as defined therein) and the Collateral
Agent.

            "Security Documents" means the Security Agreement, the Pledge
Agreement, the Collateral Assignment, the Mortgages and any other document or
instrument pursuant to which a Lien is granted by any Issuer or any Guarantor to
secure any Obligations or under which rights

or remedies with respect to such Lien are governed, as such agreements may be
amended, modified or supplemented from time to time.

            "Senior Subordinated Notes" means the 12% senior subordinated notes
due 2009 issued by the Company and SCI LLC on July 28, 1999.

            "Significant Subsidiary" means any Restricted Subsidiary that would
be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02
under Regulation S-X promulgated by the Commission.

            "Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof upon the
happening of any contingency beyond the control of the issuer unless such
contingency has occurred).

            "Subordinated Indebtedness" means any Indebtedness of the Company
(whether outstanding on the Closing Date or thereafter Incurred) that is
subordinate or junior in right of payment to the Notes pursuant to a written
agreement. "Subordinated Indebtedness" of SCI LLC or a Guarantor has a
correlative meaning.

            "Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total Voting
Stock is at the time owned or controlled, directly or indirectly, by (a) such
Person, (b) such Person and one or more Subsidiaries of such Person or (c) one
or more Subsidiaries of such Person. Notwithstanding the foregoing, with respect
to the Company, the term "Subsidiary" also shall include the following Persons:
Tesla Sezam, a.s., Terosil, a.s. and Leshan-Phoenix Semiconductor Co. Ltd, so
long as the Company directly or indirectly owns more than 50% of the Voting
Stock or economic interests of such Person.

            "Temporary Cash Investments" means any of the following: (a) any
investment in direct obligations of the United States of America or any agency
thereof or obligations Guaranteed by the United States of America or any agency
thereof, (b) investments in time deposit accounts, certificates of deposit and
money market deposits maturing not more than one year from the date of
acquisition thereof, bankers' acceptances with maturities not exceeding one year
and overnight bank deposits, in each case with a bank or trust company that is
organized under the laws of the United States of America, any state thereof
(including any foreign branch of any of the foregoing) or any foreign country
recognized by the United States of America having capital, surplus and undivided
profits aggregating in excess of $250,000,000 (or the foreign currency
equivalent thereof), (c) repurchase obligations with a term of not more than 30
days for underlying securities of the types described in clause (a) above or
clause (e) below entered into with a bank meeting the qualifications described
in clause (b) above, (d) investments in commercial paper, maturing not more than
one year after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United States
of America having at the time as of which any investment therein is made one of
the two highest

ratings obtainable from either Moody's Investors Service, Inc. ("Moody's") or
Standard and Poor's Ratings Service, a division of The McGraw-Hill Companies,
Inc. ("S&P"), (e) investments in securities with maturities of six months or
less from the date of acquisition issued or fully Guaranteed by any state,
commonwealth or territory of the United States of America, or by any foreign
government or any state, commonwealth or territory or by any political
subdivision or taxing authority thereof, and, in each case, having one of the
two highest ratings obtainable from either S&P or Moody's; and (f) investments
in funds investing exclusively in investments of the types described in clauses
(a) and (e) above.

            "TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the Closing Date.

            "TPG Preferred Stock" means the preferred stock issued on September
7, 2001, and additional shares of such series issued thereafter.

            "Trade Payables" means, with respect to any Person, any accounts
payable or any indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person arising in the ordinary course of business
in connection with the acquisition of goods or services.

            "Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.

            "Trust Officer" means any vice president, assistant vice president
or trust officer of the Trustee assigned by the Trustee to administer its
corporate trust matters.

            "Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.

            "Unrestricted Subsidiary" means (a) any Subsidiary of the Company
that at the time of determination shall be designated an Unrestricted Subsidiary
by the Board of Directors in the manner provided below and (b) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
of the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any other Subsidiary of the Company that
is not a Subsidiary of the Subsidiary to be so designated; provided, however,
that either (i) the Subsidiary to be so designated has total Consolidated assets
of $1,000 or less or (ii) if such Subsidiary has Consolidated assets greater
than $1,000, then such designation would be permitted under Section 4.04. The
Board of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, however, that immediately after giving effect to such
designation (a) the Company could Incur $1.00 of additional Indebtedness under
Section 4.03(a) and (b) no Default shall have occurred and be continuing. Any
such designation of a Subsidiary as a Restricted Subsidiary or Unrestricted
Subsidiary by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the resolution of the Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.

            "U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.

            "Voting Stock" of a Person means all classes of Capital Stock or
other interests (including partnership interests) of such Person then
outstanding and normally entitled at the time to vote in the election of
directors, managers or trustees thereof.

            "Wholly-Owned Subsidiary" means a Restricted Subsidiary of the
Company all the Capital Stock of which (other than directors' qualifying shares)
is owned by the Company or another Wholly-Owned Subsidiary.

            SECTION 1.02.     Other Definitions.  The following terms have
the definitions set forth in the Sections listed below.



                                                          Defined in
Term                                                       Section
- ----                                                       -------
                                                     
"Affiliate Transaction"..............................   4.07(a)
"Appendix"...........................................   Preamble
"Bankruptcy Law".....................................   6.01
"Change of Control Offer"............................   4.08(b)
"covenant defeasance option".........................   8.01(b)
"Custodian"..........................................   6.01
"Definitive Notes"...................................   Appendix
"Event of Default"...................................   6.01
"Excess Proceeds"....................................   4.06(b)
"Exchange Offer".....................................   Appendix
"Exchange Notes".....................................   Preamble
"Global Notes".......................................   Appendix
"Guaranteed Obligations".............................   11.01
"incorporated provision".............................   12.01
"Initial Notes"......................................   Preamble
"legal defeasance option"............................   8.01(b)
"Legal Holiday"......................................   12.08
"Liens Securing Note Obligations"....................   10.09(d)
"Liens Securing Other Second-Lien Obligations".......   10.09(d)
"Notice of Default"..................................   6.01
"Offer"..............................................   4.06(b)
"Offer Amount".......................................   4.06(c)(ii)
"Offer Period".......................................   4.06(c)(ii)
"Original Notes".....................................   Preamble
"Notes Custodian"....................................   Appendix




                                                          Defined in
Term                                                       Section
- ----                                                       -------
                                                     
"Paying Agent".......................................   2.04
"Permitted Debt".....................................   4.03(b)
"Private Exchange"...................................   Appendix
"Private Exchange Notes".............................   Appendix
"protected purchaser"................................   2.08
"Purchase Date"......................................   4.06(c)(i)
"Registrar"..........................................   2.04
"Registration Rights Agreement"......................   Appendix
"Required Information"...............................   4.02
"Restricted Payment".................................   4.04(a)
"Successor Company"..................................   5.01(a)


            SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
This Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:

            "Commission" means the Commission.

            "indenture securities" means the Notes and the Note Guarantees.

            "indenture security holder" means a Holder.

            "indenture to be qualified" means this Indenture.

            "indenture trustee" or "institutional trustee" means the Trustee.

            "obligor" on the indenture securities means the Company, the
Guarantors and any other obligor on the indenture securities.

            All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission rule
have the meanings assigned to them by such definitions.

            SECTION 1.04.     Rules of Construction.  Unless the context
otherwise requires:

            (a) a term has the meaning assigned to it;

            (b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;

            (c) "or" is not exclusive;

            (d) "including" means including without limitation;

            (e) words in the singular include the plural and words in the plural
include the singular;

            (f) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof that would
be shown on a balance sheet of the issuer dated such date prepared in accordance
with GAAP; and

            (g) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory
redemption or mandatory repurchase price with respect to such Preferred Stock,
whichever is greater.

            SECTION 1.05. Designated Senior Indebtedness. For purposes of the
indenture that governs the Senior Subordinated Notes, the Notes shall constitute
Designated Senior Indebtedness (as such term is defined in such indenture).


                                   ARTICLE II

                                    The Notes

            SECTION 2.01. Amount of Notes; Issuable in Series. The aggregate
principal amount of Notes which may be authenticated and delivered under this
Indenture is unlimited. The Notes may be issued in one or more series. All Notes
of any one series shall be substantially identical except as to denomination.

            With respect to any Additional Notes issued after the Closing Date
(except for Notes authenticated and delivered upon registration of transfer of,
or in exchange for, or in lieu of, other Notes pursuant to Section 2.07, 2.08,
2.09, 2.10 or 3.06 or the Appendix), there shall be (a) established in or
pursuant to a resolution of the Board of Directors and (b) (i) set forth or
determined in the manner provided in an Officer's Certificate or (ii)
established in one or more indentures supplemental hereto, prior to the issuance
of such Additional Notes:

            (1) whether such Additional Notes shall be issued as part of a new
      or existing series of Notes and the title of such Additional Notes (which
      shall distinguish the Additional Notes of the series from Notes of any
      other series);

            (2) the aggregate principal amount of such Additional Notes which
      may be authenticated and delivered under this Indenture, which may be in
      an unlimited aggregate principal amount;

            (3) the issue price and issuance date of such Additional Notes,
      including the date from which interest on such Additional Notes shall
      accrue; provided, however, that Additional Notes may be issued only if
      they are fungible with the other Notes issued under this Indenture for
      U.S. federal income tax purposes;

            (4) if applicable, that such Additional Notes shall be issuable in
      whole or in part in the form of one or more Global Notes and, in such
      case, the respective depositaries for such Global Notes, the form of any
      legend or legends which shall be borne by such

      Global Notes in addition to or in lieu of those set forth in Exhibit A
      hereto and any circumstances in addition to or in lieu of those set forth
      in Section 2.3 of the Appendix in which any such Global Note may be
      exchanged in whole or in part for Additional Notes registered, or any
      transfer of such Global Note in whole or in part may be registered, in the
      name or names of Persons other than the depositary for such Global Note or
      a nominee thereof; and

            (5) if applicable, that such Additional Notes shall not be issued in
      the form of Initial Notes as set forth in Exhibit A, but shall be issued
      in the form of Exchange Notes as set forth in Exhibit B.

            If any of the terms of any Additional Notes are established by
action taken pursuant to a resolution of the Board of Directors, a copy of an
appropriate record of such action shall be certified by the Secretary or any
Assistant Secretary of the Company and delivered to the Trustee at or prior to
the delivery of the Officers' Certificate or the indenture supplemental hereto
setting forth the terms of the Additional Notes.

            SECTION 2.02. Form and Dating. Provisions relating to the Original
Notes, the Additional Notes, the Private Exchange Notes and the Exchange Notes
are set forth in the Appendix, which is hereby incorporated in and expressly
made a part of this Indenture. The (a) Original Notes and the Trustee's
certificate of authentication, (b) Private Exchange Notes and the Trustee's
certificate of authentication and (c) any Additional Notes (if issued as
Transfer Restricted Notes) and the Trustee's certificate of authentication shall
each be substantially in the form of Exhibit A hereto, which is hereby
incorporated in and expressly made a part of this Indenture. The Exchange Notes
and any Additional Notes issued other than as Transfer Restricted Notes and the
Trustee's certificate of authentication shall each be substantially in the form
of Exhibit B hereto, which is hereby incorporated in and expressly made a part
of this Indenture. The Notes may have notations, legends or endorsements
required by law, stock exchange rule, agreements to which the Issuers or any
Guarantor are subject, if any, or usage (provided that any such notation, legend
or endorsement is in a form acceptable to the Issuers). Each Note shall be dated
the date of its authentication. The Notes shall be issuable only in registered
form without interest coupons and only in denominations of $1,000 and integral
multiples thereof.

            SECTION 2.03. Execution and Authentication. One Officer shall sign
the Notes for each of the Issuers by manual or facsimile signature.

            If an Officer whose signature is on a Note no longer holds that
office at the time the Trustee authenticates the Note, the Note shall be valid
nevertheless.

            A Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Note. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.

            The Trustee shall authenticate and make available for delivery Notes
as set forth in the Appendix.

            The Trustee may appoint an authenticating agent reasonably
acceptable to the Issuers to authenticate the Notes. Any such appointment shall
be evidenced by an instrument signed by a Trust Officer, a copy of which shall
be furnished to the Issuers. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Notes whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as any
Registrar, Paying Agent or agent for service of notices and demands.

            SECTION 2.04. Registrar and Paying Agent. (a) The Issuers shall
maintain an office or agency where Notes may be presented for registration of
transfer or for exchange (the "Registrar") and an office or agency where Notes
may be presented for payment (the "Paying Agent"). The Registrar shall keep a
register of the Notes and of their transfer and exchange. The Issuers may have
one or more co-registrars and one or more additional paying agents. The term
"Paying Agent" includes any additional paying agent, and the term "Registrar"
includes any co-registrars. The Issuers initially appoint the Trustee as (i)
Registrar and Paying Agent in connection with the Notes and (ii) the Notes
Custodian with respect to the Global Notes.

            (b) The Issuers shall enter into an appropriate agency agreement
with any Registrar or Paying Agent not a party to this Indenture, which shall
incorporate the terms of the TIA. The agreement shall implement the provisions
of this Indenture that relate to such agent. The Issuers shall notify the
Trustee of the name and address of any such agent. If the Issuers fail to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.07. The
Issuers or any of their domestically organized Wholly-Owned Subsidiaries may act
as Paying Agent or Registrar.

            (c) The Issuers may remove any Registrar or Paying Agent upon
written notice to such Registrar or Paying Agent and to the Trustee; provided,
however, that no such removal shall become effective until (i) acceptance of an
appointment by a successor as evidenced by an appropriate agreement entered into
by the Issuers and such successor Registrar or Paying Agent, as the case may be,
and delivered to the Trustee or (ii) notification to the Trustee that the
Trustee shall serve as Registrar or Paying Agent until the appointment of a
successor in accordance with clause (i) above. The Registrar or Paying Agent may
resign at any time upon written notice to the Issuers and the Trustee.

            SECTION 2.05. Paying Agent to Hold Money in Trust. Prior to each due
date of the principal of and interest, including Additional Interest, if any, on
any Note, the Issuers shall deposit with the Paying Agent (or if either of the
Issuers or a Subsidiary of the Issuers is acting as Paying Agent, segregate and
hold in trust for the benefit of the Persons entitled thereto) a sum sufficient
to pay such principal and interest when so becoming due. The Issuers shall
require each Paying Agent (other than the Trustee) to agree in writing that the
Paying Agent shall hold in trust for the benefit of Holders or the Trustee all
money held by the Paying Agent for the payment of principal of or interest on
the Notes, shall notify the Trustee of any default by the Issuers in making any
such payment. If either of the Issuers or a Subsidiary of the Issuers acts as
Paying Agent, it shall segregate the money held by it as Paying Agent and hold
it as a separate trust fund. The Issuers at any time may require a Paying Agent
to pay all money held by it to the Trustee and to account for any funds
disbursed by the Paying Agent. Upon complying with this Section, the Paying
Agent shall have no further liability for the money delivered to the Trustee.

            SECTION 2.06. Holder Lists. The Trustee shall preserve in as current
a form as is reasonably practicable the most recent list available to it of the
names and addresses of Holders. If the Trustee is not the Registrar, the Issuers
shall furnish, or cause the Registrar to furnish, to the Trustee, in writing at
least five Business Days before each interest payment date and at such other
times as the Trustee may request in writing, a list in such form and as of such
date as the Trustee may reasonably require of the names and addresses of
Holders.

            SECTION 2.07. Transfer and Exchange. The Notes shall be issued in
registered form and shall be transferable only upon the surrender of a Note for
registration of transfer and in compliance with the Appendix. When a Note is
presented to the Registrar with a request to register a transfer, the Registrar
shall register the transfer as requested if its requirements therefor are met.
When Notes are presented to the Registrar with a request to exchange them for an
equal principal amount of Notes of other denominations, the Registrar shall make
the exchange as requested if the same requirements are met. To permit
registration of transfers and exchanges, the Issuers shall execute and the
Trustee shall authenticate Notes at the Registrar's request. The Issuers may
require payment of a sum sufficient to pay all taxes, assessments or other
governmental charges in connection with any transfer or exchange pursuant to
this Section. The Issuers shall not be required to make and the Registrar need
not register transfers or exchanges of Notes selected for redemption (except, in
the case of Notes to be redeemed in part, the portion thereof not to be
redeemed) or any Notes for a period of 15 days before a selection of Notes to be
redeemed.

            Prior to the due presentation for registration of transfer of any
Note, the Issuers, the Guarantors, the Trustee, the Paying Agent, and the
Registrar may deem and treat the Person in whose name a Note is registered as
the absolute owner of such Note for the purpose of receiving payment of
principal of and (subject to paragraph 2 of the Notes) interest, if any, on such
Note and for all other purposes whatsoever, whether or not such Note is overdue,
and none of the Issuers, any Guarantor, the Trustee, the Paying Agent, or the
Registrar shall be affected by notice to the contrary.

            Any Holder of a Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interest in such Global Note may be
effected only through a book-entry system maintained by (a) the Holder of such
Global Note (or its agent) or (b) any Holder of a beneficial interest in such
Global Note, and that ownership of a beneficial interest in such Global Note
shall be required to be reflected in a book entry.

            All Notes issued upon any transfer or exchange pursuant to the terms
of this Indenture will evidence the same debt and will be entitled to the same
benefits under this Indenture as the Notes surrendered upon such transfer or
exchange.

            SECTION 2.08. Replacement Notes. If a mutilated Note is surrendered
to the Registrar or if the Holder of a Note claims that the Note has been lost,
destroyed or wrongfully taken, the Issuers shall issue and the Trustee shall
authenticate a replacement Note if the requirements of Section 8-405 of the
Uniform Commercial Code are met, such that the Holder (a) satisfies the Issuers
or the Trustee within a reasonable time after he has notice of such loss,
destruction or wrongful taking and the Registrar does not register a transfer
prior to receiving such notification, (b) makes such request to the Issuers or
the Trustee prior to the Note being

acquired by a protected purchaser as defined in Section 8-303 of the Uniform
Commercial Code (a "protected purchaser") and (c) satisfies any other reasonable
requirements of the Trustee. If required by the Trustee or the Issuers, such
Holder shall furnish an indemnity bond sufficient in the judgment of the Trustee
to protect the Issuers, the Trustee, the Paying Agent and the Registrar from any
loss that any of them may suffer if a Note is replaced. The Issuers and the
Trustee may charge the Holder for their expenses in replacing a Note. In the
event any such mutilated, lost, destroyed or wrongfully taken Note has become or
is about to become due and payable, the Issuers in their discretion may pay such
Note instead of issuing a new Note in replacement thereof.

            Every replacement Note is an additional obligation of the Issuers.

            Upon the issuance of any replacement Note under this Section 2.08,
the Issuers may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges that may be imposed in connection
therewith.

            The provisions of this Section 2.08 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, lost, destroyed or wrongfully taken Notes.

            SECTION 2.09. Outstanding Notes. Notes outstanding at any time are
all authenticated by the Trustee except for those canceled by it, those
delivered to it for cancelation and those described in this Section as not
outstanding. Subject to Section 12.06, a Note does not cease to be outstanding
because the Issuers or an Affiliate of the Issuers hold the Note.

            If a Note is replaced pursuant to Section 2.08, it ceases to be
outstanding unless the Trustee and the Issuers receive proof satisfactory to
them that the replaced Note is held by a protected purchaser.

            If the Paying Agent segregates and holds in trust, in accordance
with this Indenture, on a redemption date or maturity date money sufficient to
pay all principal and interest, including Additional Interest, if any, payable
on that date with respect to the Notes (or portions thereof) to be redeemed or
maturing, as the case may be, then on and after that date such Notes (or
portions thereof) cease to be outstanding and interest on them ceases to accrue.

            SECTION 2.10. Temporary Notes. In the event that Definitive Notes
are to be issued under the terms of this Indenture, until such Definitive Notes
are ready for delivery, the Issuers may prepare and the Trustee shall
authenticate temporary Notes. Temporary Notes shall be substantially in the form
of Definitive Notes but may have variations that the Issuers consider
appropriate for temporary Notes. Without unreasonable delay, the Issuers shall
prepare and the Trustee shall authenticate Definitive Notes and deliver them in
exchange for temporary Notes upon surrender of such temporary Notes at the
office or agency of the Issuers, without charge to the Holder.

            SECTION 2.11. Cancelation. The Issuers at any time may deliver Notes
to the Trustee for cancelation. The Registrar and the Paying Agent shall forward
to the Trustee any Notes surrendered to them for registration of transfer,
exchange or payment. The Trustee and no one else shall cancel all Notes
surrendered for registration of transfer, exchange, payment or

cancelation and shall dispose of canceled Notes in accordance with its customary
procedures or deliver canceled Notes to the Issuers pursuant to written
direction by an Officer. The Issuers may not issue new Notes to replace Notes it
has redeemed, paid or delivered to the Trustee for cancelation. The Trustee
shall not authenticate Notes in place of canceled Notes other than pursuant to
the terms of this Indenture.

            SECTION 2.12. Defaulted Interest. If the Issuers default in a
payment of interest on the Notes, the Issuers shall pay the defaulted interest
(plus interest on such defaulted interest to the extent lawful) in any lawful
manner. The Issuers may pay the defaulted interest to the Persons who are
Holders on a subsequent special record date. The Issuers shall fix or cause to
be fixed any such special record date and payment date to the reasonable
satisfaction of the Trustee and shall promptly mail or cause to be mailed to
each Holder a notice that states the special record date, the payment date and
the amount of defaulted interest to be paid.

            SECTION 2.13. CUSIP and "ISIN" Numbers. The Issuers in issuing the
Notes may use "CUSIP" and "ISIN" numbers (if then generally in use) and, if so,
the Trustee shall use "CUSIP" and "ISIN" numbers in notices of redemption as a
convenience to Holders; provided, however, that any such notice may state that
no representation is made as to the correctness of such numbers either as
printed on the Notes or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Notes, and any such redemption shall not be affected by any defect in or
omission of such numbers.

            SECTION 2.14. Computation of Interest. Interest on the Notes shall
be computed on the basis of a 360-day year comprised of twelve 30-day months.



                                  ARTICLE III

                                   Redemption

            SECTION 3.01. Notices to Trustee. If the Issuers elect to redeem
Notes pursuant to paragraph 5 of the Notes, they shall notify the Trustee in
writing of the redemption date and the principal amount of Notes to be redeemed.

            The Issuers shall give each notice to the Trustee provided for in
this Section at least 45 days before the redemption date unless the Trustee
consents to a shorter period. Such notice shall be accompanied by an Officers'
Certificate from the Issuers to the effect that such redemption will comply with
the conditions herein. Any such notice may be canceled at any time prior to
notice of such redemption being mailed to any Holder and shall thereby be void
and of no effect.

            SECTION 3.02. Selection of Notes To Be Redeemed. If fewer than all
the Notes are to be redeemed, the Trustee shall select the Notes to be redeemed
pro rata or by lot or by a method that the Trustee in its sole discretion shall
deem to be fair and appropriate. The Trustee shall make the selection from
outstanding Notes not previously called for redemption. The Trustee may select
for redemption portions of the principal of Notes that have denominations larger
than $1,000. Notes and portions of them the Trustee selects shall be in amounts
of $1,000

or a whole multiple of $1,000. Provisions of this Indenture that apply to Notes
called for redemption also apply to portions of Notes called for redemption. The
Trustee shall notify the Issuers promptly of the Notes or portions of Notes to
be redeemed.

            SECTION 3.03. Notice of Redemption. (a) At least 30 days but not
more than 60 days before a date for redemption of Notes, the Issuers shall mail
a notice of redemption by first-class mail to each Holder of Notes to be
redeemed at such Holder's registered address.

            The notice shall identify the Notes to be redeemed and shall state:

                  (i) the redemption date;

                  (ii) the redemption price and the amount of accrued interest
      to the redemption date;

                  (iii) the name and address of the Paying Agent;

                  (iv) that Notes called for redemption must be surrendered to
      the Paying Agent to collect the redemption price;

                  (v) if fewer than all the outstanding Notes are to be
      redeemed, the certificate numbers and principal amounts of the particular
      Notes to be redeemed;

                  (vi) that, unless the Issuers default in making such
      redemption payment or the Paying Agent is prohibited from making such
      payment pursuant to the terms of this Indenture, interest on Notes (or
      portion thereof) called for redemption ceases to accrue on and after the
      redemption date;

                  (vii) the CUSIP or ISIN number, if any, printed on the Notes
      being redeemed; and

                  (viii) that no representation is made as to the correctness or
      accuracy of the CUSIP or ISIN number, if any, listed in such notice or
      printed on the Notes.

            (b) At the Issuers' request, the Trustee shall give the notice of
redemption in the Issuers' name and at the Issuers' expense. In such event, the
Issuers shall provide the Trustee with the information required by this Section.

            SECTION 3.04. Effect of Notice of Redemption. Once notice of
redemption is mailed, Notes called for redemption become due and payable on the
redemption date and at the redemption price stated in the notice. Upon surrender
to the Paying Agent, such Notes shall be paid at the redemption price stated in
the notice, plus accrued interest, including Additional Interest, if any, to the
redemption date; provided, however, that if the redemption date is after a
regular record date and on or prior to the related interest payment date, the
accrued interest and Additional Interest, if any, shall be payable to the Holder
of the redeemed Notes registered on the relevant record date. Failure to give
notice or any defect in the notice to any Holder shall not affect the validity
of the notice to any other Holder.

            SECTION 3.05. Deposit of Redemption Price. Prior to 10:00 a.m. on
the redemption date, the Issuers shall deposit with the Paying Agent (or, if
either of the Issuers or a Subsidiary of the Issuers is the Paying Agent, shall
segregate and hold in trust) money sufficient to pay the redemption price of and
accrued interest, including Additional Interest, if any, on all Notes to be
redeemed on that date other than Notes or portions of Notes called for
redemption that have been delivered by the Issuers to the Trustee for
cancelation. On and after the redemption date, interest will cease to accrue on
Notes or portions thereof called for redemption so long as the Issuers have
deposited with the Paying Agent funds sufficient to pay the principal of, plus
accrued and unpaid interest, including Additional Interest, if any, on the Notes
to be redeemed, unless the Paying Agent is prohibited from making such payment
pursuant to the terms of this Indenture. The Paying Agent shall promptly return
to the Issuers upon their written request any money deposited with the Paying
Agent by the Issuers that is in excess of the amounts necessary to pay the
redemption price of and accrued interest, including Additional Interest, if any,
on all Notes to be redeemed.

            SECTION 3.06. Notes Redeemed in Part. Upon surrender of a Note that
is redeemed in part, the Issuers shall execute and the Trustee shall
authenticate for the Holder (at the Issuers' expense) a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.



                                   ARTICLE IV

                                    Covenants

            SECTION 4.01. Payment of Notes. The Issuers shall promptly pay the
principal of and interest, including Additional Interest, if any, on the Notes
on the dates and in the manner provided in the Notes and in this Indenture.
Principal and interest, including Additional Interest, if any, shall be
considered paid on the date due if on such date the Trustee or the Paying Agent
holds in accordance with this Indenture money sufficient to pay all principal
and interest then due and the Trustee or the Paying Agent, as the case may be,
is not prohibited from paying such money to the Holders on that date pursuant to
the terms of this Indenture.

            The Issuers shall pay interest on overdue principal at the rate
specified therefor in the Notes, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful. Notwithstanding
anything to the contrary contained in this Indenture, the Issuers

may, to the extent they are required to do so by law, deduct or withhold income
or other similar taxes imposed by the United States of America from principal or
interest payments hereunder.

            SECTION 4.02. Commission Reports. If at any time the Company is no
longer subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company shall provide the Trustee and Holders and prospective
Holders (upon request) within 15 days after it files them with the Commission
(or would be required to file with the Commission), copies of its annual report
and the information, documents and other reports that are specified in Section
13 and 15(d) of the Exchange Act (collectively, the "Required Information");
provided, however, that if any of the Required Information is filed with the
Commission, the Company shall only be required to provide the Trustee copies of
such Required Information. In addition, the Company shall furnish to the
Trustee, promptly upon their becoming available, copies of the annual report to
shareholders and any other information provided by the Company to its public
shareholders generally. The Company also shall comply with the other provisions
of TIA Section 314(a).

            SECTION 4.03. Limitation on Incurrence of Additional Indebtedness.
(a) The Company shall not, and shall not permit any Restricted Subsidiary to,
Incur, directly or indirectly, any Indebtedness; provided, however, that the
Company, SCI LLC or any Guarantor may Incur Indebtedness if on the date of such
Incurrence and after giving effect thereto, the Consolidated Coverage Ratio
would be greater than 2.25:1; provided further, however, that the Company, SCI
LLC or any Guarantor may Incur Indebtedness under any First Lien Credit
Facilities pursuant to this Section 4.03(a) only if on the date of such
Incurrence and after giving effect thereto (i) the Consolidated Coverage Ratio
would be greater than 2.75:1 and (ii) the total aggregate principal amount of
Indebtedness outstanding under all First Lien Credit Facilities and any unused
credit commitment thereunder does not exceed $400 million; provided further,
however, that the foregoing proviso shall not apply to any Incurrence of
Indebtedness under the First Lien Credit Facilities that results from a
consolidation, merger, conveyance, transfer or lease that is permitted by
Article V so long as such Indebtedness is not Incurred in connection with or in
contemplation of such transaction and the other Person involved in such
transaction is not an Affiliate of the Company.

            (b) Notwithstanding Section 4.03(a), the Company and, to the extent
specified, its Restricted Subsidiaries may Incur the following Indebtedness
(collectively, the "Permitted Debt"):

                  (i) Bank Indebtedness of the Company, SCI LLC or any Guarantor
      and any Receivables Facility in an aggregate principal amount not to
      exceed $732.2 million less the aggregate amount of all prepayments of
      principal applied to permanently reduce any such Indebtedness after the
      date of issuance of the Original Notes and the application of the proceeds
      therefrom;

                  (ii) Indebtedness in respect of a Receivables Facility in an
      aggregate principal amount not to exceed the lesser of (1) the amount of
      all prepayments of principal applied to permanently reduce Indebtedness
      under Section 4.03(b)(i) and (2) $100 million;

                  (iii) Indebtedness of the Company owed to and held by any
      Restricted Subsidiary or Indebtedness of a Restricted Subsidiary owed to
      and held by the Company or any other Restricted Subsidiary; provided,
      however, that (1) any subsequent issuance or transfer of any Capital Stock
      or any other event that results in any such Restricted Subsidiary ceasing
      to be a Restricted Subsidiary or any subsequent transfer of any such
      Indebtedness (except to the Company or another Restricted Subsidiary)
      shall be deemed, in each case, to constitute the Incurrence of such
      Indebtedness by the issuer thereof, (2) if the Company or SCI LLC is the
      obligor on such Indebtedness, such Indebtedness is expressly subordinated
      to the prior payment in full in cash of all obligations with respect to
      the Notes and (3) if a Guarantor is the obligor, such Indebtedness is
      subordinated in right of payment to the Note Guarantee of such Guarantor;

                  (iv) Indebtedness represented by the Senior Subordinated
      Notes, the Guarantees of the Senior Subordinated Notes, the Junior
      Subordinated Note, the Notes (not including any Additional Notes), the
      Note Guarantees, the Exchange Notes, Guarantees of the Exchange Notes and
      any replacement Notes issued pursuant to this Indenture;

                  (v) Indebtedness outstanding on the Closing Date (other than
      the Indebtedness described in clause (ii), (iii) or (iv) of this Section
      4.03(b));

                  (vi) Indebtedness consisting of Refinancing Indebtedness
      Incurred in respect of any Indebtedness described in Section 4.03(a) and
      in clauses (iv), (v), (vi), (vii), (x) and (xiii) of this Section 4.03(b);

                  (vii) Indebtedness consisting of Guarantees of (1) any
      Indebtedness permitted under Section 4.03(a), so long as the Person
      providing the Guarantee is a Guarantor or (2) any Indebtedness permitted
      under this Section 4.03(b);

                  (viii) Indebtedness of the Company or any of its Restricted
      Subsidiaries in respect of worker's compensation claims, self-insurance
      obligations, performance bonds, bankers' acceptances, letters of credit,
      surety, appeal or similar bonds and completion guarantees provided by the
      Company and the Restricted Subsidiaries in the ordinary course of their
      business; provided, however, that upon the drawing of letters of credit
      for reimbursement obligations, including with respect to workers'
      compensation claims, or the Incurrence of other Indebtedness with respect
      to reimbursement type obligations regarding workers' compensation claims,
      such obligations are reimbursed within 30 days following such drawing or
      Incurrence;

                  (ix) Indebtedness under Interest Rate Agreements and Currency
      Agreements entered into for bona fide hedging purposes of the Company in
      the ordinary course of business;

                  (x) Purchase Money Indebtedness, mortgage financings and
      Capitalized Lease Obligations, in each case Incurred by the Company, SCI
      LLC or any Restricted Subsidiary for the purpose of financing all or any
      part of the purchase price or cost of construction or improvement of
      property, plant or equipment used in a Permitted

      Business, and in an aggregate principal amount not in excess of $25
      million at any one time outstanding.

                  (xi) Indebtedness of the Company or any of its Restricted
      Subsidiaries arising from the honoring by a bank or other financial
      institution of a check, draft or similar instrument inadvertently (except
      in the case of daylight overdrafts) drawn against insufficient funds in
      the ordinary course of business; provided, however, that such Indebtedness
      is extinguished within five business days of Incurrence;

                  (xii) Indebtedness arising from agreements of the Company or a
      Restricted Subsidiary providing for indemnification, adjustment of
      purchase price or similar obligations, in each case, Incurred or assumed
      in connection with the disposition of any business, assets or Capital
      Stock of the Company or any Restricted Subsidiary; provided that (1) the
      maximum aggregate liability in respect of all such Indebtedness shall at
      no time exceed the gross proceeds actually received by the Company and its
      Subsidiaries in connection with such disposition and (2) such Indebtedness
      is not reflected in the balance sheet of the Company or any Restricted
      Subsidiary (contingent obligations referred to in a footnote to financial
      statements and not otherwise reflected on the balance sheet will not be
      deemed to be reflected on such balance sheet for purposes of this clause
      (2));

                  (xiii) Indebtedness of the Company or any of its Restricted
      Subsidiaries that is Acquired Debt in an aggregate principal amount at any
      time outstanding not to exceed $25 million; and

                  (xiv) Indebtedness (other than Indebtedness permitted to be
      Incurred pursuant to Section 4.03(a) or any other clause of Section
      4.03(b)) of the Company or any Restricted Subsidiary in an aggregate
      principal amount (or accreted value, as applicable) on the date of
      Incurrence that, when added to all other Indebtedness Incurred pursuant to
      this clause (xiv) and then outstanding, shall not exceed $50 million, of
      which up to $25 million may be Incurred by Restricted Subsidiaries that
      are not Guarantors.

            (c) Notwithstanding the foregoing, neither the Company nor SCI LLC
shall Incur any Indebtedness pursuant to Section 4.03(b) above if the proceeds
thereof are used, directly or indirectly, to repay, prepay, redeem, defease,
retire, refund or refinance any Subordinated Indebtedness of such Person in
reliance on Section 4.04(b)(ii) unless such Indebtedness shall be subordinated
to the Notes to at least the same extent as such Subordinated Indebtedness.

            (d) Notwithstanding any other provision of this Section 4.03, the
maximum amount of Indebtedness that the Company or any Restricted Subsidiary may
Incur pursuant to this Section 4.03 shall not be deemed to be exceeded solely as
a result of fluctuations in the exchange rates of currencies. For purposes of
determining compliance with this Section 4.03, (i) Indebtedness Incurred
pursuant to the Credit Agreement prior to or on the Closing Date shall be
treated as Incurred pursuant to Section 4.03(b)(i), (ii) Indebtedness permitted
by this Section 4.03 need not be permitted solely by reference to one provision
permitting such Indebtedness but may be permitted in part by one such provision
and in part by one or more other provisions of this Section 4.03 permitting such
Indebtedness, (iii) in the event that Indebtedness meets the criteria of more
than one of the types of Indebtedness described in this

Section 4.03, the Company, in its sole discretion, shall classify such
Indebtedness and only be required to include the amount of such Indebtedness in
one of such clauses and (iv) the aggregate amount of any Indebtedness Guaranteed
pursuant to Section 4.03(b)(vii) will be included in the calculation of
Indebtedness, but the corresponding amount of the Guarantee will not be so
included.

            (e) Accrual of interest, the accretion of accreted value and the
payment of interest in the form of additional Indebtedness will not be deemed to
be an Incurrence of Indebtedness for purposes of this Section 4.03.

            (f) For purposes of determining compliance with any U.S.
dollar-denominated restriction on the Incurrence of Indebtedness, the U.S.
dollar-equivalent principal amount of Indebtedness denominated in a foreign
currency shall be calculated based on the relevant currency exchange rate in
effect on the date such Indebtedness was Incurred, in the case of term debt, or
first committed, in the case of revolving credit debt; provided that (i) the
U.S. dollar-equivalent principal amount of any such Indebtedness outstanding or
committed on the Closing Date shall be calculated based on the relevant currency
exchange rate in effect on the Issue Date, and (ii) if such Indebtedness is
Incurred to Refinance other Indebtedness denominated in a foreign currency, and
such Refinancing would cause the applicable U.S. dollar-denominated restriction
to be exceeded if calculated at the relevant currency exchange rate in effect on
the date of such Refinancing, such U.S. dollar-denominated restriction shall be
deemed not to have been exceeded so long as the principal amount of such
Refinancing Indebtedness does not exceed the principal amount of such
Indebtedness being Refinanced. The principal amount of any Indebtedness Incurred
to Refinance other Indebtedness, if Incurred in a different currency from the
Indebtedness being Refinanced, shall be calculated based on the currency
exchange rate applicable to the currencies in which such respective Indebtedness
is denominated that is in effect on the date of such Refinancing.

            (g) The Company will not, and will not permit SCI LLC to, make any
amendment to the Senior Subordinated Notes or the Junior Subordinated Note which
(i) makes either the Senior Subordinated Notes or the Junior Subordinated Note
subordinated in right of payment to the Notes to a lesser extent than on the
Closing Date or (ii) results or could result in any cash payment of principal,
premium or interest in respect of either the Senior Subordinated Notes or the
Junior Subordinated Note becoming due at any time prior to the date such payment
would have been required in accordance with the terms of each of the Senior
Subordinated Notes or the Junior Subordinated Note as in effect on the Closing
Date.

            SECTION 4.04. Limitation on Restricted Payments. (a) The Company
shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to (i) declare or pay any dividend or make any distribution on or in
respect of the Company's or any Restricted Subsidiary's Capital Stock (including
any payment in connection with any merger or consolidation involving the
Company) or similar payment to the direct or indirect holders of its Capital
Stock except dividends or distributions payable solely in its Capital Stock
(other than Disqualified Stock) and except dividends or distributions payable to
the Company or another Restricted Subsidiary (and, if such Restricted Subsidiary
has shareholders other than the Company or other Restricted Subsidiaries, to its
other shareholders on a pro rata basis), (ii) purchase, redeem, retire or
otherwise acquire for value any Capital Stock of the Company or

any Restricted Subsidiary held by Persons other than the Company or another
Restricted Subsidiary, other than the making of a Permitted Investment, (iii)
purchase, repurchase, redeem, defease or otherwise acquire or retire for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment any Subordinated Indebtedness (other than the purchase, repurchase or
other acquisition of Subordinated Indebtedness purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition), (iv) make any
Investment (other than a Permitted Investment) in any Person or (v) make or pay
any interest or other distribution on the Junior Subordinated Note except
interest or other distributions payable solely in Capital Stock (other than
Disqualified Stock) or additional Junior Subordinated Note (any such dividend,
distribution, purchase, redemption, repurchase, defeasance, other acquisition,
retirement or Investment described in and not excluded from clauses (i) through
(v) being herein referred to as a "Restricted Payment"), if at the time the
Company or such Restricted Subsidiary makes such Restricted Payment:

            (1) a Default shall have occurred and be continuing (or would result
      therefrom);

            (2) the Company could not Incur at least $1.00 of additional
      Indebtedness under Section 4.03(a); or

            (3) the aggregate amount of such Restricted Payment and all other
      Restricted Payments (the amount so expended, if other than in cash, to be
      determined in good faith by the Board of Directors, whose determination
      shall be conclusive and evidenced by a resolution of the Board of
      Directors) declared or made subsequent to the Closing Date would exceed
      the sum of, without duplication:

            (A) 50% of the Consolidated Net Income accrued during the period
      (treated as one accounting period) from the beginning of the fiscal
      quarter immediately following the fiscal quarter during which the Closing
      Date occurs to the end of the most recent fiscal quarter for which
      internal financial statements are available prior to the date of such
      Restricted Payment (or, in case such Consolidated Net Income shall be a
      deficit, minus 100% of such deficit);

            (B) the aggregate Qualified Proceeds received by the Company from
      the issue or sale of its Capital Stock (other than Disqualified Stock)
      subsequent to the Closing Date (other than an issuance or sale to (x) a
      Subsidiary of the Company or (y) an employee stock ownership plan or other
      trust established by the Company or any of its Subsidiaries for the
      benefit of its employees to the extent that the purchase by such plan or
      trust is financed by Indebtedness of such plan or trust owed to the
      Company or any of its Subsidiaries or Indebtedness Guaranteed by the
      Company or any of its Subsidiaries);

            (C) 100% of the aggregate Qualified Proceeds received by the Company
      from the issuance or sale of debt securities of the Company or
      Disqualified Stock of the Company that after the Closing Date have been
      converted into or exchanged for Capital Stock (other than Disqualified
      Stock) of the Company (other than an issuance or sale to a Subsidiary of
      the Company or an employee stock ownership plan or other trust established
      by the Company or any of its Subsidiaries for the benefit of its employees
      to

      the extent that the purchase by such plan or trust is financed by
      Indebtedness of such plan or trust owed to the Company or any of its
      Subsidiaries or Indebtedness Guaranteed by the Company or any of its
      Subsidiaries (less the amount of any cash or the Fair Market Value of any
      property distributed by the Company or any Restricted Subsidiary upon such
      conversion or exchange); provided, however, that no amount will be
      included in this clause (C) to the extent it is already included in
      Consolidated Net Income;

            (D) in the case of any Investment by the Company or any Restricted
      Subsidiary (other than any Permitted Investment) made after the Closing
      Date, the disposition of such Investment by, or repayment of such
      Investment to, the Company or a Restricted Subsidiary or the receipt by
      the Company or any Restricted Subsidiary of any dividends or distributions
      from such Investment, an aggregate amount equal to the lesser of (x) the
      aggregate amount of such Investment treated as a Restricted Payment
      pursuant to clause (iv) above and (y) the aggregate amount in cash
      received by the Company or any Restricted Subsidiary upon such
      disposition, repayment, dividend or distribution; provided, however, that
      no amount will be included in this clause (iv) to the extent it is already
      included in Consolidated Net Income;

            (E) in the event the Company or any Restricted Subsidiary makes any
      Investment in a Person that, as a result of or in connection with such
      Investment, becomes a Restricted Subsidiary, an amount equal to the
      Company's or any Restricted Subsidiary's existing Investment in such
      Person that was previously treated as a Restricted Payment pursuant to
      clause (iv) above; provided, however, that such Person is engaged in a
      Permitted Business; and

            (F) the amount equal to the sum of (x) the net reduction in
      Investments in Unrestricted Subsidiaries resulting from payments of
      dividends, repayments of the principal of loans or advances or other
      transfers of assets to the Company or any Restricted Subsidiary from
      Unrestricted Subsidiaries and (y) the portion (proportionate to the
      Company's equity interest in such Subsidiary) of the Fair Market Value of
      the net assets of an Unrestricted Subsidiary at the time such Unrestricted
      Subsidiary is redesignated a Restricted Subsidiary; provided, however,
      that the foregoing sum shall not exceed, in the case of any Unrestricted
      Subsidiary, the amount of Investments previously made by the Company or
      any Restricted Subsidiary in such Unrestricted Subsidiary and treated as a
      Restricted Payment pursuant to clause (iv) above.

            (b) The provisions of Section 4.04(a) shall not prohibit:

                  (i) any purchase, repurchase, redemption or other acquisition
      or retirement for value of Capital Stock of the Company or any Restricted
      Subsidiary made by exchange for, or out of the proceeds of the
      substantially concurrent sale of, other Capital Stock of the Company
      (other than Disqualified Stock and other than Capital Stock issued or sold
      to a Subsidiary of the Company or an employee stock ownership plan or
      other trust established by the Company or any of its Subsidiaries for the
      benefit of its employees to the extent that the purchase by such plan or
      trust is financed by Indebtedness of such plan or trust owed to the
      Company or any of its Subsidiaries or Indebtedness Guaranteed by the
      Company or any of its Subsidiaries); provided, however, that (1) such
      Restricted

      Payment shall be excluded from the calculation of the amount of Restricted
      Payments and (2) the Net Cash Proceeds from such sale applied in the
      manner set forth in this clause (i) shall be excluded from the calculation
      of amounts under Section 4.04(a)(3)(B);

                  (ii) any purchase, repurchase, redemption, defeasance or other
      acquisition or retirement for value of Subordinated Indebtedness of the
      Company or any Restricted Subsidiary, other than the Junior Subordinated
      Note, made by exchange for, or out of the proceeds of the substantially
      concurrent sale of, Indebtedness that is permitted to be Incurred pursuant
      to Section 4.03(b); provided, however, that such purchase, repurchase,
      redemption, defeasance or other acquisition or retirement for value shall
      be excluded from the calculation of the amount of Restricted Payments;

                  (iii) the repurchase, redemption or other acquisition or
      retirement for value of Disqualified Stock of the Company or any
      Restricted Subsidiary made by exchange for, or out of the proceeds of the
      substantially concurrent sale of, Disqualified Stock of the Company or any
      Restricted Subsidiary that is permitted to be Incurred pursuant to Section
      4.03; provided, however, that such repurchase, redemption or other
      acquisition or retirement for value will be excluded from the calculation
      of the amount of Restricted Payments;

                  (iv) any purchase or redemption of Subordinated Indebtedness
      from Net Available Cash to the extent permitted by Section 4.06; provided,
      however, that such purchase or redemption shall be excluded from the
      calculation of the amount of Restricted Payments;

                  (v) upon the occurrence of a Change of Control and within 60
      days after the completion of the offer to repurchase the Notes pursuant to
      Section 4.08 (including the purchase of the Notes tendered), any purchase
      or redemption of Subordinated Indebtedness required pursuant to the terms
      thereof as a result of such Change of Control at a purchase or redemption
      price not to exceed the outstanding principal amount thereof, plus any
      accrued and unpaid interest; provided, however, that (1) at the time of
      such purchase, no Default or Event of Default shall have occurred and be
      continuing (or would result therefrom), (2) the Company would be able to
      Incur at least $1.00 of additional Indebtedness under Section 4.03 (a)
      above after giving pro forma effect to such Restricted Payment and (3)
      such purchase or redemption will be included in the calculation of the
      amount of Restricted Payments;

                  (vi) dividends paid within 60 days after the date of
      declaration thereof if at such date of declaration such dividend would
      have complied with Section 4.04(a); provided, however, that such dividend
      shall be included in the calculation of the amount of Restricted Payments
      (without duplication for declaration);

                  (vii) the repurchase, redemption or other acquisition or
      retirement for value of Capital Stock of the Company or any of its
      Subsidiaries from employees, former employees, directors or former
      directors of the Company or any of its Subsidiaries (or permitted
      transferees of such employees, former employees, directors or former
      directors), pursuant to the terms of the agreements (including employment
      agreements) or

      plans (or amendments thereto) approved by the Board of Directors under
      which such individuals purchase or sell, or are granted the option to
      purchase or sell, shares of such Capital Stock; provided, however, that
      the aggregate amount of such repurchases shall not exceed $2 million in
      any calendar year; provided further, however, that such repurchases,
      redemptions and other acquisitions or retirements for value shall be
      excluded from the calculation of the amount of Restricted Payments;

                  (viii) the declaration and payment of any dividend (or the
      making of any similar distribution or redemption) to the holders of any
      class or series of Disqualified Stock of the Company, or SCI LLC or a
      Guarantor issued or Incurred after the Closing Date in accordance with
      Section 4.03; provided that no Default or Event of Default shall have
      occurred and be continuing immediately after making such declaration or
      payment; and provided further, that such payment will be excluded from the
      calculation of the amount of Restricted Payments;

                (ix) cash payments in lieu of fractional shares issuable as
      dividends on Preferred Stock of the Company or any of its Restricted
      Subsidiaries; provided that such cash payments shall not exceed $20,000 in
      the aggregate in any twelve-month period and no Default or Event of
      Default shall have occurred and be continuing immediately after such cash
      payments; and provided further, that such cash payments will be excluded
      from the calculation of the amount of Restricted Payments; or

                  (x) other Restricted Payments in an aggregate amount not to
      exceed $20 million.

            SECTION 4.05. Limitation on Restrictions on Distributions from
Restricted Subsidiaries. The Company shall not, and shall not permit any
Restricted Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (a) pay dividends or make any other distributions on
its Capital Stock or pay any Indebtedness or other obligations owed to the
Company or any of its Restricted Subsidiaries, (b) make any loans or advances to
the Company or any of its Restricted Subsidiaries or (c) transfer any of its
property or assets to the Company or any of its Restricted Subsidiaries, except:

                  (i) any encumbrance or restriction pursuant to applicable law,
      regulation, order or an agreement in effect at or entered into on the
      Closing Date;

                  (ii) any encumbrance or restriction with respect to a
      Restricted Subsidiary pursuant to an agreement relating to any
      Indebtedness Incurred by such Restricted Subsidiary prior to the date on
      which such Restricted Subsidiary was acquired by the Company (other than
      Indebtedness Incurred as consideration in, in contemplation of, or to
      provide all or any portion of the funds or credit support utilized to
      consummate the transaction or series of related transactions pursuant to
      which such Restricted Subsidiary became a Restricted Subsidiary or was
      otherwise acquired by the Company) and outstanding on such date;

                  (iii) any encumbrance or restriction pursuant to an agreement
      effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
      referred to in clause (c)

      (i) or (c) (ii) of this Section 4.05 or this clause (iii) or contained in
      any amendment to an agreement referred to in clause (c)(i) or (c)(ii) of
      this Section 4.05 or this clause (iii); provided, however, that the
      encumbrances and restrictions contained in any agreement or amendment
      relating to such Refinancing are no less favorable to the Holders than the
      encumbrances and restrictions contained in the agreements relating to the
      Indebtedness so Refinanced;

                  (iv) any encumbrance or restriction (1) that restricts in a
      customary manner the subletting, assignment or transfer of any property or
      asset that is subject to a lease, license or similar contract or (2) that
      is contained in security agreements securing Indebtedness of a Restricted
      Subsidiary to the extent such encumbrance or restriction restricts the
      transfer of the property subject to such security agreements;

                  (v) with respect to a Restricted Subsidiary, any restriction
      imposed pursuant to an agreement entered into for the sale or disposition
      of all or substantially all the Capital Stock or assets of such Restricted
      Subsidiary pending the closing of such sale or disposition;

                  (vi) contracts for the sale of assets containing customary
      restrictions with respect to a Subsidiary pursuant to an agreement that
      has been entered into for the sale or disposition of all or substantially
      all of the Capital Stock or assets of such Subsidiary;

                  (vii) agreements for the sale of assets containing customary
      restrictions with respect to such assets;

                  (viii) restrictions relating to the common stock of
      Unrestricted Subsidiaries or Persons other than Subsidiaries;

                  (ix) encumbrances or restrictions existing under or by reason
      of provisions with respect to the disposition or distribution of assets or
      property in joint venture agreements and other similar agreements entered
      into in the ordinary course of business;

                  (x) encumbrances or restrictions existing under or by reason
      of restrictions on cash or other deposits or net worth imposed by
      customers under contracts entered into in the ordinary course of business;
      and

                  (xi) any encumbrance or restriction existing under or by
      reason of a Receivables Facility or other contractual requirements of a
      Receivables Facility permitted pursuant to Section 4.03; provided that
      such restrictions apply only to such Receivables Facility.

            SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock.
(a) The Company shall not, and shall not permit any Restricted Subsidiary to,
make any Asset Disposition unless (i) the Company or such Restricted Subsidiary,
as the case may be, receives consideration (including by way of relief from, or
by any other Person assuming sole responsibility for, any liabilities,
contingent or otherwise) at the time of such Asset Disposition at least equal to
the Fair Market Value of the shares and assets subject to such Asset Disposition
and (ii) at least 80% of the consideration thereof received by the Company or
such Restricted Subsidiary is in the form of cash, Temporary Cash Investments or
other Qualified Proceeds

(provided that the aggregate Fair Market Value of Qualified Proceeds (other than
cash and Temporary Cash Investments) shall not exceed $10 million since the
Closing Date).

            Within 365 days after the receipt of any Net Available Cash from
such Asset Disposition, the Company or such Restricted Subsidiary may apply an
amount equal to 100% of the Net Available Cash from such Asset Disposition (w)
to repay or cash collateralize any Credit Agreement Obligations, to repay
Indebtedness of the Company or any of its Restricted Subsidiaries secured by
assets not in the Collateral, or to repay any Indebtedness of any Restricted
Subsidiary that is not a Guarantor; (x) to acquire all or substantially all of
the assets of another Permitted Business; (y) to make a capital expenditure; or
(z) to acquire other long-term assets that are used or useful in the Permitted
Business; provided, however, that in connection with any prepayment, repayment
or purchase of Indebtedness pursuant to clause (x) above, the Company or such
Restricted Subsidiary shall retire such Indebtedness and shall cause the related
loan commitment (if any) to be permanently reduced in an amount equal to the
principal amount so prepaid, repaid or purchased.

            For the purposes of clause (a)(ii) of this Section 4.06 only, the
following are deemed to be cash: (A) the assumption of any liabilities (as shown
on the Company's or a Restricted Subsidiary's most recent balance sheet) of the
Company or any such Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any Note
Guarantee) pursuant to a customary novation agreement that releases the Company
or such Restricted Subsidiary from further liability in connection with such
Asset Disposition and (B) any securities or other obligations received by the
Company or any Restricted Subsidiary from the transferee that are converted
within 90 days of receipt by the Company or such Restricted Subsidiary into
cash.

            Pending the final application of any Net Available Cash, the Company
or such Restricted Subsidiary may temporarily reduce revolving credit borrowings
or otherwise invest the Net Available Cash in any manner that is not prohibited
by this Indenture.

            (b) Any Net Available Cash from Asset Dispositions that are not
applied or invested as provided in the preceding paragraphs of this Section 4.06
shall constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $15.0 million, the Issuers shall make an Asset Disposition offer (the
"Offer") to all Holders of Notes and all holders of other Indebtedness that is
pari passu in right of payment with the Notes containing provisions similar to
those set forth in Section 4.06(c) with respect to offers to purchase or redeem
with the proceeds of sales of assets to purchase the maximum principal amount of
Notes and such other pari passu Indebtedness that may be purchased out of the
Excess Proceeds. The offer price in any Offer shall be equal to 100% of
principal amount plus accrued and unpaid interest, including Additional
Interest, if any, to the date of purchase, and shall be payable in cash. If any
Excess Proceeds remain after consummation of an Offer, the Issuers may use those
Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If
the aggregate principal amount of Notes and other pari passu Indebtedness
tendered into such Offer exceeds the amount of Excess Proceeds, the Trustee
shall select the Notes and such other pari passu Indebtedness to be purchased on
a pro rata basis; provided, however, that the Issuers shall not be obligated to
purchase Notes in denominations other than integral multiples of $1,000
principal amount at maturity. Upon completion of each Offer, the amount of
Excess Proceeds shall be reset at zero.

            (c) (i) Promptly, and in any event within 10 days after the Company
becomes obligated to make an Offer, the Company shall be obligated to deliver to
the Trustee and send, by first-class mail to each Holder, a written notice
stating that the Holder may elect to have his Notes purchased by the Company
either in whole or in part (subject to prorating as hereinafter described in the
event the Offer is oversubscribed) in integral multiples of $1,000 of principal
amount, at the applicable purchase price. The notice shall specify a purchase
date not less than 30 days nor more than 60 days after the date of such notice
(the "Purchase Date") and shall contain such information concerning the business
of the Company which the Company in good faith believes will enable such Holders
to make an informed decision (which at a minimum shall include (1) the most
recently filed Annual Report on Form 10-K (including audited consolidated
financial statements) of the Company, the most recent subsequently filed
Quarterly Report on Form 10-Q and any Current Report on Form 8-K of the Company
filed subsequent to such Quarterly Report, other than Current Reports describing
Asset Dispositions otherwise described in the offering materials (or
corresponding successor reports), (2) a description of material developments in
the Company's business subsequent to the date of the latest of such reports, and
(3) if material, appropriate pro forma financial information) and all
instructions and materials necessary to tender Notes pursuant to the Offer,
together with the address referred to in clause (iii).

            (ii) Not later than the date upon which written notice of an Offer
is delivered to the Trustee as provided above, the Company shall deliver to the
Trustee an Officers' Certificate as to (1) the amount of the Offer (the "Offer
Amount"), (2) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (3) the compliance
of such allocation with the provisions of Section 4.06(a) and (b). Not later
than one Business Day before the Purchase Date, the Company shall also
irrevocably deposit with the Trustee or with a paying agent (or, if the Company
is acting as its own paying agent, segregate and hold in trust) an amount equal
to the Offer Amount with written instructions for investment in Temporary Cash
Investments and to be held for payment in accordance with the provisions of this
Section 4.06. Upon the expiration of the period for which the Offer remains open
(the "Offer Period"), the Company shall deliver to the Trustee for cancelation
the Notes or portions thereof that have been properly tendered to and are to be
accepted by the Company. The Trustee (or the Paying Agent, if not the Trustee)
shall, on the date of purchase, mail or deliver payment to each tendering Holder
in the amount of the purchase price. In the event that the Offer Amount
delivered by the Company to the Trustee is greater than the purchase price of
the Notes (and such other pari passu Indebtedness) tendered, the Trustee shall
deliver the excess to the Company immediately after the expiration of the Offer
Period for application in accordance with this Section 4.06.

            (iii) Holders electing to have a Note purchased shall be required to
surrender the Note, with an appropriate form duly completed, to the Company at
the address specified in the notice at least three Business Days prior to the
Purchase Date. Holders shall be entitled to withdraw their election if the
Trustee or the Company receives not later than one Business Day prior to the
Purchase Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Note or Notes which were
delivered by the Holder for purchase and a statement that such Holder is
withdrawing his election to have such Note or Notes purchased. If at the
expiration of the Offer Period the aggregate principal amount

of Notes and any such other pari passu Indebtedness included in the Offer
surrendered by holders thereof exceeds the Offer Amount, the Company shall
select the Notes and such other pari passu Indebtedness to be purchased on a pro
rata basis (with such adjustments as may be deemed appropriate by the Company so
that only Notes and such other pari passu Indebtedness in denominations of
$1,000, or integral multiples thereof, shall be purchased). Holders whose Notes
are purchased only in part will be issued new Notes equal in principal amount to
the unpurchased portion of the Notes surrendered

            (iv) At the time the Company delivers Notes to the Trustee which are
to be accepted for purchase, the Company shall also deliver an Officers'
Certificate stating that such Notes are to be accepted by the Company pursuant
to and in accordance with the terms of this Section. A Note shall be deemed to
have been accepted for purchase at the time the Trustee, directly or through an
agent, mails or delivers payment therefor to the surrendering Holder.

            (v) The Issuers shall comply in all material respects with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent those laws and regulations are
applicable in connection with each repurchase of Notes pursuant to an Offer. To
the extent that the provisions of any securities laws or regulations conflict
with the Asset Disposition provisions of this Indenture, the Issuers shall
comply in all material respects with the applicable securities laws and
regulations and shall not be deemed to have breached their obligations under the
Asset Disposition provisions of this Indenture by virtue of such conflict.

            SECTION 4.07. Limitation on Transactions with Affiliates. (a) The
Company shall not, and shall not permit any Restricted Subsidiary to, directly
or indirectly, enter into or conduct any transaction (including, the purchase,
sale, lease or exchange of any property or the rendering of any service) with
any Affiliate of the Company (an "Affiliate Transaction") unless such Affiliate
Transaction is on terms (i) that are no less favorable (other than in immaterial
respects) to the Company or such Restricted Subsidiary, as the case may be, than
those that could be obtained at the time of such transaction in comparable
arm's-length dealings with a Person who is not such an Affiliate, (ii) that, in
the event that such Affiliate Transaction involves an aggregate amount in excess
of $5 million, (1) are set forth in writing and (2) have been approved by a
majority of the members of the Board of Directors having no personal stake in
such Affiliate Transaction and (iii) that, in the event that such Affiliate
Transaction involves an amount in excess of $15 million, have been determined by
a nationally recognized appraisal or investment banking firm to be fair, from a
financial standpoint, to the Company and its Restricted Subsidiaries.

            (b) The provisions of Section 4.07(a) shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant to Section 4.04, (ii) any
issuance of securities, or other payments, awards or grants in cash, securities
or otherwise pursuant to, or the funding of, employment arrangements, stock
options and stock ownership plans approved by the Board of Directors, (iii) the
grant of stock options or similar rights to officers, employees, consultants and
directors of the Company pursuant to plans approved by the Board of Directors
and the payment of amounts or the issuance of securities pursuant thereto, (iv)
loans or advances to employees consistent with prudent business practice, but in
any event not to exceed $5 million in the aggregate outstanding at any one time,
(v) the payment of reasonable fees, compensation or

employee benefit arrangements to and any indemnity provided for the benefit of
directors, officers, consultants or employees of the Company or any Restricted
Subsidiary in the ordinary course of business, (vi) any transaction between the
Company and a Restricted Subsidiary or between Restricted Subsidiaries, (vii)
the payment of management, consulting and advisory fees to TPG Partners II, L.P.
or its Affiliates made pursuant to any financial advisory, financing,
underwriting or placement agreement or in respect of other investment banking
activities, including in connection with acquisitions or divestitures, in an
amount not to exceed $2 million in any calendar year and any related
out-of-pocket expenses, (viii) transactions with customers, suppliers,
contractors, joint venture partners or purchasers or sellers of goods or
services, in each case which are in the ordinary course of business (including
pursuant to joint venture agreements) and otherwise in compliance with the terms
of this Indenture, and which are fair to the Company or its Restricted
Subsidiaries, as applicable, in the reasonable determination of the Board of
Directors or the senior management of the Company or its Restricted
Subsidiaries, as applicable or are on terms at least as favorable as might
reasonably have been obtained at such time from an unaffiliated party, or (ix)
any transaction effected in connection with a Receivables Facility permitted
under Section 4.03.

            SECTION 4.08. Repurchase of Notes at the Option of the Holder Upon a
Change of Control. (a) Upon a Change of Control, each Holder shall have the
right to require that the Issuers repurchase all or any part (equal to $1,000 or
an integral multiple thereof) of such Holder's Notes at a purchase price in cash
equal to 101% of the principal amount thereof plus accrued and unpaid interest,
including Additional Interest, thereon, if any, to the date of repurchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date) in accordance with
the terms contemplated in Section 4.08(b); provided, however, that
notwithstanding the occurrence of a Change of Control, the Issuers shall not be
obligated to purchase the Notes pursuant to this Section 4.08 in the event that
they have exercised their right to redeem all the Notes under paragraph 5 of the
Notes. In the event that at the time of such Change of Control the terms of the
Bank Indebtedness restrict or prohibit the repurchase of Notes pursuant to this
Section 4.08, then prior to the mailing of the notice to Holders provided for in
Section 4.08(b) below but in any event within 30 days following any Change of
Control, SCI LLC shall (i) repay in full all Bank Indebtedness or (ii) obtain
the requisite consent under the agreements governing the Bank Indebtedness to
permit the repurchase of the Notes as provided for in Section 4.08(b).

            (b) Within 30 days following any Change of Control (except as
provided in the proviso to the first sentence of Section 4.08(a)), the Issuers
shall mail a notice to each Holder with a copy to the Trustee (the "Change of
Control Offer") stating:

                  (i) that a Change of Control has occurred and that such Holder
      has the right to require the Issuers to purchase all or a portion (equal
      to $1,000 or an integral multiple thereof) of such Holder's Notes at a
      purchase price in cash equal to 101% of the principal amount thereof, plus
      accrued and unpaid interest, including Additional Interest, if any, to the
      date of repurchase (subject to the right of Holders of record on the
      relevant record date to receive interest due on the relevant interest
      payment date);

                  (ii) the circumstances and relevant facts and financial
      information regarding such Change of Control;

                  (iii) the repurchase date (which shall be no earlier than 30
      days (or such shorter time period as may be permitted under applicable
      laws, rules and regulations) nor later than 60 days from the date such
      notice is mailed); and

                  (iv) the instructions determined by the Issuers, consistent
      with this Section 4.08, that a Holder must follow in order to have its
      Notes purchased.

            (c) Holders electing to have a Note purchased shall be required to
surrender the Note, with an appropriate form duly completed, to the Company at
the address specified in the notice at least three Business Days prior to the
purchase date. Holders shall be entitled to withdraw their election if the
Trustee or the Company receives not later than one Business Day prior to the
purchase date a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Note which was delivered for
purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Note purchased. Holders whose Notes are purchased only in
part will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered.

            (d) On the purchase date, all Notes purchased by the Company under
this Section 4.08 shall be delivered to the Trustee for cancelation, and the
Company shall pay the purchase price plus accrued and unpaid interest, including
Additional Interest, if any, to the Holders entitled thereto.

            (e) Notwithstanding the foregoing provisions of this Section 4.08,
the Issuers will not be required to make a Change of Control Offer upon a Change
of Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in Section
4.08(b) applicable to a Change of Control Offer made by the Issuers and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.

            (f) In connection with any Change of Control Offer, the Company
shall deliver to the Trustee an Officers' Certificate stating that all
conditions precedent contained herein to the right of the Company to make such
offer have been complied with.

            (g) The Issuers shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
Section. To the extent that the provisions of any securities laws or regulations
conflict with provisions of this Indenture relating to Change of Control Offers,
the Issuers shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under this Section by
virtue thereof.

            SECTION 4.09. Compliance Certificate. The Issuers shall deliver to
the Trustee within 120 days after the end of each fiscal year of the Issuers an
Officers' Certificate stating that in the course of the performance by the
signers of their duties as Officers of the Issuers they would normally have
knowledge of any Default and whether or not the signers know of any Default that
occurred during such period. If they do, the certificate shall describe the
Default, its status and what action the Issuers are taking or propose to take
with respect thereto. The Issuers also shall comply with Section 314(a)(4) of
the TIA.

            SECTION 4.10. Further Instruments and Acts. Upon request of the
Trustee, the Issuers shall execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.

            SECTION 4.11. Additional Note Guarantees and Liens. If (x) any
Domestic Subsidiary shall, after the date hereof, become a guarantor (i) of any
Credit Agreement Obligations or (ii) so long as the Senior Subordinated Notes
are outstanding, the Senior Subordinated Notes, or (y) any Foreign Subsidiary
shall, after the date hereof, become a guarantor of any of the Indebtedness of
the Company or any Domestic Subsidiary, and the aggregate principal amount of
Indebtedness of the Company and its Domestic Subsidiaries guaranteed by all
Foreign Subsidiaries exceeds $25 million, then the Issuers shall, at the time,
cause such Subsidiary to (a) execute a Guarantee of the obligations of the
Issuers under the Notes substantially in the form set forth in Exhibit C hereto,
and (b) if such Subsidiary grants any Lien upon any of its assets and property
as security for any Credit Agreement Obligations, execute any and all further
Security Documents, financing statements, agreements and instruments, upon
substantially the same terms as the security documents in respect of such Credit
Agreement Obligations, but subject to the Intercreditor Agreement, that grants
the Trustee a second-priority Lien upon such assets and property for the benefit
of the Holders and take all such actions (including the filing and recording of
financing statements, fixture filings, Mortgages and other documents) that may
be required under any applicable law, or which the Trustee may reasonably
request to create such second-priority Lien, all at the expense of the Issuers,
including all reasonable fees and expenses of counsel incurred by the Trustee in
connection therewith; provided that such Subsidiary shall not be required to
grant a second-priority Lien upon such property for the benefit of the Holders
if (i) a second-priority security interest in such property cannot be granted or
perfected under applicable law or (ii) such grant requires the consent of any
third party, which consent such Subsidiary is unable to obtain using
commercially reasonable efforts, and (c) deliver to the Trustee an Opinion of
Counsel, reasonably satisfactory to the Trustee, that such Guarantee and any
such Security Documents, as the case may be, are valid, binding and enforceable
obligations of such Subsidiary, subject to customary exceptions for bankruptcy,
fraudulent conveyance and equitable principles.

            From and after the date of this Indenture, if any Issuer or any
Guarantor creates any additional security interest upon any of its assets and
property to secure any Credit Agreement Obligations or any Other Second-Lien
Obligations (other than security interests granted solely to secure Hedging
Obligations, Commodity Hedge Obligations or Cash Management Obligations), it
shall concurrently grant a second-priority security interest (subject to
Permitted Liens) upon such assets and property as security for the Notes and
execute any and all further Security Documents, financing statements, agreements
and instruments, but subject to the Intercreditor Agreement, that grant the
Trustee a second-priority Lien upon such assets and property for the benefit of
the Holders and take all such actions (including the filing and recording of
financing statements, fixture filings, Mortgages and other documents) that may
be required under any applicable law, or which the Trustee may reasonably
request to create such second-priority Lien, all at the expense of the Issuers,
including all reasonable fees and expenses of counsel incurred by the Trustee in
connection therewith; provided that such Issuer or Guarantor shall not be
required to grant a second-priority Lien upon such property as security for the
Notes if (i) a second-priority security interest in such property cannot be
granted or perfected

under applicable law or (ii) such grant requires the consent of any third party,
which consent such Issuer or Guarantor is unable to obtain using commercially
reasonable efforts.

            In addition, the Issuers shall, with respect to each parcel of real
property in the United States owned by any Issuer or Guarantor that secures the
Credit Agreement Obligations, use commercially reasonable efforts to deliver to
the Collateral Agent, for the benefit of or addressed to the Trustee or the
Collateral Agent, as applicable, the following:

            (a) a fully executed, acknowledged, and recorded Mortgage similar to
      that provided for the benefit of the Credit Agent except that such
      mortgage or deed of trust shall be subject to the terms of the
      Intercreditor Agreement;

            (b) an opinion of local counsel in a form substantially similar to
      the opinion provided for the benefit of the Credit Agent, or otherwise
      reasonably acceptable to the Initial Purchasers and the Trustee;

            (c) a fully-paid title insurance policy (including such endorsements
      as the Credit Agent obtained in its title insurance policy) with no
      exceptions other than (i) Permitted Liens and exceptions included under
      the title insurance policy in favor of the Credit Agent, (ii) the Credit
      Agent's existing Lien on such property and (iii) other changes reasonably
      acceptable to the Initial Purchasers;

            (d) the most recent survey of each property together with either (i)
      an updated survey certification from the applicable surveyor stating that,
      based on a visual inspection of the property and the knowledge of the
      surveyor, there has been no change in the facts depicted in the survey or
      (ii) an affidavit from the Issuers stating that there has been no change,
      other than, in each case, changes reasonably acceptable to the Initial
      Purchasers, in the facts depicted in the survey; and

            (e) such other related deliveries and deliverables as the Trustee
      and the Initial Purchasers shall reasonably require.

            The Issuers shall provide each of the foregoing described in clauses
(a) through (e) above at their own expense and shall pay all reasonable fees and
expenses of counsel incurred by the Trustee in connection with each of the
foregoing.

            Each Note Guarantee will be limited in amount to an amount not to
exceed the maximum amount that can be guaranteed by the applicable Guarantor
without rendering the Note Guarantee, as it relates to such Guarantor, voidable
under applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally.

            SECTION 4.12. Limitation on Lines of Business. The Company shall
not, and shall not permit any Restricted Subsidiary (other than a Receivables
Subsidiary) to, engage in any business, other than a Permitted Business.

            SECTION 4.13. Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries. The Company shall not sell or otherwise dispose of any
shares of Capital Stock of a Restricted Subsidiary, and shall not permit any
Restricted Subsidiary, directly or indirectly, to

issue or sell or otherwise dispose of any shares of its Capital Stock except:
(a) to the Company or another Restricted Subsidiary; (b) if, immediately after
giving effect to such issuance, sale or other disposition, neither the Company
nor any of its Restricted Subsidiaries own any Capital Stock of such Restricted
Subsidiary; (c) if, immediately after giving effect to such issuance or sale,
such Restricted Subsidiary would no longer constitute a Restricted Subsidiary
and any Investment in such Person remaining after giving effect thereto would
have been permitted to be made under Section 4.04 if made on the date of such
issuance, sale or other disposition; (d) directors' qualifying shares or shares
required by applicable law to be held by a Person other than the Company or a
Restricted Subsidiary; or (e) in the case of a Restricted Subsidiary other than
a wholly-owned Restricted Subsidiary, the issuance by that Restricted Subsidiary
of Capital Stock on a pro rata basis to the Company and its Restricted
Subsidiaries, on the one hand, and minority shareholders of the Restricted
Subsidiary, on the other hand (or on less than a pro rata basis to any minority
shareholder if the minority holder does not acquire its pro rata amount), so
long as the Company or another Restricted Subsidiary owns and controls at least
the same percentage of the Voting Stock of, and economic interest in, such
Restricted Subsidiary as prior to such issuance. The cash proceeds of any sale
of Capital Stock permitted under clauses (b) and (c) shall be treated as Net
Available Cash from an Asset Disposition and shall be applied in accordance with
Section 4.06.

            SECTION 4.14. Limitation on Liens. The Company shall not, and shall
not permit any of its Restricted Subsidiaries to, directly or indirectly,
create, incur, assume or suffer to exist any Lien of any kind on any asset now
owned or hereafter acquired by the Company or its Restricted Subsidiaries,
except Permitted Liens.

            SECTION 4.15. Sale/Leaseback Transactions. The Company shall not,
and shall not permit any of its Restricted Subsidiaries to, enter into any
Sale/Leaseback Transaction; provided that the Company or any Restricted
Subsidiary may enter into a Sale/Leaseback transaction if: (a) the Company or
that Restricted Subsidiary, as applicable, could have Incurred Indebtedness in
an amount equal to the Attributable Debt relating to such Sale/Leaseback
Transaction under Section 4.03 hereof; (b) the gross cash proceeds of the
Sale/Leaseback Transaction are at least equal to the fair market value (in the
case of gross cash proceeds in excess of $5.0 million as determined in good
faith by the Board of Directors and set forth in the Officers' Certificate
delivered to the Trustee), of the property that is the subject of that
Sale/Leaseback Transaction; and (c) the transfer of assets in that
Sale/Leaseback Transaction is permitted by, and the Company applies the proceeds
of such transaction in compliance with, Section 4.06 hereof.

                                    ARTICLE V

                                Successor Company


            SECTION 5.01. When Company May Merge or Transfer Assets. (a) The
Company and SCI LLC each shall not consolidate with or merge with or into, or
convey, transfer or lease all or substantially all its assets to, any Person,
unless:

                  (i) the resulting, surviving or transferee Person (the
      "Successor Company") shall be a corporation or, subject to the proviso
      below, a partnership or a limited liability company, in each case
      organized and existing under the laws of the United States of America, any
      State thereof or the District of Columbia and the Successor Company (if
      not the Company or SCI LLC, as the case may be) shall expressly assume, by
      a supplemental indenture hereto, executed and delivered to the Trustee, in
      form reasonably satisfactory to the Trustee, all the obligations of the
      Company or SCI LLC, as the case may be under the Notes and this Indenture;
      provided, however, that at all times, at least one Issuer must be a
      corporation organized and existing under the laws of the United States of
      America, any State thereof or the District of Columbia;

                  (ii) immediately after giving effect to such transaction (and
      treating any Indebtedness which becomes an obligation of the Successor
      Company or any Restricted Subsidiary as a result of such transaction as
      having been Incurred by the Successor Company or such Restricted
      Subsidiary at the time of such transaction), no Default shall have
      occurred and be continuing;

                  (iii) immediately after giving effect to such transaction, the
      Successor Company would be able to Incur at least $1.00 of additional
      Indebtedness pursuant to Section 4.03(a) (without giving effect to the
      second proviso thereof); and

                  (iv) the Company shall have delivered to the Trustee an
      Officers' Certificate and an Opinion of Counsel, each stating that such
      consolidation, merger or transfer and such supplemental indenture (if any)
      comply with this Indenture.

            The Successor Company shall succeed to, and be substituted for, and
may exercise every right and power of, the Company or SCI LLC, as the case may
be, under this Indenture.

            (b) The Company shall not permit any Guarantor to consolidate with
or merge with or into, or convey, transfer or lease all or substantially all of
its assets to any Person unless: (i) in the case of any Guarantor that is a
Domestic Subsidiary, the resulting, surviving or transferee Person will be a
corporation, partnership or limited liability company organized and existing
under the laws of the United States of America, any State thereof or the
District of Columbia, and such Person (if not such Guarantor) shall expressly
assume, by a supplemental indenture, executed and delivered to the Trustee, in
form satisfactory to the Trustee, all the obligations of such Guarantor under
its Note Guarantee; (ii) immediately after giving effect to such transaction
(and treating any Indebtedness which becomes an obligation of the resulting,
surviving or transferee Person as a result of such transaction as having been
Incurred by such Person at the time of such transaction), no Default shall have
occurred and be continuing; and (iii) the Company shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture; provided, however, that the foregoing shall not
apply to any such consolidation or merger with or into, or conveyance, transfer
or lease to, any Person if the resulting, surviving or transferee Person will
not be a Subsidiary of the Company and the other terms of this Indenture,
including Section 4.06 are complied with.

            (c) Notwithstanding the foregoing, (i) any Restricted Subsidiary may
consolidate with, merge into or transfer all or part of its properties and
assets to the Company or SCI LLC; (ii) the Company may merge with an Affiliate
incorporated or organized solely for the purpose of reincorporating or
reorganizing the Company in another jurisdiction to realize tax or other
benefits; (iii) nothing herein shall limit any conveyance, transfer or lease of
assets between or among any of the Company, SCI LLC and the Guarantors; and (iv)
the foregoing clause (a)(iii) of this Section 5.01 shall not prohibit (1) a
merger between the Company and a Person that owns all of the Capital Stock of
the Company created solely for the purpose of holding the Capital Stock of the
Company or (2) a merger between SCI LLC and a Person that owns all of the
Capital Stock of SCI LLC created solely for the purpose of holding the Capital
Stock of SCI LLC; provided, however, that the other terms of Section 5.01(a) are
complied with.


                                   ARTICLE VI

                         Events of Defaults and Remedies

            SECTION 6.01. Events of Default. An "Event of Default" occurs if:

            (a) the Company, SCI LLC or any Guarantor defaults in any payment of
interest on any Note or in any payment of Additional Interest with respect
thereto, and such default continues for a period of 30 days;

            (b) the Company, SCI LLC or any Guarantor (i) defaults in the
payment of the principal of any Note when the same becomes due and payable at
its Stated Maturity, upon required redemption or repurchase, upon declaration or
otherwise, or (ii) fails to redeem or purchase Notes when required pursuant to
this Indenture or the Notes;

            (c) the Company, SCI LLC or any Guarantor fails to comply with
Section 5.01;

            (d) the Company, SCI LLC or any Guarantor fails to comply with
Section 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.11, 4.12, 4.13, 4.14 or 4.15
(other than a failure to purchase Notes when required under Section 4.06 or
4.08) and such failure continues for 30 days after the notice specified below;

            (e) the Company, SCI LLC or any Guarantor fails to comply with any
of its agreements in the Notes or this Indenture, any Note Guarantee or any
Security Document (other than those referred to in (a), (b), (c) or (d) above)
and such failure continues for 60 days after the notice specified below;

            (f) Indebtedness of the Company or any Restricted Subsidiary is not
paid within any applicable grace period after final maturity or the acceleration
by the holders thereof because of a default and the total amount of such
Indebtedness unpaid or accelerated exceeds $25 million or its foreign currency
equivalent at the time and such failure continues for 10 days after the notice
specified below;

            (g) the Company, SCI LLC or any other Significant Subsidiary
pursuant to or within the meaning of any Bankruptcy Law:

                  (i) commences a voluntary case;

                  (ii) consents to the entry of an order for relief against it
      in an involuntary case;

                  (iii) consents to the appointment of a Custodian of it or for
      any substantial part of its property; or

                  (iv) makes a general assignment for the benefit of its
      creditors;

                  (v) or takes any comparable action under any foreign laws
      relating to insolvency;

            (h) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:

                  (i) is for relief against the Company, SCI LLC or any other
      Significant Subsidiary in an involuntary case;

                  (ii) appoints a Custodian of the Company, SCI LLC or any other
      Significant Subsidiary or for any substantial part of its property; or

                  (iii) orders the winding up or liquidation of the Company, SCI
      LLC or any other Significant Subsidiary;

or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days;

            (i) with respect to any judgment or decree for the payment of money
in excess of $25 million or its foreign currency equivalent against the Company
or any Restricted Subsidiary (i) an enforcement proceeding is commenced thereon
by any creditor if such judgment or decree is final and nonappealable and the
Company or such Restricted Subsidiary, as applicable, fails to stay such
proceeding within 10 days thereafter or (ii) the Company or such Restricted
Subsidiary, as applicable, fails to pay such judgment or decree, which judgment
or decree has remained outstanding for a period of 60 days following the entry
of such judgment or decree without being paid, discharged, waived or stayed; or

            (j) (i) except as permitted by this Indenture, any Note Guarantee of
any Significant Subsidiary or any Security Document or any security interest
granted thereby shall be held in any judicial proceeding to be unenforceable or
invalid, or shall cease for any reason to be in full force and effect and such
default continues for 10 days after written notice, or (ii) any Issuer or
Guarantor that is a Significant Subsidiary, or any Person acting on behalf of
such Significant Subsidiary, shall deny or disaffirm its obligations under any
Note Guarantee or Security Document.

            The foregoing shall constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.

            The term "Bankruptcy Law" means Title 11, United States Code, or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.

            A Default under clause (d), (e), (f) or (j) above is not an Event of
Default until the Trustee notifies the Issuers or the Holders of at least 25% in
principal amount of the outstanding Notes notify the Issuers and the Trustee of
the Default and the Issuers or the relevant Guarantor, as applicable, do not
cure such Default within the time specified after receipt of such notice. Such
notice must specify the Default, demand that it be remedied and state that such
notice is a "Notice of Default".

            The Issuers shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any event which with the giving of notice or the lapse of time would become an
Event of Default under clauses (c), (d), (e), (f), (i) or (j), its status and
what action the Issuers are taking or propose to take with respect thereto.

            SECTION 6.02. Acceleration. (a) If an Event of Default (other than
an Event of Default specified in Section 6.01(g) or (h) with respect to the
Company or SCI LLC) occurs and is continuing, the Trustee or the Holders of at
least 25% in principal amount of the outstanding Notes, by notice to the
Issuers, may declare the principal of and accrued but unpaid interest on all the
Notes to be due and payable. Upon such a declaration, such principal and
interest shall be due and payable immediately. If an Event of Default specified
in Section 6.01(g) or (h) with respect to the Company or SCI LLC occurs, the
principal of and interest on all the Notes shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holders. The Holders of a majority in principal amount of the
Notes by notice to the Trustee may rescind an acceleration and its consequences
if the rescission would not conflict with any judgment or decree and if all
existing Events of Default have been cured or waived except nonpayment of
principal or interest that has become due solely because of acceleration. No
such rescission shall affect any subsequent Default or impair any right
consequent thereto.

            (b) In the event of a declaration of acceleration of the Notes
because an Event of Default has occurred and is continuing as a result of the
acceleration of any Indebtedness described in Section 6.01(f), the declaration
of acceleration of the Notes shall be automatically annulled if the holders of
any such Indebtedness have rescinded the declaration of acceleration in respect
of such Indebtedness within 30 days of the date of such acceleration and if (i)
the annulment of the acceleration of the Notes would not conflict with any
judgment or decree of a court of competent jurisdiction and (ii) all existing
Events of Default, except nonpayment of principal or interest on the Notes that
became due solely because of the acceleration of the Notes, have been cured or
waived.

            SECTION 6.03. Other Remedies. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Notes or to enforce the performance of any
provision of the Notes or this Indenture.

            The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy is exclusive of any
other remedy. All available remedies are cumulative.

            SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in
principal amount of the Notes by notice to the Trustee may waive on behalf of
the Holders of all of the Notes an existing Default and its consequences except
(a) a Default in the payment of the principal of or interest on a Note, (b) a
Default arising from the failure to redeem or purchase any Note when required
pursuant to the terms of this Indenture or (c) a Default in respect of a
provision that under Section 9.02 cannot be amended without the consent of each
Holder affected. When a Default is waived, it is deemed cured, but no such
waiver shall extend to any subsequent or other Default or impair any consequent
right.

            SECTION 6.05. Control by Majority. The Holders of a majority in
principal amount of the Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Holders or would involve the Trustee in personal liability;
provided, however, that the Trustee may take any other action deemed proper by
the Trustee that is not inconsistent with such direction. Prior to taking any
action hereunder, the Trustee shall be entitled to indemnification satisfactory
to it in its sole discretion against all losses and expenses caused by taking or
not taking such action.

            SECTION 6.06. Limitation on Suits. (a) Except to enforce the right
to receive payment of principal, premium (if any) or interest when due, no
Holder may pursue any remedy with respect to this Indenture or the Notes unless:

                  (i) the Holder gives to the Trustee written notice stating
      that an Event of Default is continuing;

                  (ii) the Holders of at least 25% in principal amount of the
      Notes make a written request to the Trustee to pursue the remedy;

                  (iii) such Holder or Holders offer to the Trustee reasonable
      security or indemnity against any loss, liability or expense;

                  (iv) the Trustee does not comply with the request within 60
      days after receipt of the request and the offer of security or indemnity;
      and

                  (v) the Holders of a majority in principal amount of the Notes
      do not give the Trustee a direction inconsistent with the request during
      such 60-day period.

            (b) A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over another Holder.

            SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and interest, including Additional Interest, on the
Notes held by such Holder, on or after the respective due dates expressed or
provided for in the Notes, or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Holder.

            SECTION 6.08. Collection Suit by Trustee. If an Event of Default
specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Issuers or any other obligor on the Notes for the whole amount then due and
owing (together with interest on overdue principal and (to the extent lawful) on
any unpaid interest at the rate provided for in the Notes) and the amounts
provided for in Section 7.07.

            SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Holders allowed in
any judicial proceedings relative to the Issuers, any Subsidiary or Guarantor,
their creditors or their property and, unless prohibited by law or applicable
regulations, may vote on behalf of the Holders in any election of a trustee in
bankruptcy or other Person performing similar functions, and any Custodian in
any such judicial proceeding is hereby authorized by each Holder to make
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel, and any other amounts due
the Trustee under Section 7.07.

            SECTION 6.10. Priorities. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order:

            FIRST: to the Trustee for amounts due under Section 7.07;

            SECOND: to Holders for amounts due and unpaid on the Notes for
      principal and interest, ratably, and any Additional Interest, without
      preference or priority of any kind, according to the amounts due and
      payable on the Notes for principal and interest, including any Additional
      Interest, respectively; and

            THIRD: to the Issuers.

            The Trustee may fix a record date and payment date for any payment
to Holders pursuant to this Section. At least 15 days before such record date,
the Trustee shall mail to each Holder and the Issuers a notice that states the
record date, the payment date and amount to be paid.

            SECTION 6.11. Undertaking for Costs. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit,

having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section does not apply to a suit by the Trustee, a suit
by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in
principal amount of the Notes.

            SECTION 6.12. Waiver of Stay or Extension Laws. Neither the Issuers
nor any Guarantor (to the extent it may lawfully do so) shall at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of this
Indenture; and each Issuer and each Guarantor (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and shall not hinder, delay or impede the execution of any power herein
granted to the Trustee, but shall suffer and permit the execution of every such
power as though no such law had been enacted.


                                   ARTICLE VII

                                     Trustee

            SECTION 7.01. Duties of Trustee. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent person would exercise or use under the circumstances
in the conduct of such person's own affairs.

            (b) Except during the continuance of an Event of Default:

                  (i) the Trustee undertakes to perform such duties and only
      such duties as are specifically set forth in this Indenture and no implied
      covenants or obligations shall be read into this Indenture against the
      Trustee; and

                  (ii) in the absence of bad faith on its part, the Trustee may
      conclusively rely, as to the truth of the statements and the correctness
      of the opinions expressed therein, upon certificates or opinions furnished
      to the Trustee and conforming to the requirements of this Indenture.
      However, the Trustee shall examine the certificates and opinions to
      determine whether or not they conform to the requirements of this
      Indenture.

            (c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:

                  (i) this paragraph does not limit the effect of paragraph (b)
      of this Section;

                  (ii) the Trustee shall not be liable for any error of judgment
      made in good faith by a Trust Officer unless it is proved that the Trustee
      was negligent in ascertaining the pertinent facts; and

                  (iii) the Trustee shall not be liable with respect to any
      action it takes or omits to take in good faith in accordance with a
      direction received by it pursuant to Section 6.05.

                  (iv) No provision of this Indenture shall require the Trustee
      to expend or risk its own funds or otherwise incur financial liability in
      the performance of any of its duties hereunder or in the exercise of any
      of its rights or powers, if it shall have reasonable grounds to believe
      that repayment of such funds or adequate indemnity against such risk or
      liability is not reasonably assured to it.

            (d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.

            (e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuers.

            (f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.

            (g) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.

            SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated in
the document.

            (b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.

            (c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.

            (d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute wilful
misconduct or negligence.

            (e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Notes shall be full and complete authorization and protection from liability in
respect to any action taken, omitted or suffered by it hereunder in good faith
and in accordance with the advice or opinion of such counsel.

            (f) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond,
debenture, note or other paper or document unless requested in writing to do so
by the Holders of not less than a majority in principal amount of the Notes at
the time outstanding, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit, and, if
the Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Issuers,
personally or by agent or attorney.

            SECTION 7.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Issuers or their respective Affiliates with the same
rights it would have if it were not Trustee. Any Paying Agent, Registrar or
co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.

            SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture, any Note Guarantee or the Notes, it shall not be accountable for
the Issuers' use of the proceeds from the Notes, and it shall not be responsible
for any statement of the Issuers or any Guarantor in this Indenture or in any
document issued in connection with the sale of the Notes or in the Notes other
than the Trustee's certificate of authentication. The Trustee shall not be
charged with knowledge of any Default or Event of Default under Sections
6.01(c), (d), (e), (f), (i) or (j) or of the identity of any Significant
Subsidiary unless either (a) a Trust Officer shall have actual knowledge thereof
or (b) the Trustee shall have received notice thereof in accordance with Section
12.02 hereof from the Issuers, any Guarantor or any Holder.

            SECTION 7.05. Notice of Defaults. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Holder notice of the Default within the earlier of 90 days after it occurs or 30
days after it is known to a trust officer. Except in the case of a Default in
payment of principal of or interest on any Note (including payments pursuant to
the mandatory redemption provisions of such Note, if any), the Trustee may
withhold the notice if and so long as a committee of its Trust Officers in good
faith determines that withholding the notice is in the interests of Holders.

            SECTION 7.06. Reports by Trustee to Holders. As promptly as
practicable after each May 15 beginning with May 15, 2003, the Trustee shall
mail to each Holder a brief report dated as of such May 15 that complies with
Section 313(a) of the TIA if and to the extent required thereby. The Trustee
shall also comply with Section 313(b) of the TIA.

            A copy of each report at the time of its mailing to Holders shall be
filed with the Commission and each stock exchange (if any) on which the Notes
are listed. The Issuers agree to notify promptly the Trustee whenever the Notes
become listed on any stock exchange and of any delisting thereof.

            SECTION 7.07. Compensation and Indemnity. The Issuers shall pay to
the Trustee from time to time reasonable compensation for its services hereunder
as the Issuers and the Trustee shall from time to time agree in writing. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuers shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services.
Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. Each of the Issuers and each Guarantor, jointly and severally shall
indemnify the Trustee against any and all loss, liability or expense (including
reasonable attorneys' fees) incurred by or in connection with the administration
of this trust and the performance of its duties hereunder. The Trustee shall
notify the Issuers of any claim for which it may seek indemnity promptly upon
obtaining actual knowledge thereof;

provided, however, that any failure so to notify the Issuers shall not relieve
the Issuers or any Guarantor of its indemnity obligations hereunder. The Issuers
shall defend the claim and the Trustee shall provide reasonable cooperation at
the Issuers' expense in the defense. The Trustee may have separate counsel and
the Issuers and the Guarantors, as applicable, shall pay the fees and expenses
of such counsel; provided, however, that the Issuers and the Guarantors shall
not be required to pay such fees and expenses if it assumes the Trustee's
defense and, in the reasonable judgment of the Trustee's outside counsel, there
is no conflict of interest between the Issuers and the Guarantors, on the one
hand, and the Trustee, on the other hand, in connection with such defense. The
Issuers need not reimburse any expense or indemnify against any loss, liability
or expense incurred by the Trustee through its own wilful misconduct, negligence
or bad faith.

            To secure the Issuers' payment obligations in this Section, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee other than money or property held in trust to pay
principal of and interest and Additional Interest, if any, on particular Notes.

            The Issuers' payment obligations pursuant to this Section shall
survive the satisfaction or discharge of this Indenture, any rejection or
termination of this Indenture under any bankruptcy law or the resignation or
removal of the Trustee. Without prejudice to any other rights available to the
Trustee under applicable law, when the Trustee incurs expenses after the
occurrence of a Default specified in Section 6.01(g) or (h) with respect to the
Issuers, the expenses are intended to constitute expenses of administration
under the Bankruptcy Law.

            SECTION 7.08. Replacement of Trustee. (a) The Trustee may resign at
any time by so notifying the Issuers. The Holders of a majority in principal
amount of the Notes may remove the Trustee by so notifying the Trustee and may
appoint a successor Trustee. The Issuers shall remove the Trustee if:

                  (i) the Trustee fails to comply with Section 7.10;

                  (ii) the Trustee is adjudged bankrupt or insolvent;

                  (iii) a receiver or other public officer takes charge of the
      Trustee or its property; or

                  (iv) the Trustee otherwise becomes incapable of acting.

            (b) If the Trustee resigns, is removed by the Issuers or by the
Holders of a majority in principal amount of the Notes and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Issuers shall promptly appoint a successor
Trustee.

            (c) A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to

Holders. The retiring Trustee shall promptly transfer all property held by it as
Trustee to the successor Trustee, subject to the lien provided for in Section
7.07.

            (d) If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the retiring Trustee or the Holders
of 10% in principal amount of the Notes may petition any court of competent
jurisdiction for the appointment of a successor Trustee.

            (e) If the Trustee fails to comply with Section 7.10, unless the
Trustee's duty to resign is stayed as provided in TIA Section 310(b), any Holder
who has been a bona fide holder of a Note for at least six months may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.

            (f) Notwithstanding the replacement of the Trustee pursuant to this
Section, the Issuers' obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.

            SECTION 7.09. Successor Trustee by Merger. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.

            In case at the time such successor or successors by merger,
conversion or consolidation to the Trustee shall succeed to the trusts created
by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Trustee may authenticate such Notes either
in the name of any predecessor hereunder or in the name of the successor to the
Trustee; and in all such cases such certificates shall have the full force which
it is anywhere in the Notes or in this Indenture provided that the certificate
of the Trustee shall have.

            SECTION 7.10. Eligibility; Disqualification. The Trustee shall at
all times satisfy the requirements of TIA Section 310(a). The Trustee shall have
a combined capital and surplus of at least $100,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
Section 310(b), subject to its right to apply for a stay of its duty to resign
under the penultimate paragraph of TIA Section 310(b); provided, however, that
there shall be excluded from the operation of TIA Section 310(b)(1) any
indenture or indentures under which other securities or certificates of interest
or participation in other securities of the Issuers are outstanding if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.

            SECTION 7.11. Preferential Collection of Claims Against the Issuers.
The Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.

                                  ARTICLE VIII

                       Discharge of Indenture; Defeasance

            SECTION 8.01. Discharge of Liability on Notes; Defeasance.

            (a) Subject to Section 8.01(c), when (i) all outstanding Notes
(other than Notes replaced or paid pursuant to Section 2.08) have been canceled
or delivered to the Trustee for cancelation or (ii) all outstanding Notes not
previously delivered for cancelation have become due and payable, whether at
maturity or as a result of the mailing of a notice of redemption pursuant to
Article 3 hereof, and the Issuers irrevocably deposit with the Trustee funds in
an amount sufficient or U.S. Government Obligations, the principal of and
interest on which will be sufficient, or a combination thereof sufficient, in
the written opinion of a nationally recognized firm of independent public
accountants delivered to the Trustee (which delivery shall only be required if
U.S. Government Obligations have been so deposited) to pay the principal of and
interest on the outstanding Notes when due at maturity or upon redemption of,
including interest thereon to maturity or such redemption date (other than Notes
replaced or paid pursuant to Section 2.08) and Additional Interest, if any, and
if in either case the Issuers pay all other sums payable hereunder by the
Issuers, then this Indenture shall, subject to Section 8.01(c), cease to be of
further effect. The Trustee shall acknowledge satisfaction and discharge of this
Indenture on demand of the Issuers accompanied by an Officers' Certificate and
an Opinion of Counsel and at the cost and expense of the Issuers.

            (b) Subject to Sections 8.01(c) and 8.02, the Issuers at any time
may terminate (i) all of their obligations under the Notes and this Indenture
("legal defeasance option") and (ii) their obligations under Sections 4.02,
4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.11, 4.12, 4.13, 4.14 or 4.15 and the
operation of Section 5.01(a)(iii), 6.01(d), 6.01(e), 6.01(f), 6.01(g) (with
respect to Significant Subsidiaries of the Company only), 6.01(h) (with respect
to Significant Subsidiaries of the Company only) and 6.01(i) ("covenant
defeasance option"). The Issuers may exercise their legal defeasance option
notwithstanding their prior exercise of their covenant defeasance option. In the
event that the Issuers terminate all of their obligations under the Notes and
this Indenture by exercising their legal defeasance option, the obligations
under the Note Guarantees shall each be terminated simultaneously with the
termination of such obligations.

            If the Issuers exercise their legal defeasance option, payment of
the Notes may not be accelerated because of an Event of Default. If the Issuers
exercise their covenant defeasance option, payment of the Notes may not be
accelerated because of an Event of Default specified in Section 6.01(d),
6.01(e), 6.01(f), 6.01(g) (with respect to Significant Subsidiaries of the
Company only), 6.01(h) (with respect to Significant Subsidiaries of the Company
only) or 6.01(i) or because of the failure of the Company or SCI LLC to comply
with Section 5.01(a)(iii).

            Upon satisfaction of the conditions set forth herein and upon
request of the Issuers, the Trustee shall acknowledge in writing the discharge
of those obligations that the Issuers terminate.

            (c) Notwithstanding the provisions of Sections 8.01(a) and 8.01(b),
the Issuers' obligations in Sections 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 7.07,
7.08 and in this Article 8 shall

survive until the Notes have been paid in full. Thereafter, the Issuers'
obligations in Sections 7.07, 8.04 and 8.05 shall survive.

            SECTION 8.02. Conditions to Defeasance. (a) The Issuers may exercise
their legal defeasance option or their covenant defeasance option only if:

                  (i) the Issuers irrevocably deposit in trust with the Trustee
      money in an amount sufficient or U.S. Government Obligations, the
      principal of and interest on which will be sufficient, or a combination
      thereof sufficient, to pay the principal, premium (if any) and interest on
      the Notes when due at maturity or redemption, as the case may be,
      including interest thereon to maturity or such redemption date and
      Additional Interest, if any;

                  (ii) the Issuers deliver to the Trustee a certificate from a
      nationally recognized firm of independent accountants expressing their
      opinion that the payments of principal and interest when due and without
      reinvestment on the deposited U.S. Government Obligations plus any
      deposited money without investment will provide cash at such times and in
      such amounts as will be sufficient to pay principal and interest when due
      on all the Notes to maturity or redemption, as the case may be;

                  (iii) 91 days pass after the deposit is made and during the
      91-day period no Default specified in Section 6.01(g) or (h) with respect
      to the Issuers occurs which is continuing at the end of the period;

                  (iv) the deposit does not constitute a default under any other
      agreement binding on the Issuers;

                  (v) the Issuers deliver to the Trustee an Opinion of Counsel
      to the effect that the trust resulting from the deposit does not
      constitute, or is qualified as, a regulated investment company under the
      Investment Company Act of 1940;

                  (vi) in the case of the legal defeasance option, the Issuers
      shall have delivered to the Trustee an Opinion of Counsel stating that (1)
      the Issuers has received from, or there has been published by, the
      Internal Revenue Service a ruling, or (2) since the date of this Indenture
      there has been a change in the applicable Federal income tax law, in
      either case to the effect that, and based thereon such Opinion of Counsel
      shall confirm that, the Holders will not recognize income, gain or loss
      for Federal income tax purposes as a result of such defeasance and will be
      subject to Federal income tax on the same amounts, in the same manner and
      at the same times as would have been the case if such defeasance had not
      occurred;

                  (vii) in the case of the covenant defeasance option, the
      Issuers shall have delivered to the Trustee an Opinion of Counsel to the
      effect that the Holders will not recognize income, gain or loss for
      Federal income tax purposes as a result of such covenant defeasance and
      will be subject to Federal income tax on the same amounts, in the same
      manner and at the same times as would have been the case if such covenant
      defeasance had not occurred; and

                  (viii) the Issuers deliver to the Trustee an Officers'
      Certificate and an Opinion of Counsel, each stating that all conditions
      precedent to the defeasance and discharge of the Notes as contemplated by
      this Article 8 have been complied with.

            (b) Before or after a deposit, the Issuers may make arrangements
satisfactory to the Trustee for the redemption of Notes at a future date in
accordance with Article 3.

            SECTION 8.03. Application of Trust Money. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to this
Article 8. It shall apply the deposited money and the money from U.S. Government
Obligations through the Paying Agent and in accordance with this Indenture to
the payment of principal of and interest on the Notes.

            SECTION 8.04. Repayment to the Issuers. The Trustee and the Paying
Agent shall promptly turn over to the Issuers upon request any money or U.S.
Government Obligations held by it as provided in this Article which, in the
written opinion of nationally recognized firm of independent public accountants
delivered to the Trustee (which delivery shall only be required if U.S.
Government Obligations have been so deposited), are in excess of the amount
thereof which would then be required to be deposited to effect an equivalent
discharge or defeasance in accordance with this Article.

            Subject to any applicable abandoned property law, the Trustee and
the Paying Agent shall pay to the Issuers upon written request any money held by
them for the payment of principal or interest that remains unclaimed for two
years, and, thereafter, Holders entitled to the money must look to the Issuers
for payment as general creditors and the Trustee, and the Paying Agent shall
have no further liability with respect to such monies.

            SECTION 8.05. Indemnity for Government Obligations. The Issuers
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited U.S. Government Obligations or the
principal and interest received on such U.S. Government Obligations.

            SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Issuers' obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to this Article 8 until such time as the Trustee or Paying
Agent is permitted to apply all such money or U.S. Government Obligations in
accordance with this Article 8; provided, however, that, if the Issuers have
made any payment of interest on or principal of any Notes because of the
reinstatement of its obligations, the Issuers shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.

                                   ARTICLE IX

                                   Amendments

            SECTION 9.01.     Without Consent of Holders.  (a)  The Issuers,
the Guarantors and the Trustee may amend or supplement this Indenture, the
Notes, the Note Guarantees or the Security Documents without notice to or
consent of any Holder:

                  (i) to cure any ambiguity, omission, defect or inconsistency;

                  (ii) to comply with Article 5;

                  (iii) to provide for uncertificated Notes in addition to or in
      place of certificated Notes; provided, however, that the uncertificated
      Notes are issued in registered form for purposes of Section 163(f) of the
      Code or in a manner such that the uncertificated Notes are described in
      Section 163(f)(2)(B) of the Code;

                  (iv) to add additional Note Guarantees with respect to the
      Notes;

                  (v) to add to the covenants of the Issuers for the benefit of
      the Holders or to surrender any right or power herein conferred upon the
      Issuers;

                  (vi) to make any change that does not adversely affect the
      rights of any Holder;

                  (vii) to provide for the issuance of the Exchange Notes,
      Private Exchange Notes or Additional Notes, which shall have terms
      substantially identical in all material respects to the Original Notes
      (except that the transfer restrictions contained in the Original Notes
      shall be modified or eliminated, as appropriate), and which shall be
      treated, together with any outstanding Original Notes, as a single issue
      of securities;

                  (viii) to comply with any requirement of the Commission in
      connection with qualifying, or maintaining the qualification of, this
      Indenture under the TIA; or

                  (ix) if necessary, in connection with any addition or release
      of Collateral permitted under the terms of this Indenture or Security
      Documents.

            In addition, without the consent of any Holder, any amendment,
waiver or consent agreed to by the Credit Agent or the holders of Credit
Agreement Obligations under any provision of any of the security documents
granting the first-priority lien on any Collateral to secure the Credit
Agreement Obligations shall automatically apply to the comparable provision of
the Indenture and the comparable Security Document entered into in connection
with the Notes. The Issuers shall also be entitled to other releases of the
Collateral or the Note Guarantees as described in Sections 10.03 and 11.03
hereof. If the Issuers wish under other circumstances to obtain an amendment or
waiver or seek a consent under any Security Document or Note Guarantee, the
Issuers may mail written notice of their request to the Trustee and the Holders,
specifying the amendment, waiver or consent, the reason it is being sought and
any other information requested for the Holders to reasonably consider such
matter. If the Issuers do

not receive written objections from Holders of at least 25% in aggregate
principal amount of the Notes within 20 Business Days after such mailing, such
amendment, waiver or consent shall be deemed granted. If the Issuers receive
such objections, then they shall not be entitled to effect such amendment or
waiver, and such consent shall not be effective, unless the Issuers obtain the
consent of the Holders of a majority in outstanding principal amount of the
Notes (including any Additional Notes) then outstanding voting as a single class
(including consents obtained in connection with a tender offer or exchange offer
for, or purchase of, the Notes).

            (b) After an amendment under this Section becomes effective, the
Issuers shall mail to Holders a notice briefly describing such amendment. The
failure to give such notice to all Holders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section 9.01.

            SECTION 9.02. With Consent of Holders. (a) The Issuers, the
Guarantors and the Trustee may amend this Indenture, the Notes, the Note
Guarantees or the Security Documents without notice to any Holder but with the
written consent of the Holders of at least a majority in principal amount of the
Notes then outstanding (including consents obtained in connection with a tender
offer or exchange for the Notes). However, without the consent of each Holder
affected, an amendment may not:

                  (i) reduce the amount of Notes whose Holders must consent to
      an amendment;

                  (ii) reduce the rate of or extend the time for payment of
      interest or any Additional Interest on any Note;

                  (iii) reduce the principal of or extend the Stated Maturity of
      any Note;

                  (iv) reduce the premium payable upon the redemption of any
      Note or change the time at which any Note may be redeemed in accordance
      with Article 3;

                  (v) make any Note payable in money other than that stated in
      the Note;

                  (vi) impair the right of any Holder to receive payment of
      principal of, and interest, including Additional Interest, on, such
      Holder's Notes on or after the due dates therefor or to institute suit for
      the enforcement of any payment on or with respect to such Holder's Notes;

                  (vii) make any change in Section 6.04 or 6.07 or the second
      sentence of this Section 9.02; or

                  (viii) modify the Note Guarantees in any manner adverse to the
      Holders.

            It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.

            After an amendment under this Section 9.02 becomes effective, the
Issuers shall mail to Holders a notice briefly describing such amendment. The
failure to give such notice to all Holders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section 9.02.

            SECTION 9.03. Compliance with Trust Indenture Act. Every amendment
to this Indenture or the Notes shall comply with the TIA as then in effect.

            SECTION 9.04. Revocation and Effect of Consents and Waivers. (a) A
consent to an amendment or a waiver by a Holder of a Note shall bind the Holder
and every subsequent Holder of that Note or portion of the Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
or waiver is not made on the Note. However, any such Holder or subsequent Holder
may revoke the consent or waiver as to such Holder's Note or portion of the Note
if the Trustee receives the notice of revocation before the date on which the
Trustee receives an Officers' Certificate from the Issuers certifying that the
requisite number of consents have been received. After an amendment or waiver
becomes effective, it shall bind every Holder. An amendment or waiver becomes
effective upon the (i) receipt by the Issuers or the Trustee of the requisite
number of consents, (ii) satisfaction of conditions to effectiveness as set
forth in this Indenture and any indenture supplemental hereto containing such
amendment or waiver and (iii) execution of such amendment or waiver (or
supplemental indenture) by the Issuers and the Trustee.

            (b) The Issuers may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to give their consent
or take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Holders at such record
date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.

            SECTION 9.05. Notation on or Exchange of Notes. If an amendment
changes the terms of a Note, the Trustee may require the Holder of the Note to
deliver it to the Trustee. The Trustee may place an appropriate notation on the
Note regarding the changed terms and return it to the Holder. Alternatively, if
the Issuers or the Trustee so determines, the Issuers in exchange for the Note
shall issue and the Trustee shall authenticate a new Note that reflects the
changed terms. Failure to make the appropriate notation or to issue a new Note
shall not affect the validity of such amendment.

            SECTION 9.06. Trustee to Sign Amendments. The Trustee shall sign any
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture and that such amendment
is the legal, valid and binding obligation of the Issuers and the Guarantors
enforceable against them in accordance with its

terms, subject to customary exceptions, and complies with the provisions hereof
(including Section 9.03).

            SECTION 9.07. Payment for Consent. Neither the Issuers nor any
Affiliate of the Issuers shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Notes unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.



                                    ARTICLE X

                             Collateral and Security

            SECTION 10.01. Security Documents. The due and punctual payment of
the principal of and interest and Additional Interest, if any, on the Notes when
and as the same shall be due and payable, whether on an interest payment date,
at maturity, by acceleration, repurchase, redemption or otherwise, and interest
on the overdue principal of and interest and Additional Interest, if any, on the
Notes and performance of all other obligations of the Issuers to the Holders or
the Trustee under this Indenture and the Notes, according to the terms hereunder
or thereunder, are secured as provided in the Security Documents which the
Issuers and the Guarantors have entered into simultaneously with the execution
of this Indenture, subject to the terms of the Intercreditor Agreement. Each
Holder, by its acceptance thereof, consents and agrees to the terms of the
Security Documents (including the provisions providing for foreclosure and
release of Collateral) as the same may be in effect or may be amended from time
to time in accordance with its terms and authorizes and directs the Collateral
Agent to enter into the Security Documents and to perform its obligations and
exercise its rights thereunder in accordance therewith. The Issuers shall
deliver to the Trustee (if it is not itself then the Collateral Agent) copies of
all documents delivered to the Collateral Agent pursuant to the Security
Documents, and will do or cause to be done all such acts and things as may be
required by the next sentence of this Section 10.01, to assure and confirm to
the Trustee and the Collateral Agent the security interest in the Collateral
contemplated hereby, by the Security Documents or any part thereof, as from time
to time constituted, so as to render the same available for the security and
benefit of this Indenture and of the Notes secured hereby, according to the
intent and purposes herein expressed. The Issuers shall take, and shall cause
their Restricted Subsidiaries to take, any and all actions reasonably required
to cause the Security Documents to create and maintain, as security for the
Obligations of the Issuers and the Guarantors hereunder, a valid and enforceable
perfected second-priority Lien and security interest in and on all the
Collateral, in favor of the Collateral Agent for the benefit of the Holders,
second in priority (subject to Permitted Liens) to any and all security
interests at any time granted in the Collateral to secure Credit Agreement
Obligations.

            SECTION 10.02. Recording and Opinions. (a) The Issuers will furnish
to the Collateral Agent and the Trustee on May 15 in each year beginning with
May 15, 2003, an

Opinion of Counsel, which may be rendered by internal counsel to the Issuers,
dated as of such date, either:

            (i) (A) stating that, in the opinion of such counsel, action has
      been taken with respect to the recording, registering, filing,
      re-recording, re-registering and re-filing of all supplemental indentures,
      financing statements, continuation statements or other instruments of
      further assurance as is necessary to maintain and perfect the Lien of the
      Security Documents and reciting with respect to the security interests in
      the Collateral the details of such action or referring to prior Opinions
      of Counsel in which such details are given, and (B) stating that, in the
      opinion of such counsel, based on relevant laws as in effect on the date
      of such Opinion of Counsel, all financing statements and continuation
      statements have been executed and filed that are necessary as of such date
      and during the succeeding 12 months fully to preserve, perfect and
      protect, to the extent such protection and preservation are possible by
      filing, the rights of the Holders and the Collateral Agent and the Trustee
      hereunder and under the Security Documents with respect to the security
      interests in the Collateral; or

            (ii) stating that, in the opinion of such counsel, no such action is
      necessary to maintain and perfect such Lien and assignment.

            (b) The Issuers will otherwise comply with the provisions of TIA
Section 314(b).

            SECTION 10.03. Release of Collateral. (a) Subject to subsections
(b), (c) and (d) of this Section 10.03, Collateral may be released from the Lien
and security interest created by the Security Documents at any time or from time
to time in accordance with the provisions of the Security Documents, the
Intercreditor Agreement, or as provided hereby. Whether prior to or after the
Discharge of Credit Agreement Obligations, upon the request of the Issuers
pursuant to an Officers' Certificate certifying that all conditions precedent
hereunder have been met and without the consent of any Holder, the Issuers and
the Guarantors will be entitled to releases of assets included in the Collateral
from the Liens securing the Notes under any one or more of the following
circumstances:

            (i) if all other Liens on that asset securing Credit Agreement
      Obligations or any Other Second-Lien Obligations then secured by that
      asset (including all commitments thereunder) are released; provided, that
      after giving effect to the release, obligations secured by the
      first-priority Liens on the remaining Collateral remain outstanding;

            (ii) to enable the Issuers or any Guarantor to consummate any sale,
      lease, conveyance or other disposition of any assets or rights permitted
      or not prohibited under Section 4.06 hereof;

            (iii) if the Issuers provide substitute collateral with at least an
      equivalent fair value, as determined in good faith by the Board of
      Directors;

            (iv)  in respect of assets subject to a permitted purchase money
      lien;

            (v) if all of the stock of any Subsidiary of the Company that is
      pledged to the Collateral Agent is released or if any Subsidiary that is a
      Note Guarantor is released from its Note Guarantee, such Subsidiary's
      assets will also be released;

            (vi) in respect of assets included in the Collateral with a fair
      value, as determined in good faith by the Board of Directors, of up to
      $2.0 million in any calendar year, subject to a cumulative carryover for
      any amount not used in any prior calendar year; or

            (vii) pursuant to an amendment, waiver or supplement in accordance
      with Article 9 hereof.

            Upon receipt of such Officers' Certificate, the Collateral Agent
shall execute, deliver or acknowledge any necessary or proper instruments of
termination, satisfaction or release to evidence the release of any Collateral
permitted to be released pursuant to this Indenture or the Security Documents.

            (b) Except as otherwise provided in the Intercreditor Agreement, no
Collateral may be released from the Lien and security interest created by the
Security Documents pursuant to the provisions of the Security Documents unless
the Officers' Certificate required by this Section 10.03 has been delivered to
the Collateral Agent.

            (c) At any time when a Default or Event of Default has occurred and
is continuing and the maturity of the Notes has been accelerated (whether by
declaration or otherwise) and the Trustee has delivered a notice of acceleration
to the Collateral Agent, no release of Collateral pursuant to the provisions of
the Security Documents will be effective as against the Holders, except as
otherwise provided in the Intercreditor Agreement.

            (d) The release of any Collateral from the terms of this Indenture
and the Security Documents shall not be deemed to impair the security under this
Indenture in contravention of the provisions hereof if and to the extent the
Collateral is released pursuant to the terms of the Security Documents and this
Indenture. To the extent applicable, the Issuers will cause TIA Section 313(b),
relating to reports, and TIA Section 314(d), relating to the release of property
or securities from the Lien and security interest of the Security Documents and
relating to the substitution therefor of any property or securities to be
subjected to the Lien and security interest of the Security Documents, to be
complied with. Any certificate or opinion required by TIA Section 314(d) may be
made by an Officer of the Issuers except in cases where TIA Section 314(d)
requires that such certificate or opinion be made by an independent Person,
which Person will be an independent engineer, appraiser or other expert selected
or approved by the Trustee and the Collateral Agent in the exercise of
reasonable care.

            SECTION 10.04. Certificates and Opinions of Counsel. To the extent
applicable, the Issuers will furnish to the Trustee and the Collateral Agent,
prior to each proposed release of Collateral pursuant to the Security Documents:

            (a)  all documents required by TIA Section 314(d); and

            (b) an Opinion of Counsel, which may be rendered by internal counsel
to the Issuers, to the effect that such accompanying documents constitute all
documents required by TIA Section 314(d).

            The Trustee may, to the extent permitted by Sections 7.01 and 7.02
hereof, accept as conclusive evidence of compliance with the foregoing
provisions the appropriate statements contained in such documents and such
Opinion of Counsel.

            SECTION 10.05. Certificates of the Trustee. In the event that the
Issuers wish to release Collateral in accordance with the Security Documents at
a time when the Trustee is not itself also the Collateral Agent and have
delivered the certificates and documents required by the Security Documents and
Sections 10.03 and 10.04 hereof, the Trustee will determine whether it has
received all documentation required by TIA Section 314(d) in connection with
such release and, based on such determination and the Opinion of Counsel
delivered pursuant to Section 10.04(b), will deliver a certificate to the
Collateral Agent setting forth such determination.

            SECTION 10.06. Authorization of Actions to Be Taken by the Trustee
Under the Security Documents. Subject to the provisions of Section 7.01 and 7.02
hereof and the Intercreditor Agreement, the Trustee may, in its sole discretion
and without the consent of the Holders, direct, on behalf of the Holders, the
Collateral Agent to, take all actions it deems necessary or appropriate in order
to:

            (a) enforce any of the terms of the Security Documents; and

            (b)  collect and receive any and all amounts payable in respect
of the Obligations of the Issuers hereunder.

            Subject to Section 3 of the Intercreditor Agreement, the Trustee
will have power to institute and maintain such suits and proceedings as it may
deem expedient to prevent any impairment of the Collateral by any acts that may
be unlawful or in violation of the Security Documents or this Indenture, and
such suits and proceedings as the Trustee may deem expedient to preserve or
protect its interests and the interests of the Holders in the Collateral
(including power to institute and maintain suits or proceedings to restrain the
enforcement of or compliance with any legislative or other governmental
enactment, rule or order that may be unconstitutional or otherwise invalid if
the enforcement of, or compliance with, such enactment, rule or order would
impair the security interest hereunder or be prejudicial to the interests of the
Holders or of the Trustee).

            SECTION 10.07. Authorization of Receipt of Funds by the Trustee
Under the Security Documents. The Trustee is authorized to receive any funds for
the benefit of the Holders distributed under the Security Documents, and to make
further distributions of such funds to the Holders according to the provisions
of this Indenture.

            SECTION 10.08. Termination of Security Interest. The Trustee will,
at the request of the Issuers, deliver a certificate to the Collateral Agent
stating that such Obligations have been paid in full, and instruct the
Collateral Agent to release the Liens pursuant to this Indenture and the
Security Documents upon (1) payment in full of the principal of, accrued and
unpaid interest and Additional Interest, if any, on the Notes and all other
Obligations under this

Indenture, the Note Guarantees and the Security Documents that are due and
payable at or prior to the time such principal, accrued and unpaid interest and
Additional Interest, if any, are paid, (2) a satisfaction and discharge of this
Indenture as described in Article 8 or (3) a legal defeasance or covenant
defeasance as described in Article 8. Upon receipt of such instruction, the
Collateral Agent shall execute, deliver or acknowledge any necessary or proper
instruments of termination, satisfaction or release to evidence the release of
all such Liens.

            SECTION 10.09. Collateral Agent. (a) The Trustee shall act as
Collateral Agent and shall be authorized to appoint co-Collateral Agents as
necessary in its sole discretion. Except as otherwise explicitly provided herein
or in the Security Documents, neither the Collateral Agent nor any of its
respective officers, directors, employees or agents shall be liable for failure
to demand, collect or realize upon any of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof. The Collateral
Agent shall be accountable only for amounts that it actually receives as a
result of the exercise of such powers, and neither the Collateral Agent nor any
of its officers, directors, employees or agents shall be responsible for any act
or failure to act hereunder, except for its own willful misconduct, negligence
or bad faith.

            (b) The Trustee, as Collateral Agent, is authorized and directed to
(i) enter into the Security Documents, (ii) enter into the Intercreditor
Agreement, (iii) bind the Holders on the terms as set forth in the Security
Documents and the Intercreditor Agreement and (iv) perform and observe its
obligations under the Security Documents and the Intercreditor Agreement.

            (c) If the Issuers (i) incur Indebtedness constituting Credit
Agreement Obligations at any time when no Intercreditor Agreement is in effect
or at any time when Indebtedness constituting Credit Agreement Obligations
entitled to the benefit of an existing Intercreditor Agreement is concurrently
retired, and (ii) deliver to the Collateral Agent an Officers' Certificate so
stating and requesting the Collateral Agent to enter into an Intercreditor
Agreement in favor of a designated agent or representative for the holders of
the Indebtedness so incurred, the Collateral Agent shall (and is hereby
authorized and directed to) enter into such Intercreditor Agreement, bind the
Holders on the terms set forth therein, and perform and observe its obligations
thereunder.

            (d) If (i) the Issuers at any time incur any Indebtedness
constituting Other Second-Lien Obligations, (ii) the indenture or agreement
governing such Indebtedness provides that, notwithstanding the date, manner or
order of grant, attachment or perfection of any Liens granted to the Collateral
Agent under the Security Documents (the "Liens Securing Note Obligations") or
granted to the holders of Other Second-Lien Obligations or any agent or
representative for the holders of Other Second-Lien Obligations (the "Liens
Securing Other Second-Lien Obligations"), the Liens Securing Note Obligations
and the Liens Securing Other Second-Lien Obligations shall be of equal dignity,
priority and rank, (iii) the Issuers deliver to the Collateral Agent an
Officer's Certificate so stating and requesting that the Collateral Agent assign
or transfer the Liens Securing Note Obligations to a Common Collateral Agent
identified therein and (iv) the Issuers deliver to the Collateral Agent and the
Common Collateral Agent an Opinion of Counsel stating that, in the opinion of
such counsel, the Common Collateral Agent is empowered and obligated (on
substantially the terms applicable to the Collateral Agent pursuant

to the Indenture Documents) to hold the Liens Securing Note Obligations and all
Liens Securing Other-Second Lien Obligations and all proceeds of all such Liens
for the equal and ratable benefit of the holders of all Obligations secured
thereby and further confirming as to all such Liens each of the matters referred
to in Section 10.02(a)(i), giving effect to the assignment or transfer requested
in such Officer's Certificate, then (A) the Liens Securing Note Obligations
shall be of equal dignity, priority and rank with all such Liens Securing Other
Second-Lien Obligations and (B) the Collateral Agent shall assign or transfer
the Liens Securing Note Obligations to the Common Collateral Agent as requested
in such Officer's Certificate.

            SECTION 10.10. Designations. For purposes of the provisions hereof
and the Intercreditor Agreement requiring the Issuers to designate Indebtedness
for the purposes of the term "Credit Agreement Obligations", "First-Lien Credit
Facilities", "Other Second-Lien Obligations" or any other such designations
hereunder or under the Intercreditor Agreement, any such designation shall be
sufficient if the relevant designation is set forth in writing, signed on behalf
of the Issuers by an Officer and delivered to the Trustee, the Collateral Agent
and the Credit Agent. For all purposes hereof and the Intercreditor Agreement,
the Issuers hereby designate the Credit Facilities provided pursuant to the
Credit Agreement as the "First-Lien Credit Facility" and any Obligations in
respect of the Credit Agreement as "Credit Agreement Obligations".



                                   ARTICLE XI

                                 Note Guarantees

            SECTION 11.01. Note Guarantees. (a) Each Guarantor hereby jointly
and severally irrevocably and unconditionally Guarantees, as a primary obligor
and not merely as a surety, to each Holder and to the Trustee and its successors
and assigns the full and punctual payment when due, whether at Stated Maturity,
by acceleration, by redemption or otherwise, of all obligations of the Issuers
under this Indenture (including obligations to the Trustee) and the Notes,
whether for payment of principal of, interest on or Additional Interest, if any,
in respect of the Notes and all other monetary obligations of the Issuers under
this Indenture and the Notes, whether for fees, expenses, indemnification or
otherwise (all the foregoing being hereinafter collectively called the
"Guaranteed Obligations"). Each Guarantor further agrees that the Guaranteed
Obligations may be extended or renewed, in whole or in part, without notice or
further assent from each such Guarantor, and that each such Guarantor shall
remain bound under this Article 11 notwithstanding any extension or renewal of
any Guaranteed Obligation.

            (b) Each Guarantor waives presentation to, demand of payment from
and protest to the Issuers of any of the Guaranteed Obligations and also waives
notice of protest for nonpayment. Each Guarantor waives notice of any default
under the Notes or the Guaranteed Obligations. The obligations of each Guarantor
hereunder shall not be affected by (i) the failure of any Holder or the Trustee
to assert any claim or demand or to enforce any right or remedy against the
Issuers or any other Person under this Indenture, the Notes or any other
agreement or otherwise; (ii) any extension or renewal of any thereof; (iii) any
rescission, waiver, amendment or modification of any of the terms or provisions
of this Indenture, the Notes or any other

agreement; (iv) the release of any security held by any Holder or the Trustee
for the Guaranteed Obligations or any of them; (v) the failure of any Holder or
Trustee to exercise any right or remedy against any other Guarantor; or (vi) any
change in the ownership of such Guarantor, except as provided in Section 11.03.

            (c) Each Guarantor hereby waives any right to which it may be
entitled to have its obligations hereunder divided among the Guarantors, such
that such Guarantor's obligations would be less than the full amount claimed.
Each Guarantor hereby waives any right to which it may be entitled to have the
assets of the Issuers first be used and depleted as payment of the Issuers' or
such Guarantor's obligations hereunder prior to any amounts being claimed from
or paid by such Guarantor hereunder. Each Guarantor hereby waives any right to
which it may be entitled to require that the Issuers be sued prior to an action
being initiated against such Guarantor.

            (d) Each Guarantor further agrees that its Note Guarantee herein
constitutes a guarantee of payment when due (and not a guarantee of collection)
and waives any right to require that any resort be had by any Holder or the
Trustee to any security held for payment of the Guaranteed Obligations.

            (e) Except as expressly set forth in Sections 8.01(b), 11.02, 11.03
and 11.07, the obligations of each Guarantor hereunder shall not be subject to
any reduction, limitation, impairment or termination for any reason (other than
payment of the Guaranteed Obligations in full), including any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to any
defense of setoff, counterclaim, recoupment or termination whatsoever or by
reason of the invalidity, illegality or unenforceability of the Guaranteed
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of each Guarantor herein shall not be discharged or impaired or
otherwise affected by the failure of any Holder or the Trustee to assert any
claim or demand or to enforce any remedy under this Indenture, the Notes or any
other agreement, by any waiver or modification of any thereof, by any default,
failure or delay, wilful or otherwise, in the performance of the Guaranteed
Obligations, or by any other act or thing or omission or delay to do any other
act or thing which may or might in any manner or to any extent vary the risk of
any Guarantor or would otherwise operate as a discharge of any Guarantor as a
matter of law or equity.

            (f) Each Guarantor agrees that its Note Guarantee shall remain in
full force and effect until payment in full of all the Guaranteed Obligations.
Each Guarantor further agrees that its Note Guarantee herein shall continue to
be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of principal of or interest on any Guaranteed Obligation is
rescinded or must otherwise be restored by any Holder or the Trustee upon the
bankruptcy or reorganization of the Issuers or otherwise.

            (g) In furtherance of the foregoing and not in limitation of any
other right which any Holder or the Trustee has at law or in equity against any
Guarantor by virtue hereof, upon the failure of the Issuers to pay the
Guaranteed Obligation when and as the same shall become due, whether at
maturity, by acceleration, by redemption or otherwise, each Guarantor hereby
promises to and shall, upon receipt of written demand by the Trustee, forthwith
pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal
to the sum of (i) the unpaid

amount of such Guaranteed Obligations and (ii) accrued and unpaid interest on
such Guaranteed Obligations then due and owing (but only to the extent not
prohibited by law).

            (h) Each Guarantor agrees that it shall not be entitled to any right
of subrogation in relation to the Holders in respect of any Guaranteed
Obligations guaranteed hereby until payment in full of all Guaranteed
Obligations. Each Guarantor further agrees that, as between it, on the one hand,
and the Holders and the Trustee, on the other hand, (i) the maturity of the
Guaranteed Obligations guaranteed hereby may be accelerated as provided in
Article 6 for the purposes of any Note Guarantee herein, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the Guaranteed Obligations guaranteed hereby, and (ii) in the event of any
declaration of acceleration of such Guaranteed Obligations as provided in
Article 6, such Guaranteed Obligations (whether or not due and payable) shall
forthwith become due and payable by such Guarantor for the purposes of this
Section 11.01.

            (i) Each Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees and expenses) incurred by the Trustee or
any Holder in enforcing any rights under this Section 11.01.

            (j) Upon request of the Trustee, each Guarantor shall execute and
deliver such further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the purpose of this Indenture.

            SECTION 11.02. Limitation on Liability. Any term or provision of
this Indenture to the contrary notwithstanding, the maximum aggregate amount of
the Guaranteed Obligations guaranteed hereunder by any Guarantor shall not
exceed the maximum amount that can be hereby guaranteed without rendering this
Indenture, as it relates to such Guarantor, voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally.

            SECTION 11.03. Releases of Note Guarantees. A Note Guarantee shall
be released without any action required on the part of the Trustee or any
Holder: (a) if the Credit Agent releases the Guarantee of Credit Agreement
Obligations made by such Guarantor, unless such Guarantor remains a guarantor of
the Senior Subordinated Notes; (b) if (i) all of the capital stock of, or other
equity interests in, or all or substantially all of the assets of such Guarantor
is sold or otherwise disposed of (including by way of merger or consolidation)
to a Person other than the Company or any of the Domestic Subsidiaries or (ii)
such Guarantor ceases to be a Restricted Subsidiary, and the Issuers otherwise
comply, to the extent applicable, with Sections 4.06 and 5.01 hereof; (c) if the
Issuers designate such Guarantor as an Unrestricted Subsidiary; or (d) upon the
Issuers' request if the fair market value of the assets of the applicable
Guarantor (as determined in good faith by the Board of Directors of the
Company), together with the fair market value of the assets of other Guarantors
whose Note Guarantee was released in the same calendar year, do not exceed $2.0
million (subject to cumulative carryover for amounts not used in any prior
calendar year).

            Upon delivery by the Issuers to the Trustee of an Officers'
Certificate and an Opinion of Counsel to the effect that such release was made
by the Issuers in accordance with the provisions of this Indenture, the Trustee
will execute any documents reasonably required in

order to evidence the release of any Guarantor from its obligations under its
Subsidiary Guarantee.

            Any Guarantor not released from its obligations under its Subsidiary
Guarantee will remain liable for the full amount of principal of and interest on
the Notes and for the other obligations of any Guarantor under this Indenture as
provided in this Article 11.

            SECTION 11.04. Successors and Assigns. This Article 11 shall be
binding upon each Guarantor and its successors and assigns and shall inure to
the benefit of the successors and assigns of the Trustee and the Holders and, in
the event of any transfer or assignment of rights by any Holder or the Trustee,
the rights and privileges conferred upon that party in this Indenture and in the
Notes shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions of this Indenture.

            SECTION 11.05. No Waiver. Neither a failure nor a delay on the part
of either the Trustee or the Holders in exercising any right, power or privilege
under this Article 11 shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article 11 at law,
in equity, by statute or otherwise.

            SECTION 11.06. Modification. No modification, amendment or waiver of
any provision of this Article 11, nor the consent to any departure by any
Guarantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Trustee, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on any Guarantor in any case shall entitle such Guarantor to
any other or further notice or demand in the same, similar or other
circumstances.

            SECTION 11.07. Execution of Supplemental Indenture for Future
Guarantors.

            Each Subsidiary which is required to become a Guarantor pursuant to
Section 4.11 shall promptly execute and deliver to the Trustee a supplemental
indenture in the form of Exhibit C hereto pursuant to which such Subsidiary
shall become a Guarantor under this Article 11 and shall guarantee the
Guaranteed Obligations. Concurrently with the execution and delivery of such
supplemental indenture, the Issuers shall deliver to the Trustee an Opinion of
Counsel and an Officers' Certificate to the effect that such supplemental
indenture has been duly authorized, executed and delivered by such Subsidiary
and that, subject to the application of bankruptcy, insolvency, moratorium,
fraudulent conveyance or transfer and other similar laws relating to creditors'
rights generally and to the principles of equity, whether considered in a
proceeding at law or in equity, the Note Guarantee of such Guarantor is a legal,
valid and binding obligation of such Guarantor, enforceable against such
Guarantor in accordance with its terms and or to such other matters as the
Trustee may reasonably request.

            SECTION 11.08. Non-Impairment. The failure to endorse a Note
Guarantee on any Note shall not affect or impair the validity thereof.

                                   ARTICLE XII

                                  Miscellaneous

            SECTION 12.01. Trust Indenture Act Controls. If and to the extent
that any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by, or with another provision (an "incorporated provision")
included in this Indenture by operation of, TIA Sections 310 to 318,
inclusive, such imposed duties or incorporated provision shall control.

            SECTION 12.02. Notices. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail addressed as
follows:

                        if to the Issuers:

                        c/o ON Semiconductor Corporation
                        5005 E. McDowell Road
                        Phoenix, AZ  85008

                        Attention of: President

                        with a copy to:

                        c/o ON Semiconductor Corporation
                        5005 E. McDowell Road
                        Phoenix, AZ 85008

                        Attention of: General Counsel

                        if to the Trustee:

                        Wells Fargo Bank Minnesota, National Association
                        Corporate Trust Services
                        213 Court Street, Suite 902
                        Middletown, CT 06457

                        Attention of: Robert L. Reynolds
                        Corporate Trust Services

            The Issuers or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.

            Any notice or communication mailed to a Holder shall be mailed,
first class mail, to the Holder at the Holder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.

            Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. If a
notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.

            SECTION 12.03. Communication by Holders with Other Holders. Holders
may communicate pursuant to TIA Section 312(b) with other Holders with respect
to their rights under this Indenture or the Notes. The Issuers, the Trustee, the
Registrar and anyone else shall have the protection of TIA Section 312(c).

            SECTION 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Issuers to the Trustee to take or refrain
from taking any action under this Indenture (other than a request to
authenticate the Initial Notes in accordance with this Indenture), the Issuers
shall furnish to the Trustee:

            (a) an Officers' Certificate in form reasonably satisfactory to the
Trustee stating that, in the opinion of the signers, all conditions precedent,
if any, provided for in this Indenture relating to the proposed action have been
complied with; and

            (b) an Opinion of Counsel in form reasonably satisfactory to the
Trustee stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.

            SECTION 12.05. Statements Required in Certificate or Opinion. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture (other than pursuant to Section 4.09) shall
include:

            (a) a statement that the individual making such certificate or
opinion has read such covenant or condition;

            (b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;

            (c) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and

            (d) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.

            In giving such Opinion of Counsel, counsel may rely as to factual
matters on an Officers' Certificate or on certificates of public officials.

            SECTION 12.06. When Notes Disregarded. In determining whether the
Holders of the required principal amount of Notes have concurred in any
direction, waiver or consent, Notes owned by the Issuers, any Guarantor or by
any Person directly or indirectly controlling or controlled by or under direct
or indirect common control with the Issuers or any Guarantor shall be
disregarded and deemed not to be outstanding, except that, for the purpose of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes which the Trustee knows are so owned
shall be so disregarded. Subject to the foregoing,

only Notes outstanding at the time shall be considered in any such
determination. Notwithstanding the foregoing, Notes that are to be acquired by
the Issuers, any Guarantor or by any Person directly or indirectly controlling
or controlled by or under direct or indirect common control with the Issuers or
any Guarantor pursuant to an exchange offer, tender offer or other agreement
shall not be deemed to be owned by such entity until legal title to such Notes
passes to such entity.

            SECTION 12.07. Rules by Trustee, Paying Agent and Registrar. The
Trustee may make reasonable rules for action by or a meeting of Holders. The
Registrar and the Paying Agent may make reasonable rules for their functions.

            SECTION 12.08. Legal Holidays. A "Legal Holiday" is a Saturday, a
Sunday or other day on which banking institutions are not required by law or
regulation to be open in the State of New York. If a payment date is a Legal
Holiday, payment shall be made on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period. If a regular
record date is a Legal Holiday, the record date shall not be affected.

            SECTION 12.09. GOVERNING LAW. THIS INDENTURE AND THE NOTES SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE
EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.

            SECTION 12.10. No Recourse Against Others. A director, officer,
employee, stockholder or member, as such, of the Issuers or any of the
Guarantors, shall not have any liability for any obligations of the Issuers or
any of the Guarantors under the Notes or this Indenture or for any claim based
on, in respect of or by reason of such obligations or their creation. By
accepting a Note, each Holder shall waive and release all such liability. The
waiver and release shall be part of the consideration for the issue of the
Notes.

            SECTION 12.11. Successors. All agreements of each of the Issuers and
each Guarantor in this Indenture and the Notes shall bind its successors. All
agreements of the Trustee in this Indenture shall bind its successors.

            SECTION 12.12. Multiple Originals. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.

            SECTION 12.13. Table of Contents; Headings. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.

            SECTION 12.14. Tax Treatment of the Notes. The Issuers agree, and by
acceptance of a beneficial ownership interest in the Notes, each beneficial
holder of the Notes shall be deemed to have agreed, for United States federal
income tax purposes, (i) to treat the Notes as debt instruments that are subject
to Section 1.1275-4(b) of the United States Treasury

Regulations (the "Contingent Debt Regulations") and (ii) to be bound by the
Issuer's determination of the "comparable yield" and "projected payment
schedule," within the meaning of the Contingent Debt Regulations, with respect
to the Notes.

            IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed as of the date first written above.

                  ON SEMICONDUCTOR CORPORATION,
                  SEMICONDUCTOR COMPONENTS INDUSTRIES, LLC,
                  SCG (MALAYSIA SMP) HOLDING CORPORATION,
                  SCG (CZECH) HOLDING CORPORATION,
                  SCG (CHINA) HOLDING CORPORATION,
                  SEMICONDUCTOR COMPONENTS INDUSTRIES
                     PUERTO RICO, INC.
                  SCG INTERNATIONAL DEVELOPMENT  LLC
                  SEMICONDUCTOR COMPONENTS INDUSTRIES
                     OF RHODE ISLAND, INC.
                  SEMICONDUCTOR COMPONENTS INDUSTRIES
                     INTERNATIONAL OF RHODE ISLAND, INC.

                  by    /s/ John T. Kurtzweil
                        -----------------------------------
                        Name: John T. Kurtzweil
                        Title: Chief Financial Officer


                  WELLS FARGO BANK MINNESOTA,
                   NATIONAL ASSOCIATION,
                  as Trustee


                  by    /s/ Joseph P. O'Donnell
                        -----------------------------------
                        Name: Joseph P. O'Donnell
                        Title: Corporate Trust Officer

                                                                      APPENDIX A


                     PROVISIONS RELATING TO ORIGINAL NOTES,
                    ADDITIONAL NOTES, PRIVATE EXCHANGE NOTES
                               AND EXCHANGE NOTES


      1. Definitions

      1.1  Definitions

      For the purposes of this Appendix A the following terms shall have the
meanings indicated below:

            "Applicable Procedures" means, with respect to any transfer or
transaction involving a Regulation S Global Note or beneficial interest therein,
the rules and procedures of the Depositary for such Global Note, Euroclear and
Clearstream, in each case to the extent applicable to such transaction and as in
effect from time to time.

            "Clearstream" means Clearstream Banking, S.A., or any successor
securities clearing agency.

            "Definitive Note" means a certificated Initial Note, Private
Exchange Note or Exchange Note (bearing the Restricted Notes Legend if the
transfer of such Note is restricted by applicable law) that does not include the
Global Notes Legend.

            "Depositary" means The Depository Trust Company, its nominees and
their respective successors.

            "Euroclear" means the Euroclear Clearance System or any successor
securities clearing agency.

            "Exchange Offer" means an offer by the Issuers, pursuant to a
Registration Rights Agreement, to certain Holders of Initial Notes, to issue and
deliver to such Holders, in exchange for their Initial Notes, a like aggregate
principal amount of Exchange Notes registered under the Securities Act.

            "Global Notes Legend" means the legend set forth under that caption
in Exhibit A to this Indenture.

            "Initial Purchasers" means Credit Suisse First Boston
Corporation, Morgan Stanley & Co. Incorporated, J. P. Morgan Securities Inc.
and Salomon Smith Barney Inc.

            "Notes Custodian" means the custodian with respect to a Global Note
(as appointed by the Depositary) or any successor person thereto, who shall
initially be the Trustee.

                                                                               2


            "Private Exchange" means an offer by the Issuers, pursuant to a
Registration Rights Agreement, to issue and deliver to certain purchasers, in
exchange for the Initial Notes held by such purchasers as part of their initial
distribution, a like aggregate principal amount of Private Exchange Notes.

            "Private Exchange Notes" means the Notes of the Issuers issued in
exchange for Initial Notes pursuant to this Indenture in connection with a
Private Exchange pursuant to a Registration Rights Agreement.

            "Purchase Agreement" means (a) the Purchase Agreement dated May 1,
2002, among the Issuers, the Guarantors and the Initial Purchasers and (b) any
other similar Purchase Agreement relating to Additional Notes.

            "QIB" means a "qualified institutional buyer" as defined in Rule
144A.

            "Registration Rights Agreement" means (a) the Registration Rights
Agreement dated May 6, 2002, among the Issuers, the Guarantors and the Initial
Purchasers and (b) any other similar Registration Rights Agreement relating to
Additional Notes.

            "Regulation S" means Regulation S under the Securities Act.

            "Regulation S Notes" means all Initial Notes offered and sold
outside the United States in reliance on Regulation S.

            "Restricted Period", with respect to any Notes, means the period of
40 consecutive days beginning on and including the later of (a) the day on which
such Notes are first offered to persons other than distributors (as defined in
Regulation S under the Securities Act) in reliance on Regulation S and (b) the
Issue Date with respect to such Notes, which commencement date shall be notified
by the Issuers to the Trustee.

            "Restricted Notes Legend" means the legend set forth in Section
2.3(e)(i) herein.

            "Rule 144A" means Rule 144A under the Securities Act.

            "Rule 144A Notes" means all Initial Notes offered and sold to QIBs
in reliance on Rule 144A.

            "Securities Act" means the Securities Act of 1933.

            "Shelf Registration Statement" means a registration statement filed
by the Issuers in connection with the offer and sale of Initial Notes pursuant
to a Registration Rights Agreement.

            "Transfer Restricted Notes" means Definitive Notes and any other
Notes that bear or are required to bear the Restricted Notes Legend.

      1.2  Other Definitions

                                                                               3




      Term:                                             Defined in Section:
      -----                                             -------------------
                                                     
"Agent Members".....................................          2.1(c)
"Global Note".......................................          2.1(b)
"Regulation S Global Note"..........................          2.1(b)
"Rule 144A Global Note".............................          2.1(b)


      2.  The Notes

      2.1  Form and Dating

            (a) The Original Notes issued on the date hereof are being (i)
offered and sold by the Issuers pursuant to a Purchase Agreement and (ii)
resold, initially only to (1) QIBs in reliance on Rule 144A and (2) Persons
other than U.S. Persons (as defined in Regulation S) in reliance on Regulation
S. Such Original Notes may thereafter be transferred to, among others, QIBs and
purchasers in reliance on Regulation S. Additional Notes offered after the date
hereof may be offered and sold by the Company from time to time pursuant to one
or more Purchase Agreements in accordance with applicable law.

            (b) Global Notes. Rule 144A Notes shall be issued initially in the
form of one or more permanent global Notes in definitive, fully registered form
(collectively, the "Rule 144A Global Note") and Regulation S Notes shall be
issued initially in the form of one or more global Notes (collectively, the
"Regulation S Global Note"), in each case without interest coupons and bearing
the Global Notes Legend and Restricted Notes Legend, which shall be deposited on
behalf of the purchasers of the Notes represented thereby with the Notes
Custodian, and registered in the name of the Depositary or a nominee of the
Depositary, duly executed by the Issuers and authenticated by the Trustee as
provided in this Indenture. Beneficial ownership interests in the Regulation S
Global Note shall not be exchangeable for interests in the Rule 144A Global Note
or any other Note without a Restricted Notes Legend until the expiration of the
Restricted Period. The Rule 144A Global Note and the Regulation S Global Note
are each referred to herein as a "Global Note" and are collectively referred to
herein as "Global Notes"; provided that the term "Global Note" when used in
Sections 2.1(b), 2.1(c), 2.3(g)(i), 2.3(h)(i) and 2.4 of this Appendix shall
also include any Note in global form issued in connection with an Exchange Offer
or Private Exchange. The aggregate principal amount of the Global Notes may from
time to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee and on the schedules thereto as
hereinafter provided.

            (c) Book-Entry Provisions. This Section 2.1(c) shall apply only to a
Global Note deposited with or on behalf of the Depositary.

            The Issuers shall execute and the Trustee shall, in accordance with
this Section 2.1(c) and Section 2.2 of this Appendix and pursuant to an order of
the Issuers signed by two Officers of each Issuer, authenticate and deliver
initially one or more Global Notes that (i) shall be registered in the name of
the Depositary for such Global Note or Global Notes or the nominee of such
Depositary and (ii) shall be delivered by the Trustee to such Depositary or
pursuant to such Depositary's instructions or held by the Trustee as Notes
Custodian.

                                                                               4


            Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any Global Note held
on their behalf by the Depositary or by the Trustee as Notes Custodian or under
such Global Note, and the Depositary may be treated by the Issuers, the Trustee
and any agent of the Issuers or the Trustee as the absolute owner of such Global
Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Issuers, the Trustee or any agent of the Issuers or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices of such Depositary
governing the exercise of the rights of a holder of a beneficial interest in any
Global Note.

            (d) Definitive Notes. Except as provided in Section 2.3 or 2.4 of
this Appendix, owners of beneficial interests in Global Notes will not be
entitled to receive physical delivery of certificated Notes.

      2.2 Authentication. The Trustee shall authenticate and make available for
delivery upon a written order of the Issuers signed by two Officers of each
Issuer (a) Original Notes for original issue on the date hereof in an aggregate
principal amount of $300,000,000, (b) subject to the terms of this Indenture,
Additional Notes in an unlimited aggregate principal amount and (c) the (i)
Exchange Notes for issue only in an Exchange Offer and (ii) Private Exchange
Notes for issue only in a Private Exchange, in the case of each of (i) and (ii)
pursuant to a Registration Rights Agreement and for a like principal amount of
Initial Notes exchanged pursuant thereto. Such order shall specify the amount of
the Notes to be authenticated, the date on which the original issue of Notes is
to be authenticated and whether the Notes are to be Original Notes, Additional
Notes, Exchange Notes or Private Exchange Notes. The aggregate principal amount
of Notes outstanding at any time is unlimited.

      2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive Notes.
When Definitive Notes are presented to the Registrar with a request:

            (i)  to register the transfer of such Definitive Notes; or

            (ii)  to exchange such Definitive Notes for an equal principal
      amount of Definitive Notes of other authorized denominations,

the Registrar shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; provided, however,
that the Definitive Notes surrendered for transfer or exchange:

            (1) shall be duly endorsed or accompanied by a written instrument of
      transfer in form reasonably satisfactory to the Issuers and the Registrar,
      duly executed by the Holder thereof or his attorney duly authorized in
      writing; and

            (2) in the case of Transfer Restricted Notes, are accompanied by the
      following additional information and documents, as applicable:

                                                                               5


                  (A) if such Definitive Notes are being delivered to the
            Registrar by a Holder for registration in the name of such Holder,
            without transfer, a certification from such Holder to that effect
            (in the form set forth on the reverse side of the Initial Note); or

                  (B) if such Definitive Notes are being transferred to the
            Issuers, a certification to that effect (in the form set forth on
            the reverse side of the Initial Note); or

                  (C) if such Definitive Notes are being transferred pursuant to
            an exemption from registration in accordance with Rule 144 under the
            Securities Act or in reliance upon another exemption from the
            registration requirements of the Securities Act, (x) a certification
            to that effect (in the form set forth on the reverse side of the
            Initial Note) and (y) if the Issuers so request, an opinion of
            counsel or other evidence reasonably satisfactory to it as to the
            compliance with the restrictions set forth in the legend set forth
            in Section 2.3(e)(i) of this Appendix.

            (b) Restrictions on Transfer of a Definitive Note for a Beneficial
Interest in a Global Note. A Definitive Note may not be exchanged for a
beneficial interest in a Global Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive Note,
duly endorsed or accompanied by a written instrument of transfer in form
reasonably satisfactory to the Issuers and the Registrar, together with:

            (i) certification (in the form set forth on the reverse side of the
      Initial Note) that such Definitive Note is being transferred (1) to a QIB
      in accordance with Rule 144A or (2) outside the United States in an
      offshore transaction within the meaning of Regulation S and in compliance
      with Rule 904 under the Securities Act; and

            (ii) written instructions directing the Trustee to make, or to
      direct the Notes Custodian to make, an adjustment on its books and records
      with respect to such Global Note to reflect an increase in the aggregate
      principal amount of the Notes represented by the Global Note, such
      instructions to contain information regarding the Depositary account to be
      credited with such increase, then the Trustee shall cancel such Definitive
      Note and cause, or direct the Notes Custodian to cause, in accordance with
      the standing instructions and procedures existing between the Depositary
      and the Notes Custodian, the aggregate principal amount of Notes
      represented by the Global Note to be increased by the aggregate principal
      amount of the Definitive Note to be exchanged and shall credit or cause to
      be credited to the account of the Person specified in such instructions a
      beneficial interest in the Global Note equal to the principal amount of
      the Definitive Note so canceled. If no Global Notes are then outstanding
      and the Global Note has not been previously exchanged for certificated
      securities pursuant to Section 2.4 of this Appendix, the Issuers shall
      issue and the Trustee shall authenticate, upon written order of the
      Issuers in the form of an Officers' Certificate, a new Global Note in the
      appropriate principal amount.

            (c) Transfer and Exchange of Global Notes. (i) The transfer and
exchange of Global Notes or beneficial interests therein shall be effected
through the Depositary, in

                                                                               6


accordance with this Indenture (including applicable restrictions on transfer
set forth herein, if any) and the procedures of the Depositary therefor. A
transferor of a beneficial interest in a Global Note shall deliver a written
order given in accordance with the Depositary's procedures containing
information regarding the participant account of the Depositary to be credited
with a beneficial interest in such Global Note or another Global Note and such
account shall be credited in accordance with such order with a beneficial
interest in the applicable Global Note and the account of the Person making the
transfer shall be debited by an amount equal to the beneficial interest in the
Global Note being transferred. Transfers by an owner of a beneficial interest in
the Rule 144A Global Note to a transferee who takes delivery of such interest
through the Regulation S Global Note, whether before or after the expiration of
the Restricted Period, shall be made only upon receipt by the Trustee of a
certification in the form provided on the reverse of the Initial Notes from the
transferor to the effect that such transfer is being made in accordance with
Regulation S or (if available) Rule 144 under the Securities Act and that, if
such transfer is being made prior to the expiration of the Restricted Period,
the interest transferred shall be held immediately thereafter through Euroclear
or Clearstream.

            (ii) If the proposed transfer is a transfer of a beneficial interest
      in one Global Note to a beneficial interest in another Global Note, the
      Registrar shall reflect on its books and records the date and an increase
      in the principal amount of the Global Note to which such interest is being
      transferred in an amount equal to the principal amount of the interest to
      be so transferred, and the Registrar shall reflect on its books and
      records the date and a corresponding decrease in the principal amount of
      Global Note from which such interest is being transferred.

            (iii) Notwithstanding any other provisions of this Appendix (other
      than the provisions set forth in Section 2.4 of this Appendix), a Global
      Note may not be transferred as a whole except by the Depositary to a
      nominee of the Depositary or by a nominee of the Depositary to the
      Depositary or another nominee of the Depositary or by the Depositary or
      any such nominee to a successor Depositary or a nominee of such successor
      Depositary.

            (iv) In the event that a Global Note is exchanged for Definitive
      Notes pursuant to Section 2.4 of this Appendix prior to the consummation
      of an Exchange Offer or the effectiveness of a Shelf Registration
      Statement with respect to such Notes, such Notes may be exchanged only in
      accordance with such procedures as are substantially consistent with the
      provisions of this Section 2.3 (including the certification requirements
      set forth on the reverse of the Initial Notes intended to ensure that such
      transfers comply with Rule 144A, Regulation S or such other applicable
      exemption from registration under the Securities Act, as the case may be)
      and such other procedures as may from time to time be adopted by the
      Issuers.

            (d) Restrictions on Transfer of Regulation S Global Note. (i) Prior
to the expiration of the Restricted Period, interests in the Regulation S Global
Note may only be held through Euroclear or Clearstream. During the Restricted
Period, beneficial ownership interests in the Regulation S Global Note may only
be sold, pledged or transferred through Euroclear or Clearstream in accordance
with the Applicable Procedures and only (1) so long as such security is eligible
for resale pursuant to Rule 144A, to a person whom the selling holder reasonably

                                                                               7


believes is a QIB that purchases for its own account or for the account of a QIB
to whom notice is given that the resale, pledge or transfer is being made in
reliance on Rule 144A, (2) in an offshore transaction in accordance with
Regulation S, (3) pursuant to an exemption from registration under the
Securities Act provided by Rule 144 (if applicable) under the Securities Act or
(4) pursuant to an effective registration statement under the Securities Act, in
each case in accordance with any applicable securities laws of any state of the
United States. Prior to the expiration of the Restricted Period, transfers by an
owner of a beneficial interest in the Regulation S Global Note to a transferee
who takes delivery of such interest through the Rule 144A Global Note shall be
made only in accordance with Applicable Procedures and upon receipt by the
Trustee of a written certification from the transferor of the beneficial
interest in the form provided on the reverse of the Initial Note to the effect
that such transfer is being made to a QIB within the meaning of Rule 144A in a
transaction meeting the requirements of Rule 144A. Such written certification
shall no longer be required after the expiration of the Restricted Period.

            (ii) Upon the expiration of the Restricted Period, beneficial
      ownership interests in the Regulation S Global Note shall be transferable
      in accordance with applicable law and the other terms of this Indenture.

            (e) Legend.

            (i) Except as permitted by the following paragraphs (ii), (iii) or
      (iv), each Note certificate evidencing the Global Notes and the Definitive
      Notes (and all Notes issued in exchange therefor or in substitution
      thereof) shall bear a legend in substantially the following form (each
      defined term in the legend being defined as such for purposes of the
      legend only):

      "THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION
      EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933
      (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR
      OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
      EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT
      THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE
      PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
      THEREUNDER.

      THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY THAT (A)
      THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
      (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES
      IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
      SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
      (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE
      WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION
      FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER
      (IF AVAILABLE) OR (IV) PURSUANT TO AN

                                                                               8


      EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF
      CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
      OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH
      SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM
      IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE."

            (ii) Upon any sale or transfer of a Transfer Restricted Note that is
      a Definitive Note, the Registrar shall permit the Holder thereof to
      exchange such Transfer Restricted Note for a Definitive Note that does not
      bear the legends set forth above and rescind any restriction on the
      transfer of such Transfer Restricted Note if the Holder certifies in
      writing to the Registrar that its request for such exchange was made in
      reliance on Rule 144 (such certification to be in the form set forth on
      the reverse of the Initial Note).

            (iii) After a transfer of any Original or Additional Notes or
      Private Exchange Notes during the period of the effectiveness of a Shelf
      Registration Statement with respect to such Original or Additional Notes
      or Private Exchange Notes, as the case may be, all requirements pertaining
      to the Restricted Notes Legend on such Original or Additional Notes or
      such Private Exchange Notes shall cease to apply and the requirements that
      any such Original or Additional Notes or such Private Exchange Notes be
      issued in global form shall continue to apply.

            (iv) Upon the consummation of an Exchange Offer with respect to the
      Original or Additional Notes pursuant to which Holders of such Original or
      Additional Notes are offered Exchange Notes in exchange for their Original
      or Additional Notes, all requirements pertaining to Original or Additional
      Notes that Original or Additional Notes be issued in global form shall
      continue to apply, and Exchange Notes in global form without the
      Restricted Notes Legend shall be available to Holders that exchange such
      Original or Additional Notes in such Exchange Offer.

            (v) Upon the consummation of a Private Exchange with respect to the
      Original or Additional Notes pursuant to which Holders of such Original or
      Additional Notes are offered Private Exchange Notes in exchange for their
      Original or Additional Notes, all requirements pertaining to such Original
      or Additional Notes that Original or Additional Notes be issued in global
      form shall continue to apply, and Private Exchange Notes in global form
      with the Restricted Notes Legend shall be available to Holders that
      exchange such Original or Additional Notes in such Private Exchange.

            (vi) Upon a sale or transfer after the expiration of the Restricted
      Period of any Initial Note acquired pursuant to Regulation S, all
      requirements that such Initial Note bear the Restricted Notes Legend shall
      cease to apply and the requirements requiring any such Initial Note be
      issued in global form shall continue to apply.

            (vii) Any Additional Notes sold in a registered offering shall not
      be required to bear the Restricted Notes Legend.

                                                                               9


            (f) Cancelation or Adjustment of Global Note. At such time as all
beneficial interests in a Global Note have either been exchanged for Definitive
Notes, transferred, redeemed, repurchased or canceled, such Global Note shall be
returned by the Depositary to the Trustee for cancelation or retained and
canceled by the Trustee. At any time prior to such cancelation, if any
beneficial interest in a Global Note is exchanged for Definitive Notes,
transferred in exchange for an interest in another Global Note, redeemed,
repurchased or canceled, the principal amount of Notes represented by such
Global Note shall be reduced and an adjustment shall be made on the books and
records of the Trustee (if it is then the Notes Custodian for such Global Note)
with respect to such Global Note, by the Trustee or the Notes Custodian, to
reflect such reduction.

            (g) Obligations with Respect to Transfers and Exchanges of Notes.

            (i) To permit registrations of transfers and exchanges, the Issuers
      shall execute and the Trustee shall authenticate, Definitive Notes and
      Global Notes at the Registrar's request.

            (ii) No service charge shall be made for any registration of
      transfer or exchange, but the Issuers may require payment of a sum
      sufficient to cover any transfer tax, assessments, or similar governmental
      charge payable in connection therewith (other than any such transfer
      taxes, assessments or similar governmental charge payable upon exchanges
      pursuant to Sections 2.07, 3.06, 4.06, 4.08 and 9.05 of this Indenture).

            (iii) Prior to the due presentation for registration of transfer of
      any Note, the Issuers, the Trustee, the Paying Agent or the Registrar may
      deem and treat the person in whose name a Note is registered as the
      absolute owner of such Note for the purpose of receiving payment of
      principal of and interest on such Note and for all other purposes
      whatsoever, whether or not such Note is overdue, and none of the Issuers,
      the Trustee, the Paying Agent or the Registrar shall be affected by notice
      to the contrary.

            (iv) All Notes issued upon any transfer or exchange pursuant to the
      terms of this Indenture shall evidence the same debt and shall be entitled
      to the same benefits under this Indenture as the Notes surrendered upon
      such transfer or exchange.

            (h)  No Obligation of the Trustee.

            (i) The Trustee shall have no responsibility or obligation to any
      beneficial owner of a Global Note, a member of, or a participant in the
      Depositary or any other Person with respect to the accuracy of the records
      of the Depositary or its nominee or of any participant or member thereof,
      with respect to any ownership interest in the Notes or with respect to the
      delivery to any participant, member, beneficial owner or other Person
      (other than the Depositary) of any notice (including any notice of
      redemption or repurchase) or the payment of any amount, under or with
      respect to such Notes. All notices and communications to be given to the
      Holders and all payments to be made to Holders under the Notes shall be
      given or made only to the registered Holders (which shall be the
      Depositary or its nominee in the case of a Global Note). The rights of

                                                                              10


      beneficial owners in any Global Note shall be exercised only through the
      Depositary subject to the applicable rules and procedures of the
      Depositary. The Trustee may rely and shall be fully protected in relying
      upon information furnished by the Depositary with respect to its members,
      participants and any beneficial owners.

            (ii) The Trustee shall have no obligation or duty to monitor,
      determine or inquire as to compliance with any restrictions on transfer
      imposed under this Indenture or under applicable law with respect to any
      transfer of any interest in any Note (including any transfers between or
      among Depositary participants, members or beneficial owners in any Global
      Note) other than to require delivery of such certificates and other
      documentation or evidence as are expressly required by, and to do so if
      and when expressly required by, the terms of this Indenture, and to
      examine the same to determine substantial compliance as to form with the
      express requirements hereof.

      2.4  Definitive Notes

            (a) A Global Note deposited with the Depositary or with the Trustee
as Notes Custodian pursuant to Section 2.1 or issued in connection with an
Exchange Offer or Private Exchange shall be transferred to the beneficial owners
thereof in the form of Definitive Notes in an aggregate principal amount equal
to the principal amount of such Global Note, in exchange for such Global Note,
only if such transfer complies with Section 2.3 and (i) the Depositary notifies
the Issuers that it is unwilling or unable to continue as a Depositary for such
Global Note or if at any time the Depositary ceases to be a "clearing agency"
registered under the Exchange Act, and a successor depositary is not appointed
by the Issuers within 90 days of such notice or after the Issuers become aware
of such cessation, or (ii) an Event of Default has occurred and is continuing or
(iii) the Issuers, in their sole discretion, notifies the Trustee in writing
that it elects to cause the issuance of certificated Notes under this Indenture.

            (b) Any Global Note that is transferable to the beneficial owners
thereof pursuant to this Section 2.4 shall be surrendered by the Depositary to
the Trustee, to be so transferred, in whole or from time to time in part,
without charge, and the Trustee shall authenticate and deliver, upon such
transfer of each portion of such Global Note, an equal aggregate principal
amount of Definitive Notes of authorized denominations. Any portion of a Global
Note transferred pursuant to this Section shall be executed, authenticated and
delivered only in denominations of $1,000 and any integral multiple thereof and
registered in such names as the Depositary shall direct. Any certificated
Initial Note in the form of a Definitive Note delivered in exchange for an
interest in the Global Note shall, except as otherwise provided by Section
2.3(e), bear the Restricted Notes Legend.

            (c) Subject to the provisions of Section 2.4(b), the registered
Holder of a Global Note may grant proxies and otherwise authorize any Person,
including Agent Members and Persons that may hold interests through Agent
Members, to take any action which a Holder is entitled to take under this
Indenture or the Notes.

            (d) In the event of the occurrence of any of the events specified in
Section 2.4(a)(i), (ii) or (iii), the Issuers shall promptly make available to
the Trustee a reasonable supply of Definitive Notes in fully registered form
without interest coupons.

                                                                       EXHIBIT A


            [FORM OF FACE OF INITIAL NOTE AND PRIVATE EXCHANGE NOTE]

                              [Global Notes Legend]

            UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE ISSUERS OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

            TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.


                            [Restricted Notes Legend]

            THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF
THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.

            THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I)
IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE
SECURITIES

                                                                               2


ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH
(IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED
TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE.

                                                                               3


No.________                                                     $__________

                        12% Senior Secured Note due 2008

                                                              CUSIP No. ______
                                                                 ISIN No._____

            ON Semiconductor Corporation, a Delaware corporation, and
Semiconductor Components Industries, LLC, a Delaware limited liability company,
promise to pay to [Cede & Co.], or registered assigns, the principal sum [of
       Dollars] [listed on the Schedule of Increases or Decreases in Global Note
attached hereto](1) on May 15, 2008.

            Interest Payment Dates:  May 15 and November 15.

            Record Dates:  May 1 and November 1.



- -------------

      (1) Use the Schedule of Increases and Decreases language if Note is in
Global Form.

                                                                               4


            Additional provisions of this Note are set forth on the other side
of this Note.

            IN WITNESS WHEREOF, the parties have caused this instrument to be
duly executed.

                        ON SEMICONDUCTOR CORPORATION,

                        by
                            ---------------------------------
                            Name:
                            Title:


                        SEMICONDUCTOR COMPONENTS
                        INDUSTRIES, LLC,

                        by
                            ---------------------------------
                            Name:
                            Title:

Dated:

TRUSTEE'S CERTIFICATE OF
      AUTHENTICATION

WELLS FARGO BANK MINNESOTA,
NATIONAL ASSOCIATION,

      as Trustee, certifies
      that this is one of
      the Notes referred
      to in the Indenture.


By:_________________________
      Authorized Signatory



- -----------------

*/ If the Note is to be issued in global form, add the Global Notes Legend and
the attachment from Exhibit A captioned "TO BE ATTACHED TO GLOBAL NOTES -
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE".

                                                                               5


[FORM OF REVERSE SIDE OF INITIAL NOTE AND PRIVATE EXCHANGE NOTE]

                        12% Senior Secured Note due 2008


1. Interest

            (a) ON Semiconductor Corporation, a Delaware corporation (the
"Company"), and Semiconductor Components Industries, LLC ("SCI LLC" and together
with the Company, and their successors and assigns under the Indenture
hereinafter referred to, being herein called the "Issuers"), promise to pay
interest on the principal amount of this Note at the rate per annum shown above;
provided that commencing on February 6, 2003, each Note shall accrue interest at
a rate of 13% per annum unless prior thereto the Issuers have issued common
stock or Qualified Preferred Stock generating at least $100 million in gross
cash proceeds and have used the net cash proceeds thereof to repay indebtedness
under the Credit Agreement or under any other credit facilities secured by a
first-priority lien on the Collateral and have permanently reduced the related
loan commitment equal to the amount prepaid. Such increase in interest rate, if
any, shall remain effective until such time as the Issuers have completed such
issuance of common stock or Qualified Preferred Stock and repayment, unless such
issuance and repayment of common stock or Qualified Preferred Stock occurs after
August 6, 2003, in which case such increase in interest rate will remain
effective. The Issuers shall pay interest semiannually on May 15 and November 15
of each year, commencing on November 15, 2002. Interest on the Notes shall
accrue from the most recent date to which interest has been paid or duly
provided for or, if no interest has been paid or duly provided for, from May 6,
2002 until the principal hereof is due. Interest shall be computed on the basis
of a 360-day year comprised of twelve 30-day months. "Qualified Preferred Stock"
means any preferred stock that (i) is not Disqualified Stock, (ii) does not
entitle the holder to receive cash dividends prior to November 1, 2009 (prior to
such date, dividends may accrue or be paid in kind), (iii) is convertible into
common stock and (iv) is issued to one or more financial sponsors, such as Texas
Pacific Group or any other private equity firm or similar entity.

            (b) Additional Interest. The Holder of this Note is entitled to the
benefits of a Registration Rights Agreement, dated as of May 6, 2002, among the
Issuers, SCG (Malaysia SMP) Holding Corporation, SCG (Czech) Holding
Corporation, SCG (China) Holding Corporation, Semiconductor Components
Industries Puerto Rico, Inc., SCG International Development LLC, Semiconductor
Components Industries of Rhode Island, Inc. and Semiconductor Components
Industries International of Rhode Island, Inc. (collectively, the "Guarantors")
and the Initial Purchasers named therein (the "Registration Rights Agreement").
Capitalized terms used in this paragraph (b) but not defined herein have the
meanings assigned to them in the Registration Rights Agreement. The Registration
Rights Agreement shall provide that (i) if the Issuers or the Guarantors fail to
file an Exchange Offer Registration Statement with the Commission on or prior to
150 days after the Issue Date; (ii) if the Exchange Offer Registration Statement
is not declared effective by the Commission within 270 days after the Issue
Date; (iii) if the Exchange Offer is not consummated within 300 days after the
Issue Date; (iv) if obligated to file the Shelf Registration Statement and the
Issuers and the Guarantors fail to file the same on or prior to 60 days after
such filing obligation arises or the Shelf Registration Statement is not
declared effective on or prior to 270 days after the Issue Date, or (v) if the

                                                                               6


Exchange Offer Registration Statement or the Shelf Registration Statement, as
the case may be, is declared effective within 270 days after the Issue Date (or
in the case of a Shelf Registration Statement to be filed in response to any
change in law or applicable interpretations thereof, within 60 days after the
publication of the change in law or interpretation) but shall thereafter cease
to be effective (at any time that the Issuers and the Guarantors are obligated
to maintain the effectiveness thereof) without being succeeded within 30 days by
an additional Registration Statement filed and declared effective (each such
event referred to in clauses (i) through (v), a "Registration Default"), the
Issuers and the Guarantors will be obligated to pay to each Holder of Transfer
Restricted Securities affected thereby additional interest ("Additional
Interest") at a rate of 0.50% per annum (the "Additional Interest Rate") for the
first 90-day period immediately following the occurrence of such Registration
Default. The Additional Interest Rate shall increase by an additional 0.50% per
annum with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum Additional Interest Rate of 2.0% per
annum. Any amounts of Additional Interest due will be payable in cash on the
regular interest payment dates with respect to the notes. Each obligation to pay
Additional Interest rate shall be deemed to commence accruing on the date of the
applicable Registration Default and to cease accruing when all Registration
Defaults have been cured.

            The Trustee shall have no responsibility with respect to the
determination of the amount of any such Additional Interest. For purposes of the
foregoing, "Transfer Restricted Notes" means (i) each Initial Note until the
date on which such Initial Note has been exchanged for a freely transferable
Exchange Note in the Exchange Offer, (ii) each Initial Note or Private Exchange
Note until the date on which such Initial Note or Private Exchange Note has been
effectively registered under the Securities Act and is eligible to be disposed
of in accordance with a Shelf Registration Statement or (iii) each Initial Note
or Private Exchange Note until the date on which such Initial Note or Private
Exchange Note is distributed to the public pursuant to Rule 144 under the
Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act.

2. Method of Payment

            The Issuers shall pay interest on the Notes (except defaulted
interest) to the Persons who are registered Holders of Notes at the close of
business on the May 1 or November 1 next preceding the interest payment date
even if Notes are canceled after the record date and on or before the interest
payment date. Holders must surrender Notes to a Paying Agent to collect
principal payments. The Issuers shall pay principal, premium, Additional
Interest, if any, and interest in money of the United States of America that at
the time of payment is legal tender for payment of public and private debts.
Payments in respect of the Notes represented by a Global Note (including
principal, premium, interest, including Additional Interest, if any) shall be
made by wire transfer of immediately available funds to the accounts specified
by The Depository Trust Company. The Issuers will make all payments in respect
of a certificated Note (including principal, premium and interest) by mailing a
check to the registered address of each Holder thereof; provided, however, that
payments on the Notes may also be made, in the case of a Holder of at least
$1,000,000 aggregate principal amount of Notes, by wire transfer to a U.S.
dollar account maintained by the payee with a bank in the United States if such
Holder elects payment by wire transfer by giving written notice to the Trustee
or the Paying Agent to such effect designating such account no later than 30
days immediately preceding the relevant due date for payment (or such other date
as the Trustee may accept in its discretion).

                                                                               7


3. Paying Agent and Registrar

            Initially, WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, a
national banking association (the "Trustee"), will act as Paying Agent and
Registrar. The Issuers may appoint and change any Paying Agent, Registrar or
co-registrar without notice. The Issuers or any of their domestically
incorporated Wholly-Owned Subsidiaries may act as Paying Agent, Registrar or
co-registrar.

4. Indenture

            The Issuers issued the Notes under an Indenture dated as of May 6,
2002 (the "Indenture"), among the Issuers, the Guarantors and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the
"TIA"). Terms defined in the Indenture and not defined herein have the meanings
ascribed thereto in the Indenture. The Notes are subject to all terms and
provisions of the Indenture, and Holders are referred to the Indenture and the
TIA for a statement of such terms and provisions.

            The Notes are senior secured obligations of the Issuers. This Note
is one of the [Original] [Additional] [Private Exchange] Notes referred to in
the Indenture. The Notes include the Original Notes, the Additional Notes and
any Exchange Notes and Private Exchange Notes issued in exchange for Initial
Notes pursuant to the Indenture. The Original Notes, the Additional Notes and
any Exchange Notes and Private Exchange Notes are treated as a single class of
securities under the Indenture. The Indenture imposes certain limitations on the
ability of the Issuers and its Restricted Subsidiaries to, among other things,
make certain Investments and other Restricted Payments, pay dividends and other
distributions, incur Indebtedness, enter into consensual restrictions upon the
payment of certain dividends and distributions by such Restricted Subsidiaries,
issue or sell shares of capital stock of such Restricted Subsidiaries, enter
into or permit certain transactions with Affiliates and make asset dispositions.
The Indenture also imposes limitations on the ability of the Issuers and each
Guarantor to consolidate or merge with or into any other Person or convey,
transfer or lease all or substantially all of the property of the Issuers.

            To guarantee the due and punctual payment of the principal and
interest, if any, on the Notes and all other amounts payable by the Issuers
under the Indenture and the Notes when and as the same shall be due and payable,
whether at maturity, by acceleration or otherwise, according to the terms of the
Notes and the Indenture, the Guarantors have, jointly and severally,
unconditionally guaranteed the Guaranteed Obligations on a senior subordinated
basis pursuant to the terms of the Indenture.

            The Notes are secured on a second-priority basis by the Lien created
by the Security Documents pursuant to, and subject to the terms of, the
Indenture and the Intercreditor Agreement.

5. Optional Redemption

                                                                               8


            Except as provided in paragraph 5 hereof, the Notes shall not be
redeemable at the option of the Issuers prior to May 15, 2006. On or after such
date, the Notes shall be redeemable at the option of the Issuers, in whole or in
part, on one or more occasions, on not less than 30 nor more than 60 days prior
notice, at the following redemption prices (expressed as percentages of
principal amount), plus accrued and unpaid interest, including Additional
Interest, if any, to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), if redeemed during the 12-month period commencing on May
15 of the years set forth below:



                                                             REDEMPTION
            YEAR                                               PRICE
            ----                                               -----
                                                         
            2006                                               106.0%
            2007                                               103.0%


            In addition, prior to May 15, 2005, the Issuers may, on one or more
occasions, redeem up to a maximum of 35% of the original aggregate principal
amount of the Notes (calculated giving effect to any issuance of Additional
Notes) at a redemption price equal to 112.0% of the principal amount thereof,
plus accrued and unpaid interest, including Additional Interest, if any, to the
applicable redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date) with the Net Cash Proceeds of one or more Equity Offerings by the Company;
provided, however, that after giving effect to any such redemption, (a) at least
65% of the original aggregate principal amount of the Notes (calculated giving
effect to any issuance of Additional Notes) remains outstanding and (b) such
redemption is made within 90 days of the date of closing of the applicable
Equity Offering upon not less than 30 nor more than 60 days notice mailed to
each Holder of Notes being redeemed and otherwise in accordance with the
procedures set forth in the Indenture.

            At any time on or prior to May 15, 2006, the Notes may also be
redeemed as a whole at the option of the Issuers upon the occurrence of a Change
of Control, upon not less than 30 nor more than 60 days' prior notice but in no
event more than 90 days after the occurrence of such Change of Control, mailed
by first-class mail to each Holder's registered address, at a redemption price
equal to 100% of the principal amount of Notes to be redeemed plus the
Applicable Premium as of, and accrued and unpaid interest, including Additional
Interest, if any, to the date of the redemption (the "Change of Control
Redemption Date"), except that installments of interest which are due and
payable on dates falling on or prior to the applicable redemption date will be
payable to the persons who were the Holders of record at the close of business
on the relevant record dates.

            "Applicable Premium" means, with respect to the notes at any Change
of Control Redemption Date, the greater of:

            (a) 1.0% of the principal amount of such Notes; and

            (b) the excess of

                                                                               9


                  (i) The present value at such time of (A) the redemption price
                  of such Notes at May 15, 2006, plus (B) all accrued and unpaid
                  interest required to be paid on such notes from the date of
                  redemption through May 15, 2006, computed using a discount
                  rate equal to the Treasury Rate plus 0.5% per annum, over

                  (ii) the principal amount of such Notes.

            "Treasury Rate" means the yield to maturity at the time of
computation of U.S. Treasury securities with a constant maturity (as compiled
and published in the most recent Federal Reserve Release H.15 (519) which has
become publicly available at least two Business Days prior to the Change of
Control Redemption Date (or, if such Statistical Release is no longer published,
any publicly available source or similar market data)) closest to the period
from the Change of Control Redemption Date to May 15, 2006; provided, however,
that if the period from the Change of Control Redemption Date to May 15, 2006,
is not equal to the constant maturity of a U.S. Treasury security for which a
weekly average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of one year) from the
weekly average yields of U.S. Treasury securities for which such yields are
given, except that, if the period from the Change of Control Redemption Date to
May 15, 2006, is less than one year, the weekly average yield on actually traded
U.S. Treasury securities adjusted to a constant maturity of one year shall be
used.

6. Sinking Fund

            The Notes are not subject to any sinking fund.

7. Notice of Redemption

            Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Notes to be redeemed at his or her registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000. If money sufficient to pay the redemption price of and accrued and
unpaid interest, including Additional Interest, if any, on all Notes (or
portions thereof) to be redeemed on the redemption date is deposited with the
Paying Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest ceases to accrue on such Notes (or
such portions thereof) called for redemption.

8. Repurchase of Notes at the Option of Holders upon Change of Control

            Upon a Change of Control, any Holder of Notes will have the right,
subject to certain conditions specified in the Indenture, to cause the Issuers
to repurchase all or any part of the Notes of such Holder at a purchase price
equal to 101% of the principal amount of the Notes to be repurchased plus
accrued and unpaid interest, including Additional Interest, if any, to the date
of repurchase (subject to the right of Holders of record on the relevant record
date to receive interest due on the relevant interest payment date that is on or
prior to the date of purchase) as provided in, and subject to the terms of, the
Indenture.

                                                                              10


            In accordance with Section 4.06 of the Indenture, the Issuers will
be required to offer to purchase Notes upon the occurrence of certain events.

9. Denominations; Transfer; Exchange

            The Notes are in registered form without coupons in denominations of
$1,000 and whole multiples of $1,000. A Holder may transfer or exchange Notes in
accordance with the Indenture. Upon any transfer or exchange, the Registrar and
the Trustee may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes required by law or
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Notes selected for redemption (except, in the case of a Note to be
redeemed in part, the portion of the Note not to be redeemed) or to transfer or
exchange any Notes for a period of 15 days prior to a selection of Notes to be
redeemed or 15 days before an interest payment date.

10. Persons Deemed Owners

            Except as provided in paragraph 2 hereof, the registered Holder of
this Note may be treated as the owner of it for all purposes.

11. Unclaimed Money

            If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Issuers at their written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Issuers and not to the Trustee for payment.

12. Discharge and Defeasance

            Subject to certain conditions, the Issuers at any time may terminate
some of or all their obligations under the Notes and the Indenture if the
Issuers deposit with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Notes to redemption or maturity, as the
case may be.

13. Amendment, Supplement and Waiver

            Subject to certain exceptions set forth in the Indenture, (a) the
Indenture, the Notes, the Note Guarantees or the Security Documents may be
amended without prior notice to any Holder but with the written consent of the
Holders of at least a majority in aggregate principal amount of the outstanding
Notes and (b) any default may be waived with the written consent of the Holders
of at least a majority in principal amount of the outstanding Notes. Subject to
certain exceptions set forth in the Indenture, without the consent of any
Holder, the Issuers and the Trustee may amend or supplement the Indenture, the
Notes, the Note Guarantees or the Security Documents (i) to cure any ambiguity,
omission, defect or inconsistency; (ii) to comply with Article 5; (iii) to
provide for uncertificated Notes in addition to or in place of certificated
Notes; provided, however, that the uncertificated Notes are issued in registered
form for purposes of Section 163(f) of the Code or in a manner such that the
uncertificated Notes are described in Section 163(f)(2)(B) of the Code; (iv) to
add additional Note Guarantees with

                                                                              11


respect to the Notes; (v) to add to the covenants of the Issuers for the benefit
of the Holders or to surrender any right or power herein conferred upon the
Issuers; (vi) to make any change that does not adversely affect the rights of
any Holder; (vii) to provide for the issuance of the Exchange Notes, Private
Exchange Notes or Additional Notes, which shall have terms substantially
identical in all material respects to the Original Notes (except that the
transfer restrictions contained in the Original Notes shall be modified or
eliminated, as appropriate), and which shall be treated, together with any
outstanding Original Notes, as a single issue of securities; (viii) to comply
with any requirement of the Commission in connection with qualifying, or
maintaining the qualification of, this Indenture under the TIA; or (ix) if
necessary, in connection with any addition or release of Collateral permitted
under the terms of this Indenture or Security Documents.

14. Defaults and Remedies

            If an Event of Default occurs (other than an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of the
Company or SCI LLC) and is continuing, the Trustee or the Holders of at least
25% in principal amount of the outstanding Notes may declare the principal of
and accrued but unpaid interest on all the Notes to be due and payable. If an
Event of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Company or SCI LLC occurs, the principal of and interest
on all the Notes shall become immediately due and payable without any
declaration or other act on the part of the Trustee or any Holders. Under
certain circumstances, the Holders of a majority in principal amount of the
outstanding Notes may rescind any such acceleration with respect to the Notes
and its consequences.

            If an Event of Default occurs and is continuing, the Trustee shall
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense and certain other conditions are complied with. Except to
enforce the right to receive payment of principal, premium (if any) or interest
when due, no Holder may pursue any remedy with respect to the Indenture or the
Notes unless (i) such Holder has previously given the Trustee notice that an
Event of Default is continuing, (ii) Holders of at least 25% in principal amount
of the outstanding Notes have requested the Trustee in writing to pursue the
remedy, (iii) such Holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense, (iv) the Trustee has not
complied with such request within 60 days after the receipt of the request and
the offer of security or indemnity and (v) the Holders of a majority in
principal amount of the outstanding Notes have not given the Trustee a direction
inconsistent with such request within such 60-day period. Subject to certain
restrictions, the Holders of a majority in principal amount of the outstanding
Notes are given the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust or
power conferred on the Trustee. The Trustee, however, may refuse to follow any
direction that conflicts with law or the Indenture or that the Trustee
determines is unduly prejudicial to the rights of any other Holder or that would
involve the Trustee in personal liability. Prior to taking any action under the
Indenture, the Trustee shall be entitled to indemnification satisfactory to it
in its sole discretion against all losses and expenses caused by taking or not
taking such action.

                                                                              12


15. Trustee Dealings with the Issuers

            Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with and collect obligations owed to it
by the Issuers or their Affiliates and may otherwise deal with the Issuers or
their Affiliates with the same rights it would have if it were not Trustee.

16. No Recourse Against Others

            A director, officer, employee, stockholder or member, as such, of
the Issuers or any of the Guarantors, shall not have any liability for any
obligations of the Issuers or any of the Guarantors under the Notes or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Note, each Holder shall waive and
release all such liability. The waiver and release shall be part of the
consideration for the issue of the Notes.

17. Authentication

            This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Note.

18. Abbreviations

            Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).

19. Governing Law

            THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

20. CUSIP and ISIN Numbers

            The Issuers may have caused CUSIP and ISIN numbers to be printed on
the Notes and directed the Trustee to use such CUSIP and ISIN numbers in notices
of redemption as a convenience to Holders. No representation is made as to the
accuracy of any such numbers either as printed on the Notes or as contained in
any notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.

                                                                              13


21. Designated Senior Indebtedness

            For purposes of the indenture that governs the Senior Subordinated
Notes, the Notes shall constitute Designated Senior Indebtedness (as such term
is defined in such indenture).

22. Tax Treatment of the Notes

            Pursuant to Section 12.14 of the Indenture, the Issuers agree, and
by acceptance of a beneficial ownership interest in the Notes, each beneficial
holder of the Notes shall be deemed to have agreed, for United States federal
income tax purposes, (i) to treat the Notes as debt instruments that are subject
to Section 1.1275-4(b) of the United States Treasury Regulations (the
"Contingent Debt Regulations") and (ii) to be bound by the Issuer's
determination of the "comparable yield" and "projected payment schedule," within
the meaning of the Contingent Debt Regulations, with respect to the Notes.

            THE ISSUERS WILL FURNISH TO ANY HOLDER OF NOTES UPON WRITTEN REQUEST
AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE
TEXT OF THIS NOTE.

                                                                              14


                                 ASSIGNMENT FORM


To assign this Note, fill in the form below:

I or we assign and transfer this Note to


      (Print or type assignee's name, address and zip code)

      (Insert assignee's soc. sec. or tax I.D. No.)


and irrevocably appoint                           agent to transfer this Note
on the books of the Issuers.  The agent may substitute another to act for him.


____________________________________________________________

Date: ________________ Your Signature: _____________________


____________________________________________________________________________
Sign exactly as your name appears on the other side of this Note. Signature must
be guaranteed by a participant in a recognized signature guaranty medallion
program or other signature guarantor acceptable to the Trustee.

                                       15


      CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER
                                RESTRICTED NOTES

This certificate relates to $_________ principal amount of Notes held in (check
applicable space) ____ book-entry or _____ definitive form by the undersigned.

The undersigned (check one box below):

- -     has requested the Trustee by written order to deliver in exchange for its
      beneficial interest in the Global Note held by the Depositary a Note or
      Notes in definitive, registered form of authorized denominations and an
      aggregate principal amount equal to its beneficial interest in such Global
      Note (or the portion thereof indicated above);

- -     has requested the Trustee by written order to exchange or register the
      transfer of a Note or Notes.

In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act, the undersigned confirms that such Notes are
being transferred in accordance with its terms:

CHECK ONE BOX BELOW

      (1)   -     to the Registrar for registration in the name of the
            Holder, without transfer; or

      (2)   -     pursuant to an effective registration statement under the
            Securities Act of 1933; or

      (3)   -     inside the United States to a "qualified institutional buyer"
            (as defined in Rule 144A under the Securities Act of 1933) that
            purchases for its own account or for the account of a qualified
            institutional buyer to whom notice is given that such transfer is
            being made in reliance on Rule 144A, in each case pursuant to and in
            compliance with Rule 144A under the Securities Act of 1933; or

      (4)   -     outside the United States in an offshore transaction within
            the meaning of Regulation S under the Securities Act in compliance
            with Rule 904 under the Securities Act of 1933 and such Note shall
            be held immediately after the transfer through Euroclear or
            Clearstream until the expiration of the Restricted Period (as
            defined in the Indenture); or

      (5)   -     pursuant to another available exemption from registration
            provided by Rule 144 under the Securities Act of 1933.

      Unless one of the boxes is checked, the Trustee will refuse to register
      any of the Notes evidenced by this certificate in the name of any Person
      other than the registered Holder

                                                                              16


      thereof; provided, however, that if box (4) or (5) is checked, the Trustee
      may require, prior to registering any such transfer of the Notes, such
      legal opinions, certifications and other information as the Issuers have
      reasonably requested to confirm that such transfer is being made pursuant
      to an exemption from, or in a transaction not subject to, the registration
      requirements of the Securities Act of 1933.


                                    _________________________
                                    Your Signature

Signature Guarantee:

Date: ___________________     ______________________________
Signature must be guaranteed              Signature of Signature
by a participant in a                     Guarantee
recognized signature guaranty
medallion program or other
signature guarantor acceptable
to the Trustee

____________________________________________________________




            TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.

      The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Issuers as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.



Dated: ________________       ______________________________
                                NOTICE:  To be executed by
                                        an executive officer

                                                                              17


                        [TO BE ATTACHED TO GLOBAL NOTES]

                SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE

      The initial principal amount of this Global Note is $[ ]. The following
increases or decreases in this Global Note have been made:




                                                          Principal amount of         Signature of
            Amount of decrease     Amount of increase       this Global Note      authorized signatory
 Date of    in Principal Amount    in Principal Amount       following such        of Trustee or Notes
Exchange    of this Global Note    of this Global Note     decrease or increase         Custodian
                                                                      



                                                                              18


                       OPTION OF HOLDER TO ELECT PURCHASE

                  IF YOU WANT TO ELECT TO HAVE THIS NOTE PURCHASED BY THE
ISSUERS PURSUANT TO SECTION 4.06 (ASSET DISPOSITION) OR 4.08 (CHANGE OF CONTROL)
OF THE INDENTURE, CHECK THE BOX:

                     ASSET DISPOSITION - CHANGE OF CONTROL -

                  IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS NOTE PURCHASED
BY THE ISSUERS PURSUANT TO SECTION 4.06 OR 4.08 OF THE INDENTURE, STATE THE
AMOUNT ($1,000 OR AN INTEGRAL MULTIPLE THEREOF):

$


DATE: __________________ YOUR SIGNATURE: __________________
(SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THE NOTE)


SIGNATURE GUARANTEE:_______________________________________
                     SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A
                     RECOGNIZED SIGNATURE GUARANTY MEDALLION PROGRAM OR
                     OTHER SIGNATURE GUARANTOR ACCEPTABLE TO THE TRUSTEE

                                                                       EXHIBIT B

                       [FORM OF FACE OF EXCHANGE NOTE]
                              [Global Notes Legend]

            UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE ISSUERS OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

            TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.

                                                                               2

No.________                                                     $__________

                        12% Senior Secured Note due 2008

                                                              CUSIP No. ______
                                                                  ISIN No.____

            ON Semiconductor Corporation, a Delaware corporation, and
Semiconductor Components Industries, LLC, a Delaware limited liability company,
promise to pay to [Cede & Co.], or registered assigns, the principal sum [of
         Dollars] [listed on the Schedule of Increases or Decreases in Global
Note attached hereto](2) on May 15, 2008.

            Interest Payment Dates:  May 15 and November 15.

            Record Dates:  May 1 and November 1.





______________

      2 Use the Schedule of Increases and Decreases language if Note is in
Global Form.

                                                                               3


            Additional provisions of this Note are set forth on the other side
of this Note.

            IN WITNESS WHEREOF, the parties have caused this instrument to be
duly executed.

                                    ON SEMICONDUCTOR CORPORATION,

                                    by
                                       ---------------------------------
                                       Name:
                                       Title:


                                    SEMICONDUCTOR COMPONENTS
                                    INDUSTRIES, LLC,

                                    by
                                       ---------------------------------
                                       Name:
                                       Title:


Dated:

TRUSTEE'S CERTIFICATE OF
      AUTHENTICATION

WELLS FARGO BANK MINNESOTA,
NATIONAL ASSOCIATION,

      as Trustee, certifies
      that this is one of
      the Notes referred
      to in the Indenture.

By
  -----------------------------
      Authorized Signatory



- --------------

*/ If the Note is to be issued in global form, add the Global Notes Legend and
the attachment from Exhibit A captioned "TO BE ATTACHED TO GLOBAL NOTES -
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE".

                                                                               4

                     [FORM OF REVERSE SIDE OF EXCHANGE NOTE]

                        12% Senior Secured Note due 2008


1. Interest

            ON Semiconductor Corporation, a Delaware corporation (the
"Company"), and Semiconductor Components Industries, LLC ("SCI LLC" and together
with the Company, and their successors and assigns under the Indenture
hereinafter referred to, being herein called the "Issuers"), promise to pay
interest on the principal amount of this Note at the rate per annum shown above;
provided that commencing on February 6, 2003, each Note shall accrue interest at
a rate of 13% per annum unless prior thereto the Issuers have issued common
stock or Qualified Preferred Stock generating at least $100 million in gross
cash proceeds and have used the net cash proceeds thereof to repay indebtedness
under the Credit Agreement or under any other credit facilities secured by a
first-priority lien on the Collateral and have permanently reduced the related
loan commitment equal to the amount prepaid. Such increase in interest rate, if
any, shall remain effective until such time as the Issuers have completed such
issuance of common stock or Qualified Preferred Stock and repayment, unless such
issuance and repayment of common stock or Qualified Preferred Stock occurs after
August 6, 2003, in which case such increase in interest rate will remain
effective. The Issuers shall pay interest semiannually on May 15 and November 15
of each year, commencing on November 15, 2002. Interest on the Notes shall
accrue from the most recent date to which interest has been paid or duly
provided for or, if no interest has been paid or duly provided for, from May 6,
2002 until the principal hereof is due. Interest shall be computed on the basis
of a 360-day year comprised of twelve 30-day months. "Qualified Preferred Stock"
means any preferred stock that (i) is not Disqualified Stock, (ii) does not
entitle the holder to receive cash dividends prior to November 1, 2009 (prior to
such date, dividends may accrue or be paid in kind), (iii) is convertible into
common stock and (iv) is issued to one or more financial sponsors, such as Texas
Pacific Group or any other private equity firm or similar entity.

2. Method of Payment

            The Issuers shall pay interest on the Notes (except defaulted
interest) to the Persons who are registered Holders of Notes at the close of
business on the May 1 or November 1 next preceding the interest payment date
even if Notes are canceled after the record date and on or before the interest
payment date. Holders must surrender Notes to a Paying Agent to collect
principal payments. The Issuers shall pay principal, premium, Additional
Interest, if any, and interest in money of the United States of America that at
the time of payment is legal tender for payment of public and private debts.
Payments in respect of the Notes represented by a Global Note (including
principal, premium, interest, including Additional Interest, if any) shall be
made by wire transfer of immediately available funds to the accounts specified
by The Depository Trust Company. The Issuers will make all payments in respect
of a certificated Note (including principal, premium and interest) by mailing a
check to the registered address of each Holder thereof; provided, however, that
payments on the Notes may also be made, in the case of a Holder of at least
$1,000,000 aggregate principal amount of Notes, by wire transfer to a U.S.

                                                                               5


dollar account maintained by the payee with a bank in the United States if such
Holder elects payment by wire transfer by giving written notice to the Trustee
or the Paying Agent to such effect designating such account no later than 30
days immediately preceding the relevant due date for payment (or such other date
as the Trustee may accept in its discretion).

3. Paying Agent and Registrar

            Initially, WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, a
national banking association (the "Trustee"), will act as Paying Agent and
Registrar. The Issuers may appoint and change any Paying Agent, Registrar or
co-registrar without notice. The Issuers or any of their domestically
incorporated Wholly-Owned Subsidiaries may act as Paying Agent, Registrar or
co-registrar.

4. Indenture

            The Issuers issued the Notes under an Indenture dated as of May 6,
2002 (the "Indenture"), among the Issuers, SCG (Malaysia SMP) Holding
Corporation, SCG (Czech) Holding Corporation, SCG (China) Holding Corporation,
Semiconductor Components Industries Puerto Rico, Inc., SCG International
Development LLC, Semiconductor Components Industries of Rhode Island, Inc. and
Semiconductor Components Industries International of Rhode Island, Inc.
(collectively, the "Guarantors") and the Trustee. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in
effect on the date of the Indenture (the "TIA"). Terms defined in the Indenture
and not defined herein have the meanings ascribed thereto in the Indenture. The
Notes are subject to all terms and provisions of the Indenture, and Holders are
referred to the Indenture and the TIA for a statement of such terms and
provisions.

            The Notes are senior secured obligations of the Issuers. This Note
is one of the [Exchange] [Additional] Notes referred to in the Indenture. The
Notes include the Original Notes, the Additional Notes and any Exchange Notes
and Private Exchange Notes issued in exchange for Initial Notes pursuant to the
Indenture. The Original Notes, the Additional Notes and any Exchange Notes and
Private Exchange Notes are treated as a single class of securities under the
Indenture. The Indenture imposes certain limitations on the ability of the
Issuers and its Restricted Subsidiaries to, among other things, make certain
Investments and other Restricted Payments, pay dividends and other
distributions, incur Indebtedness, enter into consensual restrictions upon the
payment of certain dividends and distributions by such Restricted Subsidiaries,
issue or sell shares of capital stock of such Restricted Subsidiaries, enter
into or permit certain transactions with Affiliates and make asset dispositions.
The Indenture also imposes limitations on the ability of the Issuers and each
Guarantor to consolidate or merge with or into any other Person or convey,
transfer or lease all or substantially all of the property of the Issuers.

            To guarantee the due and punctual payment of the principal and
interest, if any, on the Notes and all other amounts payable by the Issuers
under the Indenture and the Notes when and as the same shall be due and payable,
whether at maturity, by acceleration or otherwise, according to the terms of the
Notes and the Indenture, the Guarantors have, jointly

                                                                               6


and severally, unconditionally guaranteed the Guaranteed Obligations on a senior
subordinated basis pursuant to the terms of the Indenture.

            The Notes are secured on a second-priority basis by the Lien created
by the Security Documents pursuant to, and subject to the terms of, the
Indenture and the Intercreditor Agreement.

5. Optional Redemption

            Except as provided in paragraph 5 hereof, the Notes shall not be
redeemable at the option of the Issuers prior to May 15, 2006. On or after such
date, the Notes shall be redeemable at the option of the Issuers, in whole or in
part, on one or more occasions, on not less than 30 nor more than 60 days prior
notice, at the following redemption prices (expressed as percentages of
principal amount), plus accrued and unpaid interest, including Additional
Interest, if any, to the redemption date (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), if redeemed during the 12-month period commencing on May
15 of the years set forth below:



                                                            REDEMPTION
            YEAR                                               PRICE
            ----                                               -----
                                                         
            2006                                               106.0%
            2007                                               103.0%


            In addition, prior to May 15, 2005, the Issuers may, on one or more
occasions, redeem up to a maximum of 35% of the original aggregate principal
amount of the Notes (calculated giving effect to any issuance of Additional
Notes) at a redemption price equal to 112.0% of the principal amount thereof,
plus accrued and unpaid interest, including Additional Interest, if any, to the
applicable redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date) with the Net Cash Proceeds of one or more Equity Offerings by the Company;
provided, however, that after giving effect to any such redemption, (a) at least
65% of the original aggregate principal amount of the Notes (calculated giving
effect to any issuance of Additional Notes) remains outstanding and (b) such
redemption is made within 90 days of the date of closing of the applicable
Equity Offering upon not less than 30 nor more than 60 days notice mailed to
each Holder of Notes being redeemed and otherwise in accordance with the
procedures set forth in the Indenture.

            At any time on or prior to May 15, 2006, the Notes may also be
redeemed as a whole at the option of the Issuers upon the occurrence of a Change
of Control, upon not less than 30 nor more than 60 days' prior notice but in no
event more than 90 days after the occurrence of such Change of Control, mailed
by first-class mail to each Holder's registered address, at a redemption price
equal to 100% of the principal amount of Notes to be redeemed plus the
Applicable Premium as of, and accrued and unpaid interest, including Additional
Interest, if any, to the date of the redemption (the "Change of Control
Redemption Date"), except that installments of interest which are due and
payable on dates falling on or prior to the applicable redemption date will be
payable to the persons who were the Holders of record at the close of business
on the relevant record dates.

                                                                               7


            "Applicable Premium" means, with respect to the notes at any Change
of Control Redemption Date, the greater of:

            (a) 1.0% of the principal amount of such Notes; and

            (b) the excess of

                  (i) The present value at such time of (A) the redemption price
                  of such Notes at May 15, 2006, plus (B) all accrued and unpaid
                  interest required to be paid on such notes from the date of
                  redemption through May 15, 2006, computed using a discount
                  rate equal to the Treasury Rate plus 0.5% per annum, over

                  (ii) the principal amount of such Notes.

            "Treasury Rate" means the yield to maturity at the time of
computation of U.S. Treasury securities with a constant maturity (as compiled
and published in the most recent Federal Reserve Release H.15 (519) which has
become publicly available at least two Business Days prior to the Change of
Control Redemption Date (or, if such Statistical Release is no longer published,
any publicly available source or similar market data)) closest to the period
from the Change of Control Redemption Date to May 15, 2006; provided, however,
that if the period from the Change of Control Redemption Date to May 15, 2006,
is not equal to the constant maturity of a U.S. Treasury security for which a
weekly average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of one year) from the
weekly average yields of U.S. Treasury securities for which such yields are
given, except that, if the period from the Change of Control Redemption Date to
May 15, 2006, is less than one year, the weekly average yield on actually traded
U.S. Treasury securities adjusted to a constant maturity of one year shall be
used.

6. Sinking Fund

            The Notes are not subject to any sinking fund.

7. Notice of Redemption

            Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the redemption date to each Holder of
Notes to be redeemed at his or her registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000. If money sufficient to pay the redemption price of and accrued and
unpaid interest, including Additional Interest, if any, on all Notes (or
portions thereof) to be redeemed on the redemption date is deposited with the
Paying Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest ceases to accrue on such Notes (or
such portions thereof) called for redemption.

8. Repurchase of Notes at the Option of Holders upon Change of Control

            Upon a Change of Control, any Holder of Notes will have the right,
subject to certain conditions specified in the Indenture, to cause the Issuers
to repurchase all or any part of

                                                                               8


the Notes of such Holder at a purchase price equal to 101% of the principal
amount of the Notes to be repurchased plus accrued and unpaid interest,
including Additional Interest, if any, to the date of repurchase (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date that is on or prior to the date of
purchase) as provided in, and subject to the terms of, the Indenture.

            In accordance with Section 4.06 of the Indenture, the Issuers will
be required to offer to purchase Notes upon the occurrence of certain events.

9. Denominations; Transfer; Exchange

            The Notes are in registered form without coupons in denominations of
$1,000 and whole multiples of $1,000. A Holder may transfer or exchange Notes in
accordance with the Indenture. Upon any transfer or exchange, the Registrar and
the Trustee may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes required by law or
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Notes selected for redemption (except, in the case of a Note to be
redeemed in part, the portion of the Note not to be redeemed) or to transfer or
exchange any Notes for a period of 15 days prior to a selection of Notes to be
redeemed or 15 days before an interest payment date.

10. Persons Deemed Owners

            Except as provided in paragraph 2 hereof, the registered Holder of
this Note may be treated as the owner of it for all purposes.

11. Unclaimed Money

            If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Issuers at their written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Issuers and not to the Trustee for payment.

12. Discharge and Defeasance

            Subject to certain conditions, the Issuers at any time may terminate
some of or all their obligations under the Notes and the Indenture if the
Issuers deposit with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Notes to redemption or maturity, as the
case may be.

13. Amendment, Supplement and Waiver

            Subject to certain exceptions set forth in the Indenture, (a) the
Indenture, the Notes, the Note Guarantees or the Security Documents may be
amended without prior notice to any Holder but with the written consent of the
Holders of at least a majority in aggregate principal amount of the outstanding
Notes and (b) any default may be waived with the written consent of the Holders
of at least a majority in principal amount of the outstanding Notes. Subject to
certain exceptions set forth in the Indenture, without the consent of any
Holder, the

                                                                               9


Issuers and the Trustee may amend or supplement the Indenture, the Notes, the
Note Guarantees or the Security Documents (i) to cure any ambiguity, omission,
defect or inconsistency; (ii) to comply with Article 5; (iii) to provide for
uncertificated Notes in addition to or in place of certificated Notes; provided,
however, that the uncertificated Notes are issued in registered form for
purposes of Section 163(f) of the Code or in a manner such that the
uncertificated Notes are described in Section 163(f)(2)(B) of the Code; (iv) to
add additional Note Guarantees with respect to the Notes; (v) to add to the
covenants of the Issuers for the benefit of the Holders or to surrender any
right or power herein conferred upon the Issuers; (vi) to make any change that
does not adversely affect the rights of any Holder; (vii) to provide for the
issuance of the Exchange Notes, Private Exchange Notes or Additional Notes,
which shall have terms substantially identical in all material respects to the
Original Notes (except that the transfer restrictions contained in the Original
Notes shall be modified or eliminated, as appropriate), and which shall be
treated, together with any outstanding Original Notes, as a single issue of
securities; (viii) to comply with any requirement of the Commission in
connection with qualifying, or maintaining the qualification of, this Indenture
under the TIA; or (ix) if necessary, in connection with any addition or release
of Collateral permitted under the terms of this Indenture or Security Documents.

14. Defaults and Remedies

            If an Event of Default occurs (other than an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of the
Company or SCI LLC) and is continuing, the Trustee or the Holders of at least
25% in principal amount of the outstanding Notes may declare the principal of
and accrued but unpaid interest on all the Notes to be due and payable. If an
Event of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Company or SCI LLC occurs, the principal of and interest
on all the Notes shall become immediately due and payable without any
declaration or other act on the part of the Trustee or any Holders. Under
certain circumstances, the Holders of a majority in principal amount of the
outstanding Notes may rescind any such acceleration with respect to the Notes
and its consequences.

            If an Event of Default occurs and is continuing, the Trustee shall
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense and certain other conditions are complied with. Except to
enforce the right to receive payment of principal, premium (if any) or interest
when due, no Holder may pursue any remedy with respect to the Indenture or the
Notes unless (i) such Holder has previously given the Trustee notice that an
Event of Default is continuing, (ii) Holders of at least 25% in principal amount
of the outstanding Notes have requested the Trustee in writing to pursue the
remedy, (iii) such Holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense, (iv) the Trustee has not
complied with such request within 60 days after the receipt of the request and
the offer of security or indemnity and (v) the Holders of a majority in
principal amount of the outstanding Notes have not given the Trustee a direction
inconsistent with such request within such 60-day period. Subject to certain
restrictions, the Holders of a majority in principal amount of the outstanding
Notes are given the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust or
power conferred on the Trustee.

                                       10


The Trustee, however, may refuse to follow any direction that conflicts with law
or the Indenture or that the Trustee determines is unduly prejudicial to the
rights of any other Holder or that would involve the Trustee in personal
liability. Prior to taking any action under the Indenture, the Trustee shall be
entitled to indemnification satisfactory to it in its sole discretion against
all losses and expenses caused by taking or not taking such action.

15. Trustee Dealings with the Issuers

            Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with and collect obligations owed to it
by the Issuers or their Affiliates and may otherwise deal with the Issuers or
their Affiliates with the same rights it would have if it were not Trustee.

16. No Recourse Against Others

            A director, officer, employee, stockholder or member, as such, of
the Issuers or any of the Guarantors, shall not have any liability for any
obligations of the Issuers or any of the Guarantors under the Notes or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Note, each Holder shall waive and
release all such liability. The waiver and release shall be part of the
consideration for the issue of the Notes.

17. Authentication

            This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Note.

18. Abbreviations

            Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).

19. Governing Law

            THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

20. CUSIP and ISIN Numbers

            The Issuers may have caused CUSIP and ISIN numbers to be printed on
the Notes and directed the Trustee to use such CUSIP and ISIN numbers in notices
of redemption as a

                                                                              11


convenience to Holders. No representation is made as to the accuracy of any such
numbers either as printed on the Notes or as contained in any notice of
redemption and reliance may be placed only on the other identification numbers
placed thereon.

21. Designated Senior Indebtedness

            For purposes of the indenture that governs the Senior Subordinated
Notes, the Notes shall constitute Designated Senior Indebtedness (as such term
is defined in such indenture).

22. Tax Treatment of the Notes

            Pursuant to Section 12.14 of the Indenture, the Issuers agree, and
by acceptance of a beneficial ownership interest in the Notes, each beneficial
holder of the Notes shall be deemed to have agreed, for United States federal
income tax purposes, (i) to treat the Notes as debt instruments that are subject
to Section 1.1275-4(b) of the United States Treasury Regulations (the
"Contingent Debt Regulations") and (ii) to be bound by the Issuer's
determination of the "comparable yield" and "projected payment schedule," within
the meaning of the Contingent Debt Regulations, with respect to the Notes.

            THE ISSUERS WILL FURNISH TO ANY HOLDER OF NOTES UPON WRITTEN REQUEST
AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE
TEXT OF THIS NOTE.

                                                                              12


                                 ASSIGNMENT FORM

To assign this Note, fill in the form below:

I or we assign and transfer this Note to


     (Print or type assignee's name, address and zip code)

     (Insert assignee's soc. sec. or tax I.D. No.)


and irrevocably appoint                           agent to transfer this Note
on the books of the Issuers.  The agent may substitute another to act for him.


____________________________________________________________

Date: ________________ Your Signature: _____________________


____________________________________________________________
Sign exactly as your name appears on the other side of this Note. Signature must
be guaranteed by a participant in a recognized signature guaranty medallion
program or other signature guarantor acceptable to the Trustee.

                                                                              13


                        [TO BE ATTACHED TO GLOBAL NOTES]

                SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE

            The initial principal amount of this Global Note is $[       ]. The
following increases or decreases in this Global Note have been made:




                                                          Principal amount of         Signature of
            Amount of decrease     Amount of increase       this Global Note      authorized signatory
 Date of    in Principal Amount    in Principal Amount       following such        of Trustee or Notes
Exchange    of this Global Note    of this Global Note     decrease or increase         Custodian
                                                                      



                                                                              14


                       OPTION OF HOLDER TO ELECT PURCHASE

            IF YOU WANT TO ELECT TO HAVE THIS NOTE PURCHASED BY THE ISSUERS
PURSUANT TO SECTION 4.06 (ASSET DISPOSITION) OR 4.08 (CHANGE OF CONTROL) OF THE
INDENTURE, CHECK THE BOX:

                   ASSET DISPOSITION - CHANGE OF CONTROL -


                  IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS NOTE PURCHASED
BY THE ISSUERS PURSUANT TO SECTION 4.06 OR 4.08 OF THE INDENTURE, STATE THE
AMOUNT ($1,000 OR AN INTEGRAL MULTIPLE THEREOF):

$


DATE: __________________ YOUR SIGNATURE: __________________
                              (SIGN EXACTLY AS YOUR NAME APPEARS
                  ON THE OTHER SIDE OF THE NOTE)


SIGNATURE GUARANTEE:____________________________________________
                        SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A
                        RECOGNIZED SIGNATURE GUARANTY MEDALLION PROGRAM OR
                        OTHER SIGNATURE GUARANTOR ACCEPTABLE TO THE TRUSTEE.

                                                                       EXHIBIT C

                         FORM OF SUPPLEMENTAL INDENTURE


                        SUPPLEMENTAL INDENTURE (this "Supplemental Indenture")
                  dated as of       , among [GUARANTOR] (the "New Guarantor"), a
                  subsidiary of ON Semiconductor Corporation, a Delaware
                  corporation (the "Company"), the Company, Semiconductor
                  Components Industries, LLC ("SCI LLC" and, together with the
                  Company and their successors and assigns, the "Issuers") (or
                  their successors), SCG (Malaysia SMP) Holding Corporation, SCG
                  (Czech) Holding Corporation, SCG (China) Holding Corporation,
                  Semiconductor Components Industries Puerto Rico, Inc., SCG
                  International Development LLC, Semiconductor Components
                  Industries of Rhode Island, Inc., Semiconductor Components
                  Industries International of Rhode Island, Inc. and WELLS FARGO
                  BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking
                  association, as trustee under the indenture referred to below
                  (the "Trustee").

                              W I T N E S S E T H :

            WHEREAS the Issuers and SCG (Malaysia SMP) Holding Corporation, SCG
(Czech) Holding Corporation, SCG (China) Holding Corporation, Semiconductor
Components Industries Puerto Rico, Inc., SCG International Development LLC,
Semiconductor Components Industries of Rhode Island, Inc. and Semiconductor
Components Industries International of Rhode Island, Inc. (collectively, the
"Existing Guarantors") have heretofore executed and delivered to the Trustee an
Indenture (the "Indenture") dated as of May 6, 2002, providing for the issuance
of an unlimited aggregate principal amount of 12% Senior Secured Notes due 2008
(the "Notes");

            WHEREAS Section 4.11 of the Indenture provides that under certain
circumstances the Issuers are required to cause the New Guarantor to execute and
deliver to the Trustee a supplemental indenture pursuant to which the New
Guarantor shall unconditionally guarantee all the Issuers' obligations under the
Notes pursuant to a Note Guarantee on the terms and conditions set forth herein;
and

            WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the
Issuers and the Existing Guarantors are authorized to execute and deliver this
Supplemental Indenture;

            NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Guarantor, the Issuers, the Existing Guarantors and the Trustee mutually
covenant and agree for the equal and ratable benefit of the holders of the Notes
as follows:

            1. Agreement to Guarantee. The New Guarantor hereby agrees, jointly
and severally with all the Existing Guarantors, to unconditionally guarantee the
Issuers' obligations

                                                                               2


under the Notes on the terms and subject to the conditions set forth in Article
11 of the Indenture and to be bound by all other applicable provisions of the
Indenture and the Notes.

            2. Ratification of Indenture; Supplemental Indentures Part of
Indenture. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every holder of Notes heretofore or
hereafter authenticated and delivered shall be bound hereby.

            3. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

            4. Trustee Makes No Representation. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental Indenture.

            5. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.

            6. Effect of Headings. The Section headings herein are for
convenience only and shall not effect the construction thereof.

            IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.



                                    [NEW GUARANTOR],

                                    by
                                        ---------------------------------
                                        Name:
                                        Title:


                                    ON SEMICONDUCTOR CORPORATION,

                                    by
                                        ---------------------------------
                                        Name:
                                        Title:

                                                                               3



                                    SEMICONDUCTOR COMPONENTS INDUSTRIES LLC,

                                    by
                                        ---------------------------------
                                        Name:
                                        Title:


                                    SCG (MALAYSIA SMP) HOLDING CORPORATION,

                                    by
                                        ---------------------------------
                                        Name:
                                        Title:


                                    SCG (CZECH) HOLDING CORPORATION,

                                    by
                                        ---------------------------------
                                        Name:
                                        Title:


                                    SCG (CHINA) HOLDING CORPORATION,

                                    by
                                        ---------------------------------
                                        Name:
                                        Title:


                                    SEMICONDUCTOR COMPONENTS INDUSTRIES PUERTO
                                    RICO, INC.,

                                    by
                                        ---------------------------------
                                        Name:
                                        Title:

                                                                               4



                                    SCG INTERNATIONAL DEVELOPMENT LLC,

                                    by
                                        ---------------------------------
                                        Name:
                                        Title:


                                    SEMICONDUCTOR COMPONENTS INDUSTRIES OF RHODE
                                    ISLAND, INC.,

                                    by
                                        ---------------------------------
                                        Name:
                                        Title:


                                    SEMICONDUCTOR COMPONENTS INDUSTRIES
                                    INTERNATIONAL OF RHODE ISLAND, INC.,

                                    by
                                        ---------------------------------
                                        Name:
                                        Title:


                                    WELLS FARGO BANK MINNESOTA, NATIONAL
                                    ASSOCIATION, as Trustee,

                                    by
                                        ---------------------------------
                                        Name:
                                        Title:


                                                                     Exhibit 4.5
                                  $300,000,000

                          ON SEMICONDUCTOR CORPORATION
                    SEMICONDUCTOR COMPONENTS INDUSTRIES, LLC

                        12% SENIOR SECURED NOTES DUE 2008

                          REGISTRATION RIGHTS AGREEMENT

                                                                     May 6, 2002


Credit Suisse First Boston Corporation
Morgan Stanley & Co. Incorporated
Salomon Smith Barney Inc.
J.P. Morgan Securities Inc.
c/o Credit Suisse First Boston Corporation
      Eleven Madison Avenue
      New York, New York 10010-3629


Dear Sirs:


      ON Semiconductor Corporation, a Delaware corporation (the "HOLDING
COMPANY"), and Semiconductor Components Industries, LLC, a Delaware limited
liability Company ("SCI LLC" and, together with the Holding Company, the
"ISSUERS") propose to issue and sell to Credit Suisse First Boston Corporation
and Morgan Stanley & Co. Incorporated, Salomon Smith Barney Inc. and J.P. Morgan
Securities Inc. (collectively, the "INITIAL PURCHASERS"), upon the terms set
forth in a purchase agreement of dated May 1, 2002 (the "PURCHASE AGREEMENT"),
$300,000,000 aggregate principal amount of its 12% Senior Secured Notes (the
"INITIAL SECURITIES") to be jointly and severally guaranteed on a senior secured
basis (the "GUARANTIES") by SCG (Malaysia SMP) Holding Corporation, SCG (Czech)
Holding Corporation, SCG (China) Holding Corporation, Semiconductor Components
Industries Puerto Rico, Inc., SCG International Development LLC, Semiconductor
Components Industries of Rhode Island, Inc. and Semiconductor Components
Industries International of Rhode Island, Inc. (the "GUARANTORS" and,
collectively with the Issuers, the "COMPANY"). The Initial Securities will be
issued pursuant to an Indenture, dated as of the date hereof (the "INDENTURE"),
among the Issuers, the Guarantors and Wells Fargo Bank Minnesota, National
Association, a national banking association, as trustee (the "TRUSTEE"). As an
inducement to the Initial Purchasers to enter into the Purchase Agreement, the
Company agrees with the Initial Purchasers, for the benefit of the Initial
Purchasers and the holders of the Securities (as defined below) (collectively
the "HOLDERS"), as follows:

         1. Registered Exchange Offer. Unless not permitted by applicable law
(after the Company has complied with the ultimate paragraph of this Section 1),
the Company shall prepare and, not later than 150 days (such 150th day being a
"FILING DEADLINE") after the date on which the Initial Purchasers purchase the
Initial Securities pursuant to the Purchase Agreement (the "CLOSING DATE"), file
with the Securities and Exchange Commission (the "COMMISSION") a registration
statement (the "EXCHANGE OFFER REGISTRATION STATEMENT") on an appropriate form
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), with
respect to a proposed offer (the "REGISTERED EXCHANGE OFFER") to the Holders of
Transfer Restricted Securities (as defined in Section 6 hereof), who are not
prohibited by any law or policy of the Commission from participating in the
Registered Exchange Offer, to issue and deliver to such Holders, in exchange for
the Initial Securities, a like aggregate principal amount of debt securities of
the Company issued under the Indenture, identical in all material respects to
the Initial Securities and registered under the Securities Act (the "EXCHANGE
SECURITIES"). The Company shall use its reasonable best efforts to (i) cause
such Exchange Offer Registration Statement to be declared effective under the
Securities Act within 270 days after the Closing Date (such 270th day being an
"EFFECTIVENESS DEADLINE") and (ii) keep the Exchange Offer Registration
Statement effective for not less than 30 days (or longer, if required by
applicable law) after the date notice of the Registered Exchange Offer is mailed
to the Holders (such period being called the "EXCHANGE OFFER REGISTRATION
PERIOD").

         If the Company commences the Registered Exchange Offer, the Company
(i) will be entitled to consummate the Registered Exchange Offer 30 days after
such commencement (provided that the Company has accepted all the Initial
Securities theretofore validly tendered in accordance with the terms of the

Registered Exchange Offer) and (ii) will be required to consummate the
Registered Exchange Offer no later than 300 days after the Closing date (such
300th day being the "CONSUMMATION DEADLINE").

         Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall as promptly as is practicable
commence the Registered Exchange Offer, it being the objective of such
Registered Exchange Offer to enable each Holder of Transfer Restricted
Securities electing to exchange the Initial Securities for Exchange Securities
(assuming that such Holder is not an affiliate of the Company within the
meaning of the Securities Act, acquires the Exchange Securities in the ordinary
course of such Holder's business and has no arrangements with any person to
participate in the distribution of the Exchange Securities and is not prohibited
by any law or policy of the Commission from participating in the Registered
Exchange Offer) to trade such Exchange Securities from and after their receipt
without any limitations or restrictions under the Securities Act and without
material restrictions under the securities laws of the several states of the
United States.

         The Company acknowledges that, pursuant to current interpretations by
the Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder that is a broker-dealer electing
to exchange Initial Securities, acquired for its own account as a result of
market making activities or other trading activities, for Exchange Securities
(an "EXCHANGING DEALER"), is required to deliver a prospectus containing the
information set forth in (a) Annex A hereto on the cover, (b) Annex B hereto in
the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer"
section, and (c) Annex C hereto in the "Plan of Distribution" section of such
prospectus in connection with a sale of any such Exchange Securities received by
such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) an
Initial Purchaser that elects to sell Securities (as defined below) acquired in
exchange for Initial Securities constituting any portion of an unsold allotment,
is required to deliver a prospectus containing the information required by Items
507 or 508 of Regulation S-K under the Securities Act, as applicable, in
connection with such sale.

         The Company shall use its reasonable best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
prospectus contained therein, in order to permit such prospectus to be lawfully
delivered by all persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such persons must comply with such
requirements in order to resell the Exchange Securities; provided, however, that
(i) in the case where such prospectus and any amendment or supplement thereto
must be delivered by an Exchanging Dealer or an Initial Purchaser, such period
shall be the lesser of 180 days and the date on which all Exchanging Dealers and
the Initial Purchasers have sold all Exchange Securities held by them (unless
such period is extended pursuant to Section 3(j) below) and (ii) the Company
shall make such prospectus and any amendment or supplement thereto available to
any broker-dealer for use in connection with any resale of any Exchange
Securities for a period of not less than 180-days after the consummation of the
Registered Exchange Offer.

         If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Initial Securities acquired by it as part of its initial
distribution, the Company, simultaneously with the delivery of the Exchange
Securities pursuant to the Registered Exchange Offer, shall issue and deliver to
such Initial Purchaser upon the written request of such Initial Purchaser, in
exchange (the "PRIVATE EXCHANGE") for the Initial Securities held by such
Initial Purchaser, a like principal amount of debt securities of the Company
issued under the Indenture and identical in all material respects to the Initial
Securities (the "PRIVATE EXCHANGE SECURITIES"). The Initial Securities, the
Exchange Securities and the Private Exchange Securities are herein collectively
called the "SECURITIES".

         In connection with the Registered Exchange Offer, the Company shall:

                  (a) mail to each Holder a copy of the prospectus forming part
            of the Exchange Offer Registration Statement, together with an
            appropriate letter of transmittal and related documents;

                  (b) keep the Registered Exchange Offer open for not less than
         30 days (or longer, if required by applicable law) after the date
         notice thereof is mailed to the Holders (it being understood that the
         Company may extend a Registered Exchange Offer or Private Exchange
         beyond the time at which it is scheduled to expire (either at the end
         of the originally scheduled offer period or at the end of a
         subsequently scheduled extension of such period), by issuing a press
         release announcing such extension and otherwise complying with
         applicable law);

                  (c) utilize the services of a depositary for the Registered
         Exchange Offer with an address in the Borough of Manhattan, The City of
         New York, which may be the Trustee or an affiliate of the Trustee;


                                        2

                  (d) permit Holders to withdraw tendered Securities at any time
            prior to the close of business, New York time, on the last business
            day on which the Registered Exchange Offer shall remain open (except
            that, in the case where the Registered Exchange Offer or Private
            Exchange is extended beyond the time at which it is scheduled to
            expire (either at the end of the originally scheduled offer period
            or at the end of a subsequently scheduled extension of such period),
            those Securities that are validly tendered and not withdrawn
            pursuant to such Registered Exchange Offer or Private Exchange, as
            the case may be, as of such time may be accepted for exchange and
            may not subsequently be withdrawn by the tendering Holders); and

                  (e) otherwise comply with all applicable laws.

         As soon as practicable after the close of the Registered Exchange Offer
or the Private Exchange, as the case may be, the Company shall:

                  (x) accept for exchange all the Securities validly tendered
         and not withdrawn pursuant to the Registered Exchange Offer and the
         Private Exchange;

                  (y) deliver to the Trustee for cancellation all the Initial
         Securities so accepted for exchange; and

                  (z) cause the Trustee to authenticate and deliver promptly to
            each Holder of the Initial Securities, Exchange Securities or
            Private Exchange Securities, as the case may be, equal in principal
            amount to the Initial Securities of such Holder so accepted for
            exchange.

Notwithstanding the foregoing, it is understood that, in the case where the
Registered Exchange Offer or Private Exchange is extended beyond the time at
which it is scheduled to expire (either at the end of the originally scheduled
offer period or at the end of a subsequently scheduled extension of such
period), those Securities that are validly tendered and not withdrawn pursuant
to such Registered Exchange Offer or Private Exchange, as the case may be, as of
such time may be accepted for exchange and may not subsequently be withdrawn by
the tendering Holders.

         The Indenture will provide that the Exchange Securities will not be
subject to the transfer restrictions set forth in the Indenture and that all the
Securities will vote and consent together on all matters as one class and that
none of the Securities will have the right to vote or consent as a class
separate from one another on any matter.

         Interest on each Exchange Security and Private Exchange Security
issued pursuant to the Registered Exchange Offer and in the Private Exchange
will accrue from the last interest payment date on which interest was paid on
the Initial Securities surrendered in exchange therefor or, if no interest has
been paid on the Initial Securities, from the date of original issue of the
Initial Securities.

      Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that, at the time such Holder's tendered
Securities are accepted for exchange, (i) any Exchange Securities received by
such Holder will be acquired in the ordinary course of business, (ii) such
Holder will have no arrangements or understanding with any person to participate
in the distribution of the Securities or the Exchange Securities within the
meaning of the Securities Act, (iii) such Holder is not an "affiliate," as
defined in Rule 405 of the Securities Act, of the Company or if it is an
affiliate, such Holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable, (iv) if such Holder
is not a broker-dealer, that it is not engaged in, and does not intend to engage
in, the distribution of the Exchange Securities and (v) if such Holder is a
broker-dealer, that it will receive Exchange Securities for its own account in
exchange for Initial Securities that were acquired as a result of market-making
activities or other trading activities and that it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Securities.

         Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any prospectus
forming part of any Exchange Offer Registration Statement, and any supplement to
such prospectus, does not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.

                                       3



      If following the date hereof there has been announced a change in
Commission policy with respect to exchange offers that in the reasonable opinion
of counsel to the Company raises a substantial question as to whether the
Registered Exchange Offer is permitted by applicable federal law, the Company
will seek a no-action letter or other favorable decision from the Commission
allowing the Company to consummate the Registered Exchange Offer. The Company
will pursue the issuance of such a decision to the Commission staff level. In
connection with the foregoing, the Company will take all such other commercially
reasonable actions as may be requested by the Commission in connection with the
issuance of such decision, including without limitation (i) participating in
telephonic conferences with the Commission, (ii) delivering to the Commission
staff an analysis prepared by counsel to the Company setting forth the legal
bases, if any, upon which such counsel has concluded that the Registered
Exchange Offer should be permitted and (iii) diligently pursuing a resolution
(which need not be favorable) by the Commission staff.

      2. Shelf Registration. If, (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission, the Company
is not permitted to effect a Registered Exchange Offer, as contemplated by
Section 1 hereof, (ii) the Registered Exchange Offer is not consummated by the
300th day after the Closing Date, (iii) any Initial Purchaser so requests with
respect to the Initial Securities (or the Private Exchange Securities) not
eligible to be exchanged for Exchange Securities in the Registered Exchange
Offer and held by it following consummation of the Registered Exchange Offer or
(iv) any Holder (other than an Exchanging Dealer) is not eligible to participate
in the Registered Exchange Offer or, in the case of any Holder (other than an
Exchanging Dealer) that participates in the Registered Exchange Offer, such
Holder does not receive freely tradeable Exchange Securities on the date of the
exchange and any such Holder so requests, the Company shall take the following
actions (the date on which any of the conditions described in the foregoing
clauses (i) through (iv) occur, including in the case of clauses (iii) or (iv)
the receipt of the required notice, being a "TRIGGER DATE"):




                  (a) The Company shall promptly (but in no event more than 60
         days after the Trigger Date (such 60th day being a "FILING DEADLINE"))
         file with the Commission and there after use its reasonable best
         efforts to cause to be declared effective no later than 270 days after
         the Trigger Date (such 270th day being an "EFFECTIVENESS DEADLINE") a
         registration statement (the "SHELF REGISTRATION STATEMENT" and,
         together with the Exchange Offer Registration Statement, a
         "REGISTRATION STATEMENT") on an appropriate form under the Securities
         Act relating to the offer and sale of the Transfer Restricted
         Securities by the Holders thereof from time to time in accordance with
         the methods of distribution set forth in the Shelf Registration
         Statement and Rule 415 under the Securities Act (hereinafter, the
         "SHELF REGISTRATION"); provided, however, that no Holder (other than an
         Initial Purchaser) shall be entitled to have the Securities held by it
         covered by such Shelf Registration Statement unless such Holder agrees
         in writing to be bound by all the provisions of this Agreement
         applicable to such Holder.

                  (b) The Company shall use its reasonable best efforts to keep
         the Shelf Registration Statement continuously effective in order to
         permit the prospectus included therein to be lawfully delivered by
         the Holders of the relevant Securities, for a period of two years (or
         for such longer period if extended pursuant to Section 3(j) below)
         after the Closing Date or such shorter period that will terminate when
         all the Securities covered by the Shelf Registration Statement (i) have
         been sold pursuant thereto or (ii) are no longer restricted securities
         (as defined in Rule 144 under the Securities Act, or any successor
         rule thereof).

                  (c) Notwithstanding any other provisions of this Agreement to
         the contrary, the Company shall cause the Shelf Registration Statement
         and the related prospectus and any amendment or supplement thereto, as
         of the effective date of the Shelf Registration Statement, amendment or
         supplement, (i) to comply in all material respects with the applicable
         requirements of the Securities Act and the rules and regulations of the
         Commission and (ii) not to contain any untrue statement of a material
         fact or omit to state a material fact required to be stated therein
         or necessary in order to make the statements therein, in light of the
         circumstances under which they were made, not misleading.

         3. Registration Procedures. In connection with any Shelf Registration
contemplated by Section 2 hereof and, to the extent applicable, any Registered
Exchange Offer contemplated by Section 1 hereof, the following provisions shall
apply:


                  (a) The Company shall (i) furnish to each Initial Purchaser,
         prior to the filing thereof with the Commission, a copy of the
         Registration Statement and each amendment thereof and each supplement,
         if any, to the prospectus included therein and, in the event that an
         Initial Purchaser (with respect to any portion of an unsold allotment
         from the original offering) is participating in the Registered
         Exchange Offer or the Shelf Registration Statement, the Company shall
         use its reasonable best efforts to reflect in each such document, when
         so filed with the Commission, such


                                        4

         comments as such Initial Purchaser reasonably may propose; (ii) include
         the information set forth in Annex A hereto on the cover, in Annex B
         hereto in the "Exchange Offer Procedures" section and the "Purpose of
         the Exchange Offer" section and in Annex C hereto in the "Plan of
         Distribution" section of the prospectus forming a part of the Exchange
         Offer Registration Statement and include the information set forth in
         Annex D hereto in the Letter of Transmittal delivered pursuant to the
         Registered Exchange Offer; (iii) if requested by an Initial Purchaser,
         include the information required by Items 507 or 508 of Regulation S-K
         under the Securities Act, as applicable, in the prospectus forming a
         part of the Exchange Offer Registration Statement; (iv) include within
         the prospectus contained in the Exchange Offer Registration Statement a
         section entitled "Plan of Distribution," reasonably acceptable to the
         Initial Purchasers, which shall contain a summary statement of the
         positions taken or policies made by the staff of the Commission with
         respect to the potential "underwriter" status of any broker-dealer that
         is the beneficial owner (as defined in Rule 13d-3 under the Securities
         Exchange Act of 1934, as amended (the "EXCHANGE ACT")) of Exchange
         Securities received by such broker-dealer in the Registered Exchange
         Offer (a "PARTICIPATING BROKER-DEALER"), whether such positions or
         policies have been publicly disseminated by the staff of the Commission
         or such positions or policies, in the reasonable judgment of the
         Initial Purchasers based upon advice of counsel (which may be in-house
         counsel), represent the prevailing views of the staff of the
         Commission; and (v) in the case of a Shelf Registration Statement,
         include the names of the Holders who propose to sell Securities
         pursuant to the Shelf Registration Statement as selling
         security holders.

                  (b) The Company shall give written notice to the Initial
         Purchasers, the Holders of the Securities and any Participating
         Broker-Dealer from whom the Company has received prior written notice
         that it will be a Participating Broker-Dealer in the Registered
         Exchange Offer (which notice pursuant to clauses (ii)-(v) hereof shall
         be accompanied by an instruction to suspend the use of the prospectus
         until the requisite changes have been made):

                           (i) when the Registration Statement or any amendment
                  thereto has been filed with the Commission and when the
                  Registration Statement or any post-effective amendment thereto
                  has become effective;

                           (ii) of any request by the Commission for amendments
                  or supplements to the Registration Statement or the prospectus
                  included therein or for additional information;


                           (iii) of the issuance by the Commission of any stop
                  order suspending the effectiveness of the Registration
                  Statement or the initiation of any proceedings for that
                  purpose;


                           (iv) of the receipt by the Company or its legal
                  counsel of any notification with respect to the suspension of
                  the qualification of the Securities for sale in any
                  jurisdiction or the initiation or threatening of any
                  proceeding for such purpose; and

                           (v) of the happening of any event that requires
                  the Company to make changes in the Registration Statement or
                  the prospectus in order that the Registration Statement or the
                  prospectus do not contain an untrue statement of a material
                  fact nor omit to state a material fact required to be stated
                  therein or necessary to make the statements therein (in the
                  case of the prospectus, in light of the circumstances under
                  which they were made) not misleading.

                  (c) The Company shall make every reasonable effort to obtain
         the withdrawal at the earliest possible time, of any order suspending
         the effectiveness of the Registration Statement.

                  (d) The Company shall furnish to each Holder of Securities
         included within the coverage of the Shelf Registration, without charge,
         at least one copy of the Shelf Registration Statement and any
         post-effective amendment thereto, including financial statements and
         schedules, and, if the Holder so requests in writing, all exhibits
         thereto (including those, if any, incorporated by reference).

                  (e) The Company shall deliver to each Exchanging Dealer and
         each Initial Purchaser, and to any other Holder who so requests,
         without charge, at least one copy of the Exchange Offer Registration
         Statement and any post-effective amendment thereto, including
         financial statements and schedules, and, if any Initial Purchaser or
         any such Holder requests, all exhibits thereto (including those
         incorporated by reference).


                                        5

                  (f) The Company shall, during the Shelf Registration Period,
         deliver to each Holder of Securities included within the coverage of
         the Shelf Registration, without charge, as many copies of the
         prospectus (including each preliminary prospectus) included in the
         Shelf Registration Statement and any amendment or supplement thereto as
         such person may reasonably request. The Company consents, subject to
         the provisions of this Agreement, to the use of the prospectus or any
         amendment or supplement thereto by each of the selling Holders of the
         Securities in connection with the offering and sale of the Securities
         covered by the prospectus, or any amendment or supplement thereto,
         included in the Shelf Registration Statement.

                  (g) The Company shall deliver to each Initial Purchaser, any
         Exchanging Dealer, any Participating Broker-Dealer and such other
         persons required to deliver a prospectus following the Registered
         Exchange Offer, without charge, as many copies of the final prospectus
         included in the Exchange Offer Registration Statement and any
         amendment or supplement thereto as such persons may reasonably request.
         The Company consents, subject to the provisions of this Agreement,
         to the use of the prospectus or any amendment or supplement thereto
         by any Initial Purchaser, if necessary, any Participating
         Broker-Dealer and such other persons required to deliver a prospectus
         following the Registered Exchange Offer in connection with the offering
         and sale of the Exchange Securities covered by the prospectus, or any
         amendment or supplement thereto, included in such Exchange Offer
         Registration Statement.

                  (h) Prior to any public offering of the Securities pursuant to
         any Registration Statement the Company shall register or qualify or
         cooperate with the Holders of the Securities included therein and their
         respective counsel in connection with the registration or qualification
         of the Securities for offer and sale under the securities or "blue sky"
         laws of such states of the United States as any Holder of the
         Securities reasonably requests in writing and do any and all other
         acts or things necessary or advisable to enable the offer and sale in
         such jurisdictions of the Securities covered by such Registration
         Statement; provided, however, that the Company shall not be required to
         (i) qualify generally to do business in any jurisdiction where it is
         not then so qualified or (ii) take any action which would subject it to
         general service of process or to taxation in any jurisdiction where it
         is not then so subject.

                  (i) The Company shall cooperate with the Holders of the
         Securities to facilitate the timely preparation and delivery of
         certificates representing the Securities to be sold pursuant to any
         Registration Statement free of any restrictive legends and in such
         denominations and registered in such names as the Holders may request
         a reasonable period of time prior to sales of the Securities pursuant
         to such Registration Statement.

                  (j) Upon the occurrence of any event contemplated by
         paragraphs (ii) through (v) of Section 3(b) above during the period for
         which the Company is required to maintain an effective Registration
         Statement, the Company shall promptly prepare and file a post-effective
         amendment to the Registration Statement or a supplement to the related
         prospectus and any other required document so that, as thereafter
         delivered to Holders of the Securities or purchasers of Securities,
         the prospectus will not contain an untrue statement of a material fact
         or omit to state any material fact required to be stated therein or
         necessary to make the statements therein, in light of the circumstances
         under which they were made, not misleading. If the Company notifies the
         Initial Purchasers, the Holders of the Securities and any known
         Participating Broker-Dealer in accordance with paragraphs (ii) through
         (v) of Section 3(b) above to suspend the use of the prospectus until
         the requisite changes to the prospectus have been made, then the
         Initial Purchasers, the Holders of the Securities and any such
         Participating Broker-Dealers shall suspend use of such prospectus, and
         the period of effectiveness of the Shelf Registration Statement
         provided for in Section 2(b) above and the Exchange Offer
         Registration Statement provided for in Section 1 above shall each be
         extended by the number of days from and including the date of the
         giving of such notice to and including the date when the Initial
         Purchasers, the Holders of the Securities and any known Participating
         Broker-Dealer shall have received such amended or supplemented
         prospectus pursuant to this Section 3(j).

                  (k) Not later than the effective date of the applicable
         Registration Statement, the Company will provide a CUSIP number for
         the Initial Securities, the Exchange Securities or the Private Exchange
         Securities, as the case may be, and provide the applicable trustee with
         printed certificates for the Initial Securities, the Exchange
         Securities or the Private Exchange Securities, as the case may be, in a
         form eligible for deposit with The Depository Trust Company.

                  (l) The Company will comply with all rules and regulations of
         the Commission to the extent and so long as they are applicable to the
         Registered Exchange Offer or the Shelf Registration and will make
         generally available to its security holders (or otherwise provide in


                                        6

      accordance with Section 11(a) of the Securities Act) an earnings statement
      satisfying the provisions of Section 11(a) of the Securities Act, no later
      than 45 days after the end of a 12-month period (or 90 days, if such
      period is a fiscal year) beginning with the first month of the Company's
      first fiscal quarter commencing after the effective date of the
      Registration Statement, which statement shall cover such 12-month period.

            (m) The Company shall cause the Indenture to be qualified under the
      Trust Indenture Act of 1939, as amended, in a timely manner and containing
      such changes, if any, as shall be necessary for such qualification. In the
      event that such qualification would require the appointment of a new
      trustee under the Indenture, the Company shall appoint a new trustee
      thereunder pursuant to the applicable provisions of the Indenture.

            (n) The Company may require each Holder of Securities to be sold
      pursuant to the Shelf Registration Statement to furnish to the Company
      such information regarding the Holder and the distribution of the
      Securities as the Company may from time to time reasonably require for
      inclusion in the Shelf Registration Statement, and the Company may exclude
      from such registration the Securities of any Holder that unreasonably
      fails to furnish such information within a reasonable time after receiving
      such request.

            (o) The Company shall enter into such customary agreements
      (including, if requested, an underwriting agreement in customary form) and
      take all such other action, if any, as any Holder of the Securities shall
      reasonably request in order to facilitate the disposition of the
      Securities pursuant to any Shelf Registration.

            (p) In the case of any Shelf Registration, the Company shall (i)
      make reasonably available for inspection by the Holders of the Securities,
      any underwriter participating in any disposition pursuant to the Shelf
      Registration Statement and any attorney, accountant or other agent
      retained by the Holders of the Securities or any such underwriter all
      relevant financial and other records, pertinent corporate documents and
      properties of the Company and (ii) cause the Company's officers,
      directors, employees, accountants and auditors to supply all relevant
      information reasonably requested by the Holders of the Securities or any
      such underwriter, attorney, accountant or agent in connection with the
      Shelf Registration Statement, in each case, as shall be reasonably
      necessary to enable such persons, to conduct a reasonable investigation
      within the meaning of Section 11 of the Securities Act; provided, however,
      that the foregoing inspection and information gathering shall be
      coordinated on behalf of the Initial Purchasers by you and on behalf of
      the other parties, by one counsel designated by and on behalf of such
      other parties as described in Section 4 hereof.

            (q) In the case of any Shelf Registration, the Company, if requested
      by any Holder of Securities covered thereby, shall cause (i) its counsel
      (who may be in-house counsel) to deliver an opinion and updates thereof
      relating to the Securities in customary form addressed to such Holders and
      the managing underwriters, if any, thereof and dated, in the case of the
      initial opinion, the effective date of such Shelf Registration Statement
      (it being agreed that the matters to be covered by such opinion shall
      include, without limitation, the due incorporation and good standing of
      the Company and its subsidiaries; the qualification of the Company and its
      subsidiaries to transact business as foreign corporations; the due
      authorization, execution and delivery of the relevant agreement of the
      type referred to in Section 3(o) hereof; the due authorization, execution,
      authentication and issuance, and the validity and enforceability, of the
      applicable Securities; the absence of material legal or governmental
      proceedings involving the Company and its subsidiaries; the absence of
      governmental approvals required to be obtained in connection with the
      Shelf Registration Statement, the offering and sale of the applicable
      Securities, or any agreement of the type referred to in Section 3(o)
      hereof; the compliance as to form of such Shelf Registration Statement and
      any documents incorporated by reference therein and of the Indenture with
      the requirements of the Securities Act and the Trust Indenture Act,
      respectively; and, as of the date of the opinion and as of the effective
      date of the Shelf Registration Statement or most recent post-effective
      amendment thereto, as the case may be, the absence from such Shelf
      Registration Statement and the prospectus included therein, as then
      amended or supplemented, and from any documents incorporated by reference
      therein of an untrue statement of a material fact or the omission to state
      therein a material fact required to be stated therein or necessary to make
      the statements therein not misleading (in the case of any such documents,
      in the light of the circumstances existing at the time that such documents
      were filed with the Commission under the Exchange Act); (ii) its officers
      to execute and deliver all customary documents and certificates and
      updates thereof requested by any underwriters of the applicable Securities
      and (iii) its independent public accountants and the independent public
      accountants with respect to the financial information relating to
      Semiconductor Components Group of Motorola, Inc. provided in the Shelf


                                       7

      Registration Statement to provide to the selling Holders of the applicable
      Securities and any underwriter therefor a comfort letter in customary form
      and covering matters of the type customarily covered in comfort letters in
      connection with primary underwritten offerings, subject to receipt of
      appropriate documentation as contemplated, and only if permitted, by
      Statement of Auditing Standards No. 72.

            (r) In the case of the Registered Exchange Offer, if requested by
      any Initial Purchaser or any known Participating Broker-Dealer, the
      Company shall cause (i) its counsel (who may be in-house counsel) to
      deliver to such Initial Purchaser or such Participating Broker-Dealer a
      signed opinion in the form set forth in Section 6(c) of the Purchase
      Agreement with such changes as are customary in connection with the
      preparation of a Registration Statement and (ii) its independent public
      accountants and the independent public accountants with respect to the
      financial information relating to Semiconductor Components Group of
      Motorola, Inc. provided in the Registration Statement to deliver to such
      Initial Purchaser or such Participating Broker-Dealer a comfort letter, in
      customary form, meeting the requirements as to the substance thereof as
      set forth in Section 6(a) of the Purchase Agreement, with appropriate date
      changes.

            (s) If Securities are to be accepted for exchange pursuant to a
      Registered Exchange Offer or a Private Exchange, upon delivery of such
      Securities by Holders to the Company (or to such other Person as directed
      by the Company) in exchange for the Exchange Securities or the Private
      Exchange Securities, as the case may be, the Company shall mark, or caused
      to be marked, on the Initial Securities so exchanged that such Initial
      Securities are being canceled in exchange for the Exchange Securities or
      the Private Exchange Securities, as the case may be; in no event shall the
      Initial Securities be marked as paid or otherwise satisfied.

            (t) In the event that any broker-dealer registered under the
      Exchange Act shall underwrite any Securities or participate as a member of
      an underwriting syndicate or selling group or "assist in the distribution"
      (within the meaning of the Conduct Rules (the "RULES") of the National
      Association of Securities Dealers, Inc. ("NASD ")) thereof, whether as a
      Holder of such Securities or as an underwriter, a placement or sales agent
      or a broker or dealer in respect thereof, or otherwise, the Company will
      assist such broker-dealer in complying with the requirements of such
      Rules, including, without limitation, by (i) if such Rules, including Rule
      2720, shall so require, engaging a "qualified independent underwriter" (as
      defined in Rule 2720) to participate in the preparation of the
      Registration Statement relating to such Securities, to exercise usual
      standards of due diligence in respect thereto and, if any portion of the
      offering contemplated by such Registration Statement is an underwritten
      offering or is made through a placement or sales agent, to recommend the
      yield of such Securities, (ii) indemnifying any such qualified independent
      underwriter to the extent of the indemnification of underwriters provided
      in Section 5 hereof and (iii) providing such information to such
      broker-dealer as may be required in order for such broker-dealer to comply
      with the requirements of the Rules.

            (u) The Company shall use its reasonable best efforts to take all
      other steps necessary to effect the registration of the Securities covered
      by a Registration Statement contemplated hereby.

            4. Registration Expenses.

            (a) All expenses incident to the Company's performance of and
      compliance with this Agreement will be borne by the Company, regardless of
      whether a Registration Statement is ever filed or becomes effective,
      including without limitation;

                  (i) all registration and filing fees and expenses;

                  (ii) all fees and expenses of compliance with federal
            securities and state "blue sky" or securities laws;

                  (iii) all expenses of printing (including printing
            certificates for the Securities to be issued in the Registered
            Exchange Offer and the Private Exchange and printing of
            Prospectuses), messenger and delivery services and telephone;

                  (iv) all fees and disbursements of counsel for the Company;

                  (v) all application and filing fees in connection with listing
            the Exchange Securities on a national securities exchange or
            automated quotation system pursuant to the requirements hereof; and


                                       8

                  (vi) all fees and disbursements of independent certified
            public accountants of the Company (including the expenses of any
            special audit and comfort letters required by or incident to such
            performance).

The Company will bear its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expenses of any annual audit and the fees and expenses
of any person, including special experts, retained by the Company.

            (b) In connection with any Registration Statement required by this
      Agreement, the Company will reimburse the Initial Purchasers and the
      Holders of Transfer Restricted Securities who are tendering Initial
      Securities in the Registered Exchange Offer and/or selling or reselling
      Securities pursuant to the "Plan of Distribution" contained in the
      Exchange Offer Registration Statement or the Shelf Registration Statement,
      as applicable, for the reasonable, documented fees and disbursements of
      not more than one counsel chosen by the Initial Purchasers unless another
      firm shall be chosen by the Holders of a majority in principal amount of
      the Transfer Restricted Securities for whose benefit such Registration
      Statement is being prepared.

      5. Indemnification.

            (a) The Company agrees to indemnify and hold harmless each Holder of
      the Securities, any Participating Broker-Dealer and each person, if any,
      who controls such Holder or such Participating Broker-Dealer within the
      meaning of the Securities Act or the Exchange Act (each Holder, any
      Participating Broker-Dealer and such controlling persons are referred to
      collectively as the "INDEMNIFIED PARTIES") from and against any losses,
      claims, damages or liabilities, joint or several, or any actions in
      respect thereof (including, but not limited to, any losses, claims,
      damages, liabilities or actions relating to purchases and sales of the
      Securities) to which each Indemnified Party may become subject under the
      Securities Act, the Exchange Act or otherwise, insofar as such losses,
      claims, damages, liabilities or actions arise out of or are based upon any
      untrue statement or alleged untrue statement of a material fact contained
      in a Registration Statement or prospectus or in any amendment or
      supplement thereto or in any preliminary prospectus relating to a Shelf
      Registration, or arise out of, or are based upon, the omission or alleged
      omission to state therein a material fact required to be stated therein or
      necessary to make the statements therein not misleading, and shall
      reimburse, as incurred, the Indemnified Parties for any legal or other
      expenses reasonably incurred by them in connection with investigating or
      defending any such loss, claim, damage, liability or action in respect
      thereof; provided, however, that (i) the Company shall not be liable in
      any such case to the extent that such loss, claim, damage or liability
      arises out of or is based upon any untrue statement or alleged untrue
      statement or omission or alleged omission made in a Registration Statement
      or prospectus or in any amendment or supplement thereto or in any
      preliminary prospectus relating to a Shelf Registration in reliance upon
      and in conformity with written information pertaining to such Holder and
      furnished to the Company by or on behalf of such Holder specifically for
      inclusion therein and (ii) with respect to any untrue statement or
      omission or alleged untrue statement or omission made in any preliminary
      prospectus relating to a Shelf Registration Statement, the indemnity
      agreement contained in this subsection (a) shall not inure to the benefit
      of any Holder or Participating Broker-Dealer from whom the person
      asserting any such losses, claims, damages or liabilities purchased the
      Securities concerned, to the extent that a prospectus relating to such
      Securities was required to be delivered by such Holder or Participating
      Broker-Dealer under the Securities Act in connection with such purchase
      and any such loss, claim, damage or liability of such Holder or
      Participating Broker-Dealer results from the fact that there was not sent
      or given to such person, at or prior to the written confirmation of the
      sale of such Securities to such person, a copy of the final prospectus if
      the Company had previously furnished copies thereof to such Holder or
      Participating Broker-Dealer; provided further, however, that this
      indemnity agreement will be in addition to any liability which the Company
      may otherwise have to such Indemnified Party. The Company shall also
      indemnify underwriters, their officers and directors and each person who
      controls such underwriters within the meaning of the Securities Act or the
      Exchange Act to the same extent as provided above with respect to the
      indemnification of the Holders of the Securities if requested by such
      Holders.

            (b) Each Holder of the Securities, severally and not jointly, will
      indemnify and hold harmless the Company and each person, if any, who
      controls the Company within the meaning of the Securities Act or the
      Exchange Act from and against any losses, claims, damages or liabilities
      or any actions in respect thereof, to which the Company or any such
      controlling person may become subject under the Securities Act, the
      Exchange Act or otherwise, insofar as such losses, claims, damages,
      liabilities or actions arise out of or are based upon any untrue statement
      or alleged untrue statement of a material fact contained in a Registration
      Statement or prospectus or


                                       9

      in any amendment or supplement there to or in any preliminary prospectus
      relating to a Shelf Registration, or arise out of or are based upon the
      omission or alleged omission to state therein a material fact necessary to
      make the statements therein not misleading, but in each case only to the
      extent that the untrue statement or omission or alleged untrue statement
      or omission was made in reliance upon and in conformity with written
      information pertaining to such Holder and furnished to the Company by or
      on behalf of such Holder specifically for inclusion therein; and, subject
      to the limitation set forth immediately preceding this clause, shall
      reimburse, as incurred, the Company for any documented legal or other
      expenses reasonably incurred by the Company or any such controlling person
      in connection with investigating or defending any loss, claim, damage,
      liability or action in respect thereof. This indemnity agreement will be
      in addition to any liability which such Holder may otherwise have to the
      Company or any of its controlling persons.

            (c) Promptly after receipt by an indemnified party under this
      Section 5 of notice of the commencement of any action or proceeding
      (including a governmental investigation), such indemnified party will, if
      a claim in respect thereof is to be made against the indemnifying party
      under this Section 5, notify the indemnifying party of the commencement
      thereof; but the omission so to notify the indemnifying party will not, in
      any event, relieve the indemnifying party from any obligations to any
      indemnified party other than the indemnification obligation provided in
      paragraph (a) or (b) above. In case any such action is brought against any
      indemnified party, and it notifies the indemnifying party of the
      commencement thereof, the indemnifying party will be entitled to
      participate therein and, to the extent that it may wish, jointly with any
      other indemnifying party similarly notified, to assume the defense
      thereof, with counsel reasonably satisfactory to such indemnified party
      (who shall not, except with the consent of the indemnified party, be
      counsel to the indemnifying party), and after notice from the indemnifying
      party to such indemnified party of its election so to assume the defense
      thereof the indemnifying party will not be liable to such indemnified
      party under this Section 5 for any legal or other expenses, other than
      reasonable costs of investigation, subsequently incurred by such
      indemnified party in connection with the defense thereof and as provided
      in the following sentence. In any such proceeding, any indemnified party
      shall have the right to retain its own counsel, but the fees and expenses
      of such counsel shall be at the expense of such indemnified party unless
      (i) the indemnifying party and the indemnified party shall have mutually
      agreed to the contrary; (ii) the indemnifying party has failed within a
      reasonable time to retain counsel reasonably satisfactory to the
      indemnified party; (iii) the indemnified party shall have reasonably
      concluded that there may be legal defenses available to it that are
      different from or in addition to those available to the indemnifying
      party; or (iv) the named parties in any such proceeding (including any
      impleaded parties) include both the indemnifying party and the indemnified
      party and representation of both parties by the same counsel would be
      inappropriate due to actual or potential differing interests between them.
      No indemnifying party shall, without the prior written consent of the
      indemnified party, effect any settlement of any pending or threatened
      action in respect of which any indemnified party is or could have been a
      party and indemnity could have been sought hereunder by such indemnified
      party unless such settlement (i) includes an unconditional release of such
      indemnified party from all liability on any claims that are the subject
      matter of such action, and (ii) does not include a statement as to or an
      admission of fault, culpability or a failure to act by or on behalf of any
      indemnified party.

            (d) If the indemnification provided for in this Section 5 is
      unavailable or insufficient to hold harmless an indemnified party under
      subsections (a) or (b) above, then each indemnifying party shall
      contribute to the amount paid or payable by such indemnified party as a
      result of the losses, claims, damages or liabilities (or actions in
      respect thereof) referred to in subsection (a) or (b) above in such
      proportion as is appropriate to reflect the relative fault of the
      indemnifying party or parties on the one hand and the indemnified party
      on the other in connection with the statements or omissions that resulted
      in such losses, claims, damages or liabilities (or actions in respect
      thereof) as well as any other relevant equitable considerations. The
      relative fault of the parties shall be determined by reference to, among
      other things, whether the untrue or alleged untrue statement of a material
      fact or the omission or alleged omission to state a material fact relates
      to information supplied by the Company on the one hand or such Holder or
      such other indemnified party, as the case may be, on the other, and the
      parties' relative intent, knowledge, access to information and opportunity
      to correct or prevent such statement or omission. The amount paid by an
      indemnified party as a result of the losses, claims, damages or
      liabilities referred to in the first sentence of this subsection (d) shall
      be deemed to include any legal or other expenses reasonably incurred by
      such indemnified party in connection with investigating or defending any
      action or claim which is the subject of this subsection (d).
      Notwithstanding any other provision of this Section 5(d), the Holders of
      the Securities shall not be required to contribute any amount in excess of
      the amount by which the net proceeds received by such Holders from the
      sale of the Securities pursuant to a Registration Statement exceeds the
      amount of damages which such Holders have otherwise been required to pay
      by reason of such untrue or alleged untrue statement or omission or


                                       10

      alleged omission. No person guilty of fraudulent misrepresentation (within
      the meaning of Section 11(f) of the Securities Act) shall be entitled to
      contribution from any person who was not guilty of such fraudulent
      misrepresentation. For purposes of this paragraph (d), each person, if
      any, who controls such indemnified party within the meaning of the
      Securities Act or the Exchange Act shall have the same rights to
      contribution as such indemnified party and each person, if any, who
      controls the Company within the meaning of the Securities Act or the
      Exchange Act shall have the same rights to contribution as the Company.

            (e) The agreements contained in this Section 5 shall survive the
      sale of the Securities pursuant to a Registration Statement and shall
      remain in full force and effect, regardless of any termination or
      cancellation of this Agreement or any investigation made by or on behalf
      of any indemnified party.

      6. Additional Interest Under Certain Circumstances.

            (a) Additional interest (the "ADDITIONAL INTEREST") with respect to
      the Securities shall be assessed as follows if any of the following events
      occur (each such event in clauses (i) through (iv) below being herein
      called a "REGISTRATION DEFAULT"):

                  (i) any Registration Statement required by this Agreement is
            not filed with the Commission on or prior to the applicable Filing
            Deadline;

                  (ii) any Registration Statement required by this Agreement is
            not declared effective by the Commission on or prior to the
            applicable Effectiveness Deadline;

                  (iii) the Registered Exchange Offer has not been consummated
            on or prior to the Consummation Deadline; or

                  (iv) any Registration Statement is declared effective within
            270 days after the Closing Date (or in the case of Shelf
            Registration Statement to be filed in response to any change in law
            or applicable interpretations thereof, within 60 days after the
            publication of the change in law or interpretation) but shall
            thereafter cease to be effective (at any time that the Company is
            obligated to maintain the effectiveness thereof) without being
            succeeded within 30 days by an additional Registration Statement
            filed and declared effective.

Each of the foregoing will constitute a Registration Default whatever the reason
for any such event and whether it is voluntary or involuntary or is beyond the
control of the Company or pursuant to operation of law or as a result of any
action or inaction by the Commission.

Additional Interest shall accrue on the Securities over and above the interest
set forth in the title of the Securities from and including the date on which
any such Registration Default shall occur to but excluding the date on which all
such Registration Defaults have been cured, at a rate of 0.50% per annum (the
"ADDITIONAL INTEREST RATE") for the first 90-day period immediately following
the occurrence of such Registration Default. The Additional Interest Rate shall
increase by an additional 0.50% per annum with respect to each subsequent 90-day
period until all Registration Defaults have been cured, up to a maximum
Additional Interest Rate of 2.0% per annum.

      (b) Any amounts of Additional Interest due pursuant to Section 6(a) will
be payable in cash on the regular interest payment dates with respect to the
Securities. The amount of Additional Interest will be determined by multiplying
the applicable Additional Interest Rate by the principal amount of the
Securities and further multiplied by a fraction, the numerator of which is the
number of days such Additional Interest Rate was applicable during such period
(determined on the basis of a 360-day year comprised of twelve 30-day months),
and the denominator of which is 360.

      (c) "TRANSFER RESTRICTED SECURITIES" means each Security until (i) the
date on which such Security has been exchanged by a person other than a
broker-dealer for a freely transferable Exchange Security in the Registered
Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered
Exchange Offer of an Initial Security for an Exchange Note, the date on which
such Exchange Note is sold to a purchaser who receives from such broker-dealer
on or prior to the date of such sale a copy of the prospectus contained in the
Exchange Offer Registration Statement, (iii) the date on which such Security has
been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iv) the date on which such
Security is distributed to the public pursuant to Rule 144 under the Securities
Act or is saleable pursuant to Rule 144(k) under the Securities Act.


                                       11

      7. Rules 144 and 144A. The Company shall use its best efforts to file the
reports required to be filed by it under the Securities Act and the Exchange Act
in a timely manner and, if at any time the Company is not required to file such
reports, it will, upon the request of any Holder of Securities, make publicly
available other information so long as necessary to permit sales of their
securities pursuant to Rules 144 and 144A. The Company covenants that it will
take such further action as any Holder of Securities may reasonably request, all
to the extent required from time to time to enable such Holder to sell
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rules 144 and 144A (including the requirements of
Rule 144A(d)(4)). The Company will provide a copy of this Agreement to
prospective purchasers of Initial Securities identified to the Company by the
Initial Purchasers upon request. Upon the request of any Holder of Initial
Securities, the Company shall deliver to such Holder a written statement as to
whether it has complied with such requirements. Notwithstanding the foregoing,
nothing in this Section 7 shall be deemed to require the Company to register any
of its securities pursuant to the Exchange Act.

      8. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering ("MANAGING UNDERWRITERS") will be selected by
the Holders of a majority in aggregate principal amount of such Transfer
Restricted Securities to be included in such offering.

      No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.

      9. Miscellaneous.

            (a) Remedies. The Company acknowledges and agrees that any failure
      by the Company to comply with its obligations under Section 1 and 2 hereof
      may result in material irreparable injury to the Initial Purchasers or the
      Holders for which there is no adequate remedy at law, that it will not be
      possible to measure damages for such injuries precisely and that, in the
      event of any such failure, the Initial Purchasers or any Holder may obtain
      such relief as may be required to specifically enforce the Company's
      obligations under Sections 1 and 2 hereof. The Company further agrees to
      waive the defense in any action for specific performance that a remedy at
      law would be adequate.

            (b) No Inconsistent Agreements. The Company will not on or after the
      date of this Agreement enter into any agreement with respect to its
      securities that is inconsistent with the rights granted to the Holders in
      this Agreement or otherwise conflicts with the provisions hereof. The
      rights granted to the Holders hereunder do not in any way conflict with
      and are not inconsistent with the rights granted to the holders of the
      Company's securities under any agreement in effect on the date hereof.

      (c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and the written
consent of the Holders of a majority in principal amount of the Securities
affected by such amendment, modification, supplement, waiver or consents.
Without the consent of the Holder of each Security, however, no modification may
change the provisions relating to the payment of Additional Interest.

      (d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:

            (1) if to a Holder of the Securities, at the most current address
      given by such Holder to the Company.

            (2) if to the Initial Purchasers;

            Credit Suisse First Boston Corporation
            Eleven Madison Avenue
            New York, NY 10010-3629
            Fax No.: (212) 325-8278
            Attention: Transactions Advisory Group


                                       12

            (3) if to the Company, at its address as follows:

            ON Semiconductor Corporation
            5005 East McDowell Road
            Phoenix, Arizona 85005
            Fax No.:  (602) 244-5601
            Attention: General Counsel

      with a copy to:

            Cleary, Gottlieb, Steen & Hamilton
            One Liberty Plaza
            New York, New York 10006-1470
            Fax No.:  (212) 225-3999
            Attention: Steven H. Shalen, Esq.

      All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged by recipient's facsimile machine operator, if sent by facsimile
transmission; and on the day delivered, if sent by overnight air courier
guaranteeing next day delivery.

      (e) Third Party Beneficiaries. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent they may deem such enforcement
necessary or advisable to protect their rights or the rights of Holders
hereunder.

      (f) Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns.

      (g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

      (h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

      (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.

      (j) Severability. If any one or more of the provisions contained herein,
or the application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or imp aired thereby.

      (k) Securities Held by the Company. Whenever the consent or approval of
Holders of a specified percentage of principal amount of Securities is required
hereunder, Securities held by the Company or its affiliates (other than
subsequent Holders of Securities if such subsequent Holders are deemed to be
affiliates solely by reason of their holdings of such Securities) shall not be
counted in determining whether such consent or approval was given by the Holders
of such required percentage.

      If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Holding Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will


                                       13

become a binding agreement among the several Initial Purchasers, the Issuers and
the Guarantors in accordance with its terms.

                                            Very truly yours,


                                            By: ON SEMICONDUCTOR CORPORATION,


                                            by /s/ George H. Cave
                                              ----------------------------------
                                              Name: George H. Cave
                                              Title: Secretary



                                            By: SEMICONDUCTOR COMPONENTS
                                                INDUSTRIES, LLC,


                                            by /s/ George H. Cave
                                              ----------------------------------
                                              Name: George H. Cave
                                              Title: Secretary



                                            By: SCG (MALAYSIA SMP) HOLDING
                                                CORPORATION,


                                            by /s/ George H. Cave
                                              ----------------------------------
                                              Name: George H. Cave
                                              Title: Secretary



                                            By: SCG (CZECH) HOLDING CORPORATION,


                                            by /s/ George H. Cave
                                              ----------------------------------
                                              Name: George H. Cave
                                              Title: Secretary



                                            By: SCG (CHINA) HOLDING CORPORATION,


                                            by /s/ George H. Cave
                                              ----------------------------------
                                              Name: George H. Cave
                                              Title: Secretary


                                            By: SEMICONDUCTOR COMPONENTS
                                                INDUSTRIES PUERTO RICO, INC.,


                                            by /s/ George H. Cave
                                              ----------------------------------
                                              Name: George H. Cave
                                              Title: Secretary


                                       14

                                           By: SCG INTERNATIONAL DEVELOPMENT,
                                               LLC,


                                           by /s/ George H. Cave
                                             ----------------------------------
                                             Name: George H. Cave
                                             Title: Secretary



                                           By: SEMICONDUCTOR COMPONENTS
                                               INDUSTRIES OF RHODE ISLAND, INC.,


                                           by /s/ Judith A. Boyle
                                             ----------------------------------
                                             Name: Judith A. Boyle
                                             Title: Secretary



                                           By: SEMICONDUCTOR COMPONENTS
                                               INDUSTRIES INTERNATIONAL OF RHODE
                                               ISLAND, INC.,


                                           by /s/ Judith A. Boyle
                                             ----------------------------------
                                             Name: Judith A. Boyle
                                             Title: Secretary


The foregoing Registration
Rights Agreement is hereby confirmed
and accepted as of the date first
above written.

CREDIT SUISSE FIRST BOSTON CORPORATION
MORGAN STANLEY & CO. INCORPORATED
SALOMON SMITH BARNEY INC.
J.P. MORGAN  SECURITIES INC.


By: CREDIT SUISSE FIRST BOSTON CORPORATION,



by /s/ Ted Iantuono
  -----------------------------------
  Name: Ted Iantuono
  Title: Director


                                       15

                                                                         ANNEX A


Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. The Letter
of Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Securities received in exchange for Initial Securities
where such Initial Securities were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."


                                       16

                                                                         ANNEX B


     Each broker-dealer that receives Exchange Securities for its own account in
exchange for Initial Securities, where such Initial Securities were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."


                                       17

                                                                         ANNEX C


                              PLAN OF DISTRIBUTION

      Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Securities received in
exchange for Initial Securities where such Initial Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 180 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until               , 2002,
all dealers effecting transactions in the Exchange Securities may be required to
deliver a prospectus.(1)

      The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Securities. Any broker-dealer that resells Exchange Securities that were
received by it for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Securities and any commission or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.

      For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
Holders of the Securities) other than commissions or concessions of any brokers
or dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.



- ----------

  (1) In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the inside front cover page of the Exchange Offer prospectus below the
Table of Contents.


                                       18

                                                                         ANNEX D


[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.

     Name:    ___________________________________________

     Address: ___________________________________________




If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Initial Securities that were
acquired as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.


                                       19



                                                                    Exhibit 10.1


                 ON SEMICONDUCTOR 2002 EXECUTIVE INCENTIVE PLAN

1. PURPOSES.

         The purposes of the ON Semiconductor 2002 Executive Incentive Plan
("Plan") are to motivate the Company's Covered Employees (as defined below) to
improve stockholder value by linking a portion of their cash compensation to the
Company's financial performance, reward Covered Employees for improving the
Company's financial performance, and help attract and retain such Covered
Employees. The Plan is designed to ensure that the bonus paid hereunder to the
Covered Employees of the Company is deductible without limit under Section
162(m) of the Internal Revenue Code of 1986, as amended, and the regulations and
interpretations promulgated thereunder (the "Code").

2. DEFINITIONS.

         The use of singular or plural defined terms in the Plan shall have the
same meaning as in this Article 2.

         A. "Award" means any cash incentive payment made under the Plan.

         B. "Code" means the Internal Revenue Code of 1986, as amended.

         C. "Committee" means the Compensation Committee of ON's Board of
Directors, or such other committee designated by that Board of Directors, which
is authorized to administer the Plan under Section 3 hereof. The Committee shall
consist of at least two individuals who qualify as outside directors of the
Company under Code Section 162(m). The Committee shall have the sole discretion
and authority to administer and interpret the Plan in accordance with Code
Section 162(m).

         D. "Company" means ON and any corporation or other business entity of
which ON (i) directly or indirectly has an ownership interest of 50% or more, or
(ii) has a right to elect or appoint 50% or more of the board of directors or
other governing body.

         E. "Covered Employee" means any employee of the Company who is a
"covered employee" as within the meaning of Section 162(m)(3) of the Code.

         F. "ON" means ON Semiconductor Corporation.

         G. "Participant" means a Covered Employee who is designated by the
Committee to participate in the Plan for a fiscal year (or performance period)
pursuant to Article 4 of this Plan.

         H. "Plan" means the ON Semiconductor 2002 Executive Incentive Plan.

3. ADMINISTRATION.

         A. The Plan shall be administered by the Committee. The Committee shall
have the authority to:

                                                                               1

                  (i) interpret and determine all questions of policy and
         expediency pertaining to the Plan;

                  (ii) adopt such rules, regulations, agreements and instruments
         as it deems necessary for its proper administration;

                  (iii) select Covered Employees to receive Awards;

                  (iv) determine the terms of Awards including, without
         limitation, the duration of any performance period;

                  (v) determine amounts subject to Awards (within the limits
         prescribed in the Plan);

                  (vi) determine whether Awards will be granted in replacement
         of or as alternatives to any other incentive or compensation plan of
         the Company or an acquired business unit;

                  (vii) accelerate the payment of Awards only as permitted under
         Section 162 (m) of the Code;

                  (viii) correct any defect, supply any omission, or reconcile
         any inconsistency in the Plan, any Award or any Award notice;

                  (ix) take any and all other actions it deems necessary or
         advisable for the proper administration of the Plan;

                  (x) adopt such Plan procedures, regulations, subplans and the
         like as it deems are necessary to enable Covered Employees to receive
         Awards; and

                  (xi) amend the Plan at any time and from time to time,
         provided however that no amendment to the Plan shall be effective
         unless approved by the Company's stockholders, to the extent such
         stockholder approval is required under Section 162(m) of the Code.

         B. The Committee may delegate its authority to grant and administer
Awards to a separate committee; however, only to the extent permitted under
Section 162(m) of the Code.

4. ELIGIBILITY.

         Participation in the Plan is limited in any fiscal year (or performance
period) to each employee that the Committee concludes will likely be a Covered
Employee for such fiscal year (or performance period). If an employee is
designated in its discretion by the Committee to be a Participant under the
Plan, but it is later determined that the Participant is in fact not a Covered
Employee under the Code, such employee shall remain a Covered Employee for
purposes of the Plan and shall remain a Participant in the Plan for such fiscal
year (or performance period).

                                                                               2

5.  PERFORMANCE GOALS.

         A. The Committee shall establish performance goals in writing
applicable to a particular fiscal year (or performance period) prior to its
start, provided, however, that such goals may be established after the start of
the fiscal year (or performance period) but while the outcome of the performance
goal is substantially uncertain in accordance with the timing and method of
establishing performance goals, as permitted under Code Section 162(m).

         B. Each performance goal shall identify one or more business criteria
of the Company and/or any business unit that are to be monitored during the
fiscal year (or performance period), such as:

         -        Net income
         -        Earnings per share
         -        Return on investment or assets
         -        Operating income
         -        Strategic positioning programs
         -        Return on equity
         -        New product releases
         -        Operating margin
         -        Gross profit
         -        Stockholder return
         -        Revenue
         -        Revenue growth
         -        New product development
         -        Market share
         -        Return on net assets
         -        Cash flow
         -        Earnings before interest, taxes, depreciation and amortization
                  (EBITDA)

         C. The Committee shall determine the target level of performance that
must be achieved with respect to each criterion that is identified in a
performance goal in order for a performance goal to be treated as attained.

         D. The Committee may base performance goals on one or more of the
foregoing business criteria. In the event performance goals are based on more
than one business criteria, the Committee may determine, in its discretion, to
make Awards based on alternative criteria, weighting of criteria, or other
relevant basis on which the Committee shall establish and determine.

6.  AWARDS.

         A. Awards may be made on the basis of Company and/or business unit
performance goals and formulas determined by the Committee. During any fiscal
year of the Company, no Participant shall receive an Award of more $5,000,000.

         B. The Committee, in its discretion, may reduce or eliminate a
Participant's Award at any time before it is paid, whether or not calculated on
the basis of pre-established performance goals or formulas.


                                                                               3

         C. The payment of an Award requires that the Participant be on the
Company's payroll as of the last day of the fiscal year (or performance period)
and on the Company's payroll as of the date the Award is paid. The Committee may
make exceptions to this requirement in the case of retirement, death or
disability, as determined by the Committee in its sole discretion.

         D. The Company shall withhold all applicable federal, state, local and
foreign taxes required by law to be paid or withheld relating to the receipt or
payment of any Award.

         E. At the discretion of the Committee, payment of an Award or any
portion thereof may be deferred until a time established by the Committee.
Deferrals shall be unfunded and shall be made in accordance with guidelines
established by the Committee to ensure that such deferrals comply with
applicable requirements of the Code and its regulations. Deferrals shall be
initiated by the delivery of a written, irrevocable election by the Participant
to the Committee or its nominee. Such election shall be made prior to the date
specified by the Committee. The Committee may also credit earnings on cash
payments that are deferred and set the rates of such interest.

7.  GENERAL.

         A. The Plan shall become effective as of January 1, 2002, subject to
stockholder approval of the Plan at the Company's 2002 Annual Shareholders
Meeting. The Plan shall terminate on December 31, 2006. No Award may be made
under the Plan after the date the Plan terminates, but Awards made prior to that
date may extend beyond that date.

         B. Any rights of a Participant under the Plan shall not be assignable
by such Participant, by operation of law or otherwise, except by will or the
laws of descent and distribution. No Participant may create a lien on any funds
or rights to which he or she may have an interest under the Plan, or which is
held by the Company for the account of the Participant under the Plan.

         C. Participation in the Plan shall not give any Covered Employee any
right to remain in the employ of the Company. Further, the adoption of this Plan
shall not be deemed to give any Covered Employee or other individual the right
to be selected as a Participant or to be granted an Award.

         D. To the extent any person acquires a right to receive payments from
the Company under this Plan; such rights shall be no greater than the rights of
an unsecured creditor of the Company.

         E. The Plan shall be governed by and construed in accordance with the
laws of the State of Arizona.

         F. The Committee may suspend or terminate the Plan at any time with or
without prior notice. In addition, the Committee may from time to time and with
or without prior notice, amend or modify the Plan in any manner, but may not
without stockholder approval adopt any amendment that would require the vote of
stockholders of the Company pursuant to 162(m) of the Code.

                                                                               4



                                                                    Exhibit 10.2

                             EMPLOYEE INCENTIVE PLAN
                                  JANUARY 2002

1. PURPOSES

The purposes of the Employee Incentive Plan of ON Semiconductor Corporation are
to motivate employees of the Company (as defined below) to improve stockholder
value by linking a portion of their cash compensation to the Company's financial
performance, reward employees for improving the Company's financial performance,
and help attract and retain key employees.

2. DEFINITIONS

         A. "Award" means any cash incentive payment made under the Plan.

         B. "Committee" means the Compensation Committee of the Board of
Directors of ON Semiconductor Corporation, or such other committee designated by
the Board of Directors, which is authorized to administer the Plan (as defined
below) under Section 3 hereof.

         C. "Company" means ON Semiconductor Corporation and any corporation or
other business entity of which ON Semiconductor Corporation (i) directly or
indirectly has an ownership interest of 50% or more, or (ii) has a right to
elect or appoint 50% or more of the board of directors or other governing body.

         D. "EBITDA" means the Company's earnings before interest, taxes,
depreciation, and amortization.

         E. "Participant" means any employee to whom an Award is granted under
the Plan.

         F. "Plan" means this Plan, which shall be known as the Employee
Incentive Plan and/or the ONcentive Plan.

         G. "Performance Period" means one or more periods of time, which may be
of varying and overlapping duration, 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, compensation under the
Plan.

         H. "Deferred Compensation Plan" means the ON Semiconductor Executive
Deferred Compensation Plan, as amended and restated on March 8, 2000, and as
thereafter amended from time to time.

3. ADMINISTRATION

         A. The Plan shall be administered by the Committee. The Committee
shall have the authority to:

         (i)      interpret and determine all questions of policy and expediency
                  pertaining to the Plan;


                                                                               1

         (ii)     adopt such rules, regulations, agreements and instruments, as
                  it deems necessary for its proper administration;

         (iii)    select employees to be Participants in the Plan;

         (iv)     determine Participants that receive Awards;

         (v)      determine performance goals and levels of performance for the
                  Plan;

         (vi)     determine any formula necessary to calculate the amount of
                  Awards under the Plan;

         (vii)    determine the terms of Awards including, without limitation,
                  the duration of any Performance Period;

         (viii)   determine amounts subject to Awards (within the limits
                  prescribed in the Plan);

         (ix)     determine whether Awards will be granted in replacement of or
                  as alternatives to any other incentive or compensation plan of
                  the Company or an acquired business unit;

         (x)      grant waivers of Plan or Award conditions;

         (xi)     accelerate the payment of Awards;

         (xii)    correct any defect, supply any omission, or reconcile any
                  inconsistency in the Plan, any Award or any Award notice;

         (xiii)   take any and all other actions it deems necessary or advisable
                  for the proper administration of the Plan;

         (xiv)    adopt such Plan procedures, regulations, subplans and the like
                  as it deems are necessary to enable Participants to receive
                  Awards; and

         (xv)     amend the Plan at any time and from time to time.

         B. The Committee may delegate its authority to grant and administer
Awards to a separate committee.

4. ELIGIBILITY

Each regular full-time or part-time employee of the Company working twenty (20)
hours or more per week is eligible to participate in the Plan; provided, however
such employee shall not be eligible to participant in the Plan, if the employee
is eligible to participate in any other bonus incentive plan of the Company. Any
employee of the Company who is designated as an on-call, intern, co-op,
part-time working less than 20 hours per week, or any individual designated as a
contractor, consultant, hired through a temporary staffing agency, or similar
arrangement is not eligible to participate in the Plan. From among the above
eligible employees, the Committee shall select individuals to be Participants in
the Plan.

                                                                               2

5. PERFORMANCE GOALS

         A. The Company will grant an Award in the event certain performance
goals are met for a Performance Period as determined by the Committee. The
performance goals shall be determined by the Committee in its sole and absolute
discretion. It is the Committee's initial determination to base the performance
goals on EBITDA, however, the Committee, in its sole and absolute discretion,
may select any other performance goal at any time in the future. The target goal
for each Performance Period will be communicated to the Participants in a timely
manner by the Company near the beginning of each Performance Period.

         B. The Committee shall determine level(s) of performance that must be
achieved before there is an Award.

         C. Based on the Company's recommendation, the Committee shall establish
the formula necessary to determine the amount, if any, of each Participant's
Award.

6. AWARDS

         A. Awards may be made on the basis of Company and/or business unit
performance goals and formulas as determined by the Committee; provided, however
that for the first and second Performance Period of the Plan the Committee has
determined that EBITDA shall be the performance goals. Should the EBITDA goals
for the first Performance Period of the Plan be met, Awards will be paid by the
Company as soon as is reasonably practicably after the close of the accounting
books and records of the Company for the period ended June 28, 2002. Should the
EBITDA goals for the second Performance Period of the Plan be met, Awards shall
be paid by the Company as soon as is reasonably practicable after the close of
the accounting books and records of the Company for the period ended December
31, 2002. Subject to the terms of the Plan, the Company will pay Awards to
Participants as soon as is reasonably practicable after the close of the
accounting books and records of the Company for the relevant Performance Period.

         B. The Committee, in its sole and absolute discretion, may increase,
reduce or eliminate a Participant's Award at any time before it is paid, whether
or not calculated on the basis of pre-established performance goals or formulas.

         C. The payment of an Award requires that the Participant be on the
Company's payroll as of the last day of each Performance Period and on the
Company's payroll as of the date the Award is paid. The Committee may make
exceptions to this requirement in its sole and absolute discretion.

         D. The Company shall withhold all applicable federal, state, local and
foreign taxes required by law to be paid or withheld relating to the receipt or
payment of any Award.

         E. Those Participants who are also participants in the Deferred
Compensation Plan may defer payment of an Award or any portion thereof under
this Plan pursuant to the Deferred Compensation Plan.

7. GENERAL

         A. The Plan shall become effective as of January 1, 2002.

                                                                               3

         B. Any rights of a Participant under the Plan shall not be assignable
by such Participant, by operation of law or otherwise, except by will or the
laws of descent and distribution. No Participant may create a lien on any funds
or rights to which he or she may have an interest under the Plan, or which is
held by the Company for the account of the Participant under the Plan.

         C. Participation in the Plan shall not give any employee any right to
remain an employ of the Company. Further, the adoption of this Plan shall not be
deemed to give any employee or other individual the right to be selected as a
Participant or to be granted an Award.

         D. To the extent any person acquires a right to receive payments from
the Company under this Plan; such rights shall be no greater than the rights of
an unsecured creditor of the Company.

         E. The Plan shall be governed by and construed in accordance with the
laws of the State of Arizona.

         F. The Committee may suspend or terminate the Plan at any time with or
without prior notice, and with or without reason. In addition, the Committee may
from time to time, with or without prior notice, and with or without reason,
amend or modify the Plan in any manner.


                                                                               4



                                                                    Exhibit 10.3


                                             AMENDMENT dated as of April 17,
                                    2002 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, JPMORGAN CHASE
                                    BANK (formerly known as 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 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 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. Amendments to Section 1.01 (Defined Terms). Section
1.01 of the Credit Agreement is hereby amended as follows:

                  (a) by substituting the text "directors so nominated; (f) the
occurrence of a "Change of Control", as defined in the Subordinated Debt
Documents; or (g) the occurrence of a "Change of Control" as defined in the
Second Lien Documents" for the text "directors so nominated; or (f) the
occurrence of a "Change of Control", as defined in the Subordinated Debt
Documents" at the end of the definition of the term "Change in Control".

                  (b) by substituting the text "Subrogation and Contribution
Agreement, the Security Documents and the Intercreditor Agreement" for the text
"Subrogation and Contribution Agreement and the Security Documents" in the
definition of the term "Loan Documents".

                                                                               2

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

                  "Financial Report" means a report containing the financial
information set forth on Schedule 5.01, which report shall be certified by a
Financial Officer.

                  "Intercreditor Agreement" means the intercreditor agreement
entered into among Holdings, the Borrower, the Administrative Agent and the
trustee under the Second Lien Note Indenture (or any other trustee or agent to
which Liens are granted under the Second Lien Security Documents), providing for
(a) the priority of the Liens granted pursuant to the Security Documents over
the Liens granted pursuant to the Second Lien Security Documents and (b)
restrictions on the exercise of remedies under the Second Lien Security
Documents.

                  "Restructuring Liquidation Sales" means sales of plant,
property and equipment for cash consideration as part of restructuring
activities in which Holdings, the Borrower or any Subsidiary is, as of April 17,
2002, currently engaged in or committed to engage in, which activities were
disclosed to the Administrative Agent prior to April 17, 2002.

                  "Second Lien Documents" means the Second Lien Note Indenture,
the Intercreditor Agreement, the Second Lien Security Documents and all other
instruments, agreements and other documents evidencing or governing the Second
Lien Notes or providing for any Guarantee or other right in respect thereof.

                  "Second Lien Note Indenture" means the indenture pursuant to
which the Second Lien Notes are issued.

                  "Second Lien Notes" means the senior secured second lien notes
to be co-issued by the Borrower and Holdings pursuant to the Second Lien Note
Indenture in an initial principal amount not less than $250,000,000 and an
aggregate principal amount of not more than $500,000,000.

                  "Second Lien Security Documents" means any and all security
agreements, pledge agreements, mortgages and other agreements and documents
pursuant to which any Liens are granted to secure any Indebtedness or other
obligations in respect of the Second Lien Notes.

                  SECTION 2. Amendment to Section 2.10 (Amortization of Term
Loans). Section 2.10(f) of the Credit Agreement is hereby amended by the
deleting the first sentence thereof in its entirety and substituting the
following therefor:

                                    (f) Any prepayment of a Term Borrowing of
                           any Class shall be applied to reduce the subsequent
                           scheduled repayments of the Term Borrowing of such
                           Class to be made pursuant to this Section ratably,
                           provided that any prepayment made pursuant to
                           Sections 2.11(c)(i) and 2.11(c)(ii) shall be applied
                           to reduce the scheduled repayments of the Term
                           Borrowings of such Class to be made pursuant to this
                           Section in reverse chronological order.

                                                                               3

                  SECTION 3. Amendment to Section 2.11 (Prepayment of Loans).
Section 2.11(c) of the Credit Agreement is hereby amended by adding the
following at the end thereof:

                                    (iii) 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 (A) the issuance of the Second Lien Notes, (B) any
                           payment by the China JV of any Indebtedness owing to
                           Holdings, the Borrower or any Subsidiary from the Net
                           Proceeds to the China JV of any Indebtedness incurred
                           by the China JV as contemplated by clause (xiv)(1) of
                           Section 6.01(a) or (C) any Indebtedness incurred by
                           the Borrower as contemplated by clause (xiv)(2) of
                           Section 6.01(a), then, in each such case, the
                           Borrower shall, on the date of receipt of such Net
                           Proceeds (in the case of any such Net Proceeds in
                           respect of the issuance of the Second Lien Notes or
                           the incurrence by the Borrower of Indebtedness
                           referred to in the foregoing clause (C)) or within 10
                           Business Days after such Net Proceeds are received
                           (in the case of any such Net Proceeds in respect of
                           Indebtedness of the China JV), prepay Term Borrowings
                           in an aggregate amount equal to such Net Proceeds.

                  SECTION 4. Amendment to Article III (Representations and
Warranties). Article III of the Credit Agreement is hereby amended by adding the
following at the end thereof:

                                    SECTION 3.19. Senior Secured Obligations .
                           All the Obligations constitute "Credit Agreement
                           Obligations" under and as defined in the Second Lien
                           Note Indenture. The Liens granted pursuant to the
                           Security Documents are prior to the Liens granted
                           pursuant to the Second Lien Security Documents.

                  SECTION 5. Amendments to Section 5.01 (Financial Statements
and Other Information). Section 5.01 of the Credit Agreement is hereby amended
by deleting clause (h) in its entirety and substituting the following therefor:

                                    (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, a Financial Report for
                           each such 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, a Financial Report for such fiscal month
                           and for such fiscal quarter and for the then elapsed
                           portion of the fiscal year.

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

                  (a) Clause (xi) of Section 6.01(a) is amended by deleting the
text "and" following the semicolon.

                                                                               4

                  (b) Clause (xii) of Section 6.01(a) is amended by substituting
a semicolon for the period at the end thereof.

                  (c) Section 6.01(a) is further amended by inserting the
following new clauses (xiii) and (xiv) after clause (xii):

                                    (xiii) the Second Lien Notes, provided that
                           the Second Lien Notes shall not be Guaranteed by any
                           Subsidiary that has not guaranteed the Obligations;
                           and

                                    (xiv) Indebtedness for borrowed money
                           incurred (1) by the China JV to refinance
                           Indebtedness owed by the China JV to Holdings, the
                           Borrower or any Subsidiary or (2) by the Borrower,
                           which Indebtedness is guaranteed by the China JV in
                           consideration for the cancelation by Holdings, the
                           Borrower or any Subsidiary, as the case may be, of
                           Indebtedness of the China JV owing to Holdings, the
                           Borrower or such Subsidiary, as the case may be,
                           having an aggregate principal amount that is no
                           greater than the aggregate principal amount of the
                           Indebtedness so canceled; provided that (i) the
                           aggregate principal amount of such Indebtedness shall
                           not exceed $100,000,000, (ii) the interest rate
                           payable by the China JV or the Borrower in respect of
                           any such Indebtedness so incurred is less than the
                           interest rate payable by the China JV in respect of
                           the Indebtedness so repaid (in the case of
                           Indebtedness incurred under clause (1) above) or
                           canceled (in the case of Indebtedness incurred under
                           clause (2) above), (iii) such Indebtedness (x) shall
                           not be secured by any Lien other than Liens permitted
                           by Section 6.02(a)(xi), (y) shall not be Guaranteed
                           by any Person other than the China JV and (z) shall
                           not (in the case of Indebtedness incurred pursuant to
                           clause (2) above) mature, and no amortization or
                           principal payment in respect thereof shall be made,
                           prior to the date that is six months after the
                           Tranche D Maturity Date.

                  (d) Section 6.01 is further amended by adding the text "and
(a)(xiii)" after the text "under clause (a)(v)" in Section 6.01(b).

                  SECTION 7. Amendments to Section 6.02 (Liens). Section 6.02 of
the Credit Agreement is hereby amended as follows:

                  (a) Clause (viii) of Section 6.02(a) is amended by deleting
the text "and" following the semicolon.

                  (b) Clause (ix) of Section 6.02(a) is amended by substituting
the text ";" for the period at the end of such clause.

                  (c) The following additional clauses are added at the end of
Section 6.02(a):

                                    (x) Liens granted under the Second Lien
                           Security Documents; provided that (A) such Liens
                           secure only obligations in respect of the Second Lien
                           Notes, (B) such Liens do not apply to any asset other
                           than

                                                                               5

                           Collateral that is subject to a prior Lien granted
                           under a Security Document and (C) all such Liens and
                           Second Lien Security Documents shall be subject to
                           the terms of the Intercreditor Agreement; and

                                    (xi) Liens on the assets of the China JV
                           securing Indebtedness permitted under clause (xiv) of
                           Section 6.01(a).

                  (d) Section 6.02 is further amended by substituting the text
"Pledge Agreement and the Second Lien Documents and Permitted Encumbrances" for
the text "Pledge Agreement and Permitted Encumbrances" in Section 6.02(b).

                  SECTION 8. Amendment to Section 6.05 (Asset Sales). Clause (a)
of Section 6.05 of the Credit Agreement is hereby amended to add, after the
words "in the ordinary course of business", the words ", Restructuring
Liquidation Sales".

                  SECTION 9. SECTION 9. Amendment to Section 6.08 (Restricted
Payments; Certain Payments of Indebtedness). Section 6.08(b) of the Credit
Agreement is hereby amended by deleting clause (v) thereof in its entirety and
substituting the following therefor:

                                    (v) payments on account of the redemption of
                           Second Lien Notes with not more than 25% of the
                           aggregate net proceeds of one or more issuances of
                           equity securities of Holdings, provided that (A)
                           after giving effect to such redemption, no Default or
                           Event of Default shall have occurred and be
                           continuing, (B) not more than 35% of the original
                           aggregate principal amount of the Second Lien Notes
                           is redeemed and (C) any such redemption shall be made
                           within 90 days of such equity issuance and otherwise
                           in compliance with the provisions of the Second Lien
                           Note Indenture.

                  SECTION 10. Amendments to Section 6.11 (Amendments of Material
Documents). Section 6.11(a) of the Credit Agreement is hereby amended by
substituting a comma for the word "or" at the end of clause (iii) thereof and
adding the following at the end thereof: "or (v) except for amendments to the
Second Lien Security Documents permitted by the Intercreditor Agreement, any
Second Lien Document."

                  SECTION 11. 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
                           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:

                                                                               6




                       Period                                     Ratio
                       ------                                     -----
                                                            
     January 1, 2004 to and including December 31, 2004        2.00 to 1.00
     January 1, 2005 to and including July 1, 2005             2.25 to 1.00
     July 2, 2005 to and including December 31, 2005           2.50 to 1.00
     January 1, 2006 to and including June 30, 2006            2.75 to 1.00
     July 1, 2006 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, 2004 shall
be deemed to be equal to Consolidated EBITDA for the fiscal quarter then ended
multiplied by 4, (ii) ended June 30, 2004 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, 2004 shall be deemed to be equal
to Consolidated EBITDA for the three consecutive fiscal quarters then ended
multiplied by 4/3.

                  SECTION 12. 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, 2004 to and including July 2, 2004           5.00 to 1.00
    July 3, 2004 to and including December 31, 2004         4.75 to 1.00
    January 1, 2005 to and including July 1, 2005           4.50 to 1.00
    July 2, 2005 to and including December 31, 2005         4.25 to 1.00
    January 1, 2006 to and including June 30, 2006          4.00 to 1.00
    July 1, 2006 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 four
consecutive fiscal quarters of Holdings (i) ended March 31, 2004 shall be deemed
to be equal to Consolidated EBITDA for the fiscal quarter then ended multiplied
by 4, (ii) ended June 30, 2004 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, 2004 shall be deemed to be equal to Consolidated
EBITDA for the three consecutive fiscal quarters then ended multiplied by 4/3.
For purposes of this Section 6.13,

                                                                               7

the Funded Indebtedness component of the Leverage Ratio shall be calculated
excluding any Supplemental Interest otherwise included therein.

                  SECTION 13. SECTION 13. Amendment to Section 6.15 (Minimum
Consolidated EBITDA). Section 6.15 of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:

                                    SECTION 6.15. Minimum Consolidated EBITDA.
                           The Borrower will not permit Consolidated EBITDA for
                           any period set forth below to be less than the amount
                           set forth opposite such period:



                                              Period                             Amount
                                              ------                             ------
                                                                          
                           June 30, 2001 to and including March 29,          $        0.0
                           2002

                           June 30, 2001 to and including June 28, 2002      $ 35,000,000

                           September 29, 2001 to and including                 80,000,000
                           September 27, 2002

                           January 1, 2002 to and including December         $120,000,000
                           31, 2002

                           March 29, 2002 to and including March 28,         $140,000,000
                           2003

                           June 29, 2002 to and including June 27,           $160,000,000
                           2003

                           September 28, 2002 to and including               $180,000,000
                           September 26, 2003

                           January 1, 2003 to and including December         $200,000,000
                           31, 2003



                  SECTION 14. Amendment to Consultant Arrangement. Section 19 of
the waiver, consent and amendment to the Credit Agreement dated as of August 13,
2001, is hereby deleted.

                  SECTION 15. Consent to Amendment of the Leshan JV Agreement.
The Lenders hereby consent to the amendment and modification of the Leshan JV
Agreement (a) to provide for the construction of a manufacturing facility as
more fully described on Exhibit A hereto and (b) to permit the Liens
contemplated in Section 6.02(a)(xi).

                  SECTION 16. Amendment Fee. The Borrower agrees to pay to the
Administrative Agent, for the account of each Lender that delivers an executed
counterpart of

                                                                               8

this Amendment at or prior to 4:00 p.m., New York City time, on April 17, 2002,
an amendment fee in an amount equal to 0.125% of the sum of such Lender's
Revolving Commitment and outstanding Term Loans as of the date this Amendment
becomes effective (determined after giving effect to all prepayments that are
made on such date); provided that such fee shall not be payable unless and until
this Amendment becomes effective as provided in Section 18.

                  SECTION 17. 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.

                  SECTION 18. Conditions to Effectiveness. This Amendment shall
become effective on the date that the Second Lien Notes are issued (which date
shall not be later than June 30, 2002), subject to satisfaction of the following
conditions on or prior to such date: (a) the Administrative Agent shall have
received counterparts of this Amendment that, when taken together, bear the
signatures of Holdings, the Borrower and the Required Lenders, (b) 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, in each case to the extent invoiced in writing to the
Borrower at least three Business Days prior to the date that this Amendment
becomes effective) shall have been paid or reimbursed, as applicable (including
all fees and disbursements of counsel previously invoiced), (c) the
Intercreditor Agreement shall be satisfactory in form and substance to the
Administrative Agent and shall have been executed and delivered by all parties
thereto and shall be in full force and effect, (d) the terms and conditions of
the Second Lien Notes and the Second Lien Documents (including but not limited
to terms and conditions relating to payment, covenants, events of default,
remedies and maturity) shall be reasonably satisfactory to the Administrative
Agent and (e) the gross cash proceeds from the Second Lien Notes shall not be
less than $250,000,000.

                  SECTION 19. 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

                                                                               9

Credit Agreement shall mean the Credit Agreement as amended or modified hereby.
This Amendment shall be a Loan Document for all purposes.

                  SECTION 20. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

                  SECTION 21. 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 22. 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 23. 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.

                                                                              10


                  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/ John T. Kurtzweil
                                  -----------------------------------------
                                  Name:  John T. Kurtzweil
                                  Title: Senior Vice President,
                                         Chief Financial Officer,
                                         and Treasurer

                               SEMICONDUCTOR COMPONENTS INDUSTRIES, LLC,

                               by

                                   /s/ John T. Kurtzweil
                                  -----------------------------------------
                                  Name:  John T. Kurtzweil
                                  Title: Senior Vice President,
                                         Chief Financial Officer
                                         and Treasurer

                               JPMORGAN CHASE BANK,
                               individually and as administrative agent,

                               by

                                   /s/ Edmond DeForest
                                  -----------------------------------------
                                  Name:  Edmond DeForest
                                  Title: Vice President

                                                                              11

                                    SIGNATURE PAGE TO THE AMENDMENT DATED AS OF
                                    APRIL 17, 2002 TO THE CREDIT AGREEMENT AMONG
                                    ON SEMICONDUCTOR CORPORATION, SEMICONDUCTOR
                                    COMPONENTS INDUSTRIES, LLC, THE LENDERS
                                    PARTY THERETO, JPMORGAN CHASE 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.

                                    BEAR, STEARNS & CO. INC.


                                    by
                                           /s/ Alan J. Mintz
                                         ------------------------------------
                                         Name:  Alan J. Mintz
                                         Title: Senior Managing Director




         [Signature pages for all Lenders follow in original document]

                                    Exhibit A


         The China JV proposes to construct a new manufacturing facility in
Leshan, China consisting of a multi-phased submicron capable wafer fab (the "New
Leshan Facility"). The New Leshan Facility will be constructed on real property
currently owned by the China JV that is adjacent to the China JV's existing
facilities. The approximate cost of the first phase of the construction of the
New Leshan Facility, which is currently scheduled to begin in August of 2002, is
approximately $20 million. The cost and precise timing of future phases will
depend on market conditions, but it is currently expected that future phases
would commence in late 2003 and that the New Leshan Facility would be completed
in 2006 at an aggregate cost of approximately $350 million.

         The following amendments to the Leshan JV agreement, among others, may
be required in order to construct the New Leshan Facility:

         -        revise the scope of operations of the Leshan JV to include New
                  Leshan Facility;

         -        increase the total authorized investment by $350 million; and

         -        increase the registered capital by $70 million.

         Any investment in the Leshan JV by Holdings, the Borrower or any other
Subsidiary remains subject to the terms of the Credit Agreement.

ON SEMICONDUCTOR, INC.                                             Schedule 5.01
SCHEDULE OF REPORTING REQUIREMENTS



 LISTING OF ITEMS REQUIRED                                   DESCRIBED IN CFO LETTER            FINANCIAL SCHEDULE
 -------------------------                                   -----------------------            ------------------
                                                        ANNUAL    QUARTERLY     MONTHLY    ANNUAL    QUARTERLY    MONTHLY
                                                        ------    ---------     -------    ------    ---------    -------
                                                                                                
   1)  CFO Letter describing current
       state of company performance                                                          X          X            X

   2)  Budget by Quarter

          -  Income Statement /
             Balance Sheet /
             Statement of Cash Flow                                                          X

   3)  Audited Financial Statements

          -  Income Statement /
             Balance Sheet /
             Statement of Cash Flow (Form 10K)                                               X
          -  Statement of Stockholders'
             Equity (Form 10K)                                                               X
          -  Footnotes (Form 10K)                                                            X

   4)  Unaudited Financial Statements

          -  Income Statement /
             Balance Sheet /
             Statement of Cash Flow (Form 10Q)                                               X          X
          -  Income Statement /
             Balance Sheet /
             Statement of Cash Flow
             (variance to Budget)                                                            X          X
          -  Income Statement /
             Balance Sheet /
             Statement of Cash Flow
             (in the form of Budget)                                                                    X
          -  Statement of Stockholders'
             Equity (Form 10Q)                                                                          X
          -  Footnotes (Form 10Q)                                                                                    X

   5)  Explanation for any Budget
       variance of greater than 10%
       versus actual performance                         X          X

   6)  Revenue by Product Line

          -  Analog, ECL, Logic, Discreet, TMOS                                              X          X

   7)  Key Balance Sheet Metrics

          -  Days Sales Outstanding,
             Days Payables Outstanding                                                       X          X            X
          -  Days Inventory on Hand                                                          X          X
          -  Explanation for any non-
             ordinary course inventory
             write-downs                                 X          X

   8)  Financial Covenant Calculations
       (as applicable) with full
       build up as per credit agreement
       definitions, noting any
       variance from public filings.

          -  EBITDA Calculation (through 4Q03)                                               X          X
          -  Minimum Cash Balance                                                            X          X            X
          -  Capital Expenditures                                                            X          X
          -  Leverage Ratio                                                                  X          X
          -  Coverage Ratio                                                                  X          X

   9)  Rolling 6-Month Monthly Cash
       Forecast (as applicable)
          -  In sufficient detail to describe
             key sources and uses of cash                                                    X          X

   10) High-Level Explanation of overall status
       of restructuring Initiatives                      X          X            X



                                                                    Exhibit 10.4

                                                                  EXECUTION COPY

                            INTERCREDITOR AGREEMENT

                                    INTERCREDITOR AGREEMENT, dated as of May 6,
                           2002, among JPMORGAN CHASE BANK, as Credit Agent,
                           WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as
                           Trustee, ON SEMICONDUCTOR CORPORATION and
                           SEMICONDUCTOR COMPONENTS INDUSTRIES, LLC.

                              W I T N E S S E T H :

                  WHEREAS, the Companies (such term and each other capitalized
term used herein having the meanings set forth in Section 1 below), certain
lenders, JPMorgan Chase 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, are parties
to the Credit Agreement dated as of August 4, 1999, as amended and restated as
of April 3, 2000, as amended (as further amended, supplemented or otherwise
modified from time to time, the "Existing Credit Agreement");

                  WHEREAS, the Obligations of the Companies under the Credit
Agreement are secured (together with certain other obligations) by various
assets of the Companies and certain Subsidiaries thereof;

                  WHEREAS, the Companies and the Trustee have entered into the
Indenture dated as of May 6, 2002 (as amended, supplemented or otherwise
modified from time to time, the "Indenture"), pursuant to which the Companies
intend to issue the Notes;

                  WHEREAS, the Companies and certain lenders under the Existing
Credit Agreement have entered into an Amendment dated as of April 17, 2002 (the
"Amendment"), to the Existing Credit Agreement that, among other things,
permits, subject to certain terms and conditions, (a) the issuance of the Notes
by the Companies and (b) a second priority Lien on the Common Collateral to
secure the Noteholder Claims; and

                  WHEREAS, it is a condition precedent to the effectiveness of
the Amendment that the parties hereto enter into this Agreement;

                  NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and obligations herein set forth and for other good and valuable
consideration, the sufficiency and receipt of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:

                  SECTION 1. (A) DEFINITIONS. As used in this Agreement, the
following terms have the meanings specified below:

                  "Agreement" means this Agreement, as amended, renewed,
extended, supplemented or otherwise modified from time to time in accordance
with the terms hereof.

                  "Amendment" has the meaning set forth in the recitals hereto.

                                       1

                  "Bank Indebtedness" means any and all amounts payable under or
in respect of the Credit Agreement and any Refinancing Indebtedness (as defined
in the Indenture) with respect thereto, as amended from time to time, including
principal, premium (if any), interest (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to
either Company whether or not a claim for post-filing interest is allowed in
such proceedings), fees, charges, expenses, reimbursement obligations,
guarantees and all other amounts payable thereunder or in respect thereof. It is
understood and agreed that Refinancing Indebtedness (as defined in the
Indenture) in respect of the Credit Agreement may be Incurred (as defined in the
Indenture) from time to time after termination of the Credit Agreement.

                  "Bankruptcy Law" means Title 11 of the United States Code and
any similar Federal, state or foreign law for the relief of debtors.

                  "Business Day" means any day other than a Saturday, a Sunday
or a day that is a legal holiday under the laws of the State of New York or on
which banking institutions in the State of New York are required or authorized
by law or other governmental action to close.

                  "Cash Management Obligations " means, with respect to any
Person, all Obligations of such Person in respect of overdrafts and related
liabilities owed to any other Person that arise from treasury, depositary or
cash management services in connection with any automated clearing house
transfers of funds or any similar transactions.

                  "Commodity Hedge Obligations " means, with respect to any
Person, all Obligations of such Person in respect of any commodity price
protection agreement or other commodity price hedging arrangement or other
similar agreement or arrangement.

                  "Common Collateral" means all of the assets of any Grantor,
whether real, personal or mixed, constituting both Senior Lender Collateral and
Noteholder Collateral.

                  "Companies" means Holdings and SCI.

                  "Comparable Noteholder Collateral Document" means, in relation
to any Common Collateral subject to any Lien created under any Senior Collateral
Document, that Noteholder Collateral Document which creates a Lien on the same
Common Collateral, granted by the same Grantor.

                  "Credit Agent" means JPMorgan Chase Bank in its capacity as
collateral agent under the Existing Credit Agreement and the Security Documents
(as defined therein) and also includes its successors hereunder as collateral
agent for the Senior Lenders (or if there is more than one agent, a majority of
them) under the Senior Lender Documents exercising substantially the same rights
and powers, or if there is no acting Credit Agent under the Senior Credit
Agreement, the Required Lenders.

                  "Credit Agreement" means the Existing Credit Agreement and all
other Loan Documents (as defined therein) and any amendments, supplements,
modifications, extensions, renewals, restatements or refundings thereof (except
to the extent that any such amendment, supplement, modification, extension,
renewal, restatement or refunding would be prohibited by

                                       2

the terms of the Indenture, unless otherwise agreed to by the Holders of at
least a majority in aggregate principal amount of Notes at the time outstanding)
and any indentures or credit facilities or commercial paper facilities with
banks or other institutional lenders that replace, refund or refinance any part
of the loans, notes, other credit facilities or commitments thereunder,
including any such replacement, refunding or refinancing facility or indenture
that increases the amount borrowable thereunder or alters the maturity thereof.

                  "Credit Facilities" means one or more debt facilities
(including the Credit Agreement) or commercial paper facilities providing for
revolving credit loans, term loans, receivables financing (including through the
sale of receivables to lenders or to special purpose entities formed to borrow
from lenders against such receivables) or letters of credit, or any debt
securities or other form of debt financing (including convertible or
exchangeable debt instruments), in each case, as amended, supplemented,
modified, extended, renewed, restated or refunded in whole or in part from time
to time.

                  "Discharge of Senior Lender Claims" means, except to the
extent otherwise provided in Section 5.6, payment in full in cash of (a) the
principal of and interest and premium, if any, on all Indebtedness outstanding
under the First-Lien Credit Facilities or, with respect to letters of credit
outstanding thereunder, delivery of cash collateral or backstop letters of
credit in respect thereof in compliance with such First-Lien Credit Facilities,
as applicable, in each case after or concurrently with termination of all
commitments to extend credit thereunder and (b) any other Senior Lender Claims
that are due and payable or otherwise accrued and owing at or prior to the time
such principal and interest are paid.

                  "Existing Credit Agreement" has the meaning set forth in the
recitals hereto.

                  "First-Lien Credit Facilities" means (a) the Credit Facilities
provided pursuant to the Credit Agreement and (b) any other Credit Facility,
that, in the case of both clauses (a) and (b), is secured by a Permitted Lien
(as defined in the Indenture) described in clause (a) of the definition thereof
and (except for the Credit Facilities provided pursuant to the Existing Credit
Agreement) is designated by the Companies as a "First-Lien Credit Facility" for
purposes of the Indenture.

                  "Future First-Lien Credit Facility" means any First-Lien
Credit Facility (other than the Existing Credit Agreement) that is designated by
the Companies as a "First-Lien Credit Facility" for purposes of the Indenture,
provided that the Required Lenders under any Senior Credit Agreement then in
effect have consented to such designation.

                  "Future Other First-Lien Obligations" means all Obligations of
either Company or any other Grantor in respect of Cash Management Obligations or
Hedging Obligations that are designated by the Companies as "Credit Agreement
Obligations" for purposes of the Indenture (other than any Senior Lender Cash
Management Obligations and Senior Lender Hedging Obligations); provided that the
Required Lenders under any Senior Credit Agreement then in effect have consented
to such designation.

                  "Grantors" means each of the Companies and the Subsidiaries
that has executed and delivered a Noteholder Collateral Document or a Senior
Collateral Document.

                                       3

                  "Hedging Obligations" means, with respect to any Person, the
Obligations of such Person in respect of (a) interest rate or currency swap
agreements, interest rate or currency cap agreements, interest rate or currency
collar agreements, (b) other agreements or arrangements designed to protect such
Person against fluctuations in interest rates and/or currency exchange rates or
(c) Commodity Hedge Obligations.

                  "Holdings" means ON Semiconductor Corporation, a Delaware
corporation.

                  "Indebtedness" means and includes all Obligations that
constitute "Indebtedness" within the meaning of the Indenture or the Senior
Credit Agreement.

                  "Indenture" has the meaning set forth in the recitals hereto.

                  "Insolvency or Liquidation Proceeding" means (a) any voluntary
or involuntary case or proceeding under any Bankruptcy Law with respect to any
Grantor, (b) any other voluntary or involuntary insolvency, reorganization or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding with respect to any Grantor or with respect
to any of their respective assets, (c) any liquidation, dissolution,
reorganization or winding up of any Grantor whether voluntary or involuntary and
whether or not involving insolvency or bankruptcy or (d) any assignment for the
benefit of creditors or any other marshalling of assets and liabilities of any
Grantor.

                  "Lien" means, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset, (b) the interest of a vendor or a lessor under
any conditional sale agreement, capital lease or title retention agreement (or
any financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.

                  "Noteholder Claims" means all Obligations in respect of the
Notes or arising under the Noteholder Documents or any of them.

                  "Noteholder Collateral" means all of the assets of any
Grantor, whether real, personal or mixed, with respect to which a Lien is
granted as security for any Noteholder Claim.

                  "Noteholder Collateral Assignment" means the Collateral
Assignment, dated as of May 6, 2002, between SCI and the Trustee.

                  "Noteholder Collateral Documents" means the Noteholder Pledge
Agreement, the Noteholder Security Agreement, the Noteholder Collateral
Assignment, the Noteholder Mortgages and any other document or instrument
pursuant to which a Lien is granted by any Grantor to secure any Noteholder
Claims or under which rights or remedies with respect to any such Lien are
governed.

                  "Noteholder Documents" means (a) the Indenture, the Notes, the
Noteholder Collateral Documents and any document or instrument evidencing or
governing any Other Second-Lien Obligations (as defined in the Indenture) and
any (b) other related document or

                                       4

instrument executed and delivered pursuant to any Noteholder Document described
in clause (a) above evidencing or governing any Obligations thereunder.

                  "Noteholder Mortgages" means a collective reference to each
mortgage, deed of trust and any other document or instrument under which any
Lien on real property owned by any Grantor is granted to secure any Noteholder
Claims or under which rights or remedies with respect to any such Liens are
governed.

                  "Noteholder Pledge Agreement" means Pledge Agreement, dated as
of May 6, 2002, among the Companies, the other Grantors and the Trustee.

                  "Noteholder Security Agreement" means the Security Agreement,
dated as of May 6, 2002, among the Companies, the other Grantors and the
Trustee.

                  "Noteholders" means the Persons holding Noteholder Claims.

                  "Notes" means (a) the 12% Senior Secured Notes due 2008 to be
issued by the Companies as co-issuers, (b) the exchange notes issued in exchange
therefor as contemplated by the Registration Rights Agreement dated as of May 6,
2002, among Holdings, SCI and the Initial Purchasers (as defined therein) and
(c) any additional notes issued under the Indenture by the Companies as
co-issuers, to the extent permitted by the Indenture and the Senior Credit
Agreement.

                  "Obligations" means any and all obligations with respect to
the payment of (a) any principal of or interest (including interest accruing on
or after the commencement of any Insolvency or Liquidation Proceeding, whether
or not a claim for post-filing interest is allowed in such proceeding) or
premium on any Indebtedness, including any reimbursement obligation in respect
of any letter of credit, (b) any fees, indemnification obligations, expense
reimbursement obligations or other liabilities payable under the documentation
governing any Indebtedness, (c) any obligation to post cash collateral in
respect of letters of credit and any other obligations or (d) any Cash
Management Obligations or Hedging Obligations.

                  "Person" means any natural person, corporation, limited
liability company, trust, joint venture, association, company, partnership,
entity or other party, including any government and any political subdivision,
agency or instrumentality thereof.

                  "Pledged Collateral" means (a) the "Pledged Securities" under,
and as defined in, the Noteholder Pledge Agreement, and (b) any other Common
Collateral in the possession of the Credit Agent (or its agents or bailees), to
the extent that possession thereof is necessary to perfect a Lien thereon under
the Uniform Commercial Code.

                  "Recovery" has the meaning set forth in Section 6.5 hereof.

                  "Required Lenders" means, with respect to any amendment or
modification of the Senior Credit Agreement, or any termination or waiver of any
provision of the Senior Credit Agreement, or any consent or departure by
Holdings, the SCI or any of the Subsidiaries therefrom, those Senior Lenders the
approval of which is required to approve such amendment or modification,
termination or waiver or consent or departure.

                                       5

                  "SCI" means Semiconductor Components Industries, LLC, a
Delaware limited liability company.

                  "Senior Collateral Documents" means the Security Documents (as
defined in the Existing Credit Agreement) and any other agreement, document or
instrument pursuant to which a Lien is granted securing any Senior Lender Claims
or under which rights or remedies with respect to such Liens are governed.

                  "Senior Credit Agreement" means the Existing Credit Agreement;
provided that if at any time a Discharge of Senior Lender Claims occurs with
respect to the Existing Credit Agreement (without giving effect to Section 5.6),
then, to the extent provided in Section 5.6, the term "Senior Credit Agreement"
means the Future First-Lien Credit Facility designated by the Companies as the
"Senior Credit Agreement" in accordance with such Section.

                  "Senior Lender Cash Management Obligations" means any Cash
Management Obligations secured by any Common Collateral under the same Senior
Collateral Documents that secure Obligations under the Senior Credit Agreement.

                  "Senior Lender Claims" means (a) all Bank Indebtedness and all
other Indebtedness outstanding under one or more of the Senior Lender Documents,
including any Future First-Lien Credit Facilities, the Indebtedness under each
of which (i) constitutes Permitted Debt (as defined in the Indenture) or is
otherwise permitted by the Indenture, (ii) is designated by the Companies as
"Credit Agreement Obligations" for purposes of the Indenture and (iii) is
secured by a Permitted Lien (as defined in the Indenture) described in clause
(a) of the definition thereof, (b) all other Obligations (not constituting
Indebtedness) of either Company or any Grantor under the Senior Lender Documents
or any such other Future First-Lien Credit Facility, including all Senior Lender
Hedging Obligations and Senior Lender Cash Management Obligations and (c) all
Future Other First-Lien Obligations. Senior Lender Claims shall include all
interest accrued or accruing (or which would, absent the commencement of an
Insolvency or Liquidation Proceeding, accrue) after the commencement of an
Insolvency or Liquidation Proceeding in accordance with and at the rate
specified in the relevant senior Lender Document whether or not the claim for
such interest is allowed as a claim in such Insolvency or Liquidation
Proceeding. To the extent any payment with respect to the Senior Lender Claims
(whether by or on behalf of any Grantor, as proceeds of security, enforcement of
any right of set-off or otherwise) is declared to be fraudulent or preferential
in any respect, set aside or required to be paid to a debtor in possession,
trustee, receiver or similar Person, then the obligation or part thereof
originally intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment had not occurred. Notwithstanding anything to the
contrary contained in the first sentence of this definition, any Obligation
under the Senior Lender Documents or any Future First-Lien Credit Facility
(including any Cash Management Obligations or Hedging Obligations) shall
constitute a "Senior Lender Claim" if the Credit Agent or the relevant Senior
Lender or Senior Lenders shall have received a written representation from
either Company in or in connection with the Senior Lender Documents evidencing
such Obligation that such Obligation constitutes a "Credit Agreement Obligation"
under and as defined in the Indenture (whether or not such Obligation is at any
time determined not to have been permitted to be incurred under the Indenture).

                                       6

                  "Senior Lender Collateral" means all of the assets of any
Grantor, whether real, personal or mixed, with respect to which a Lien is
granted as security for any Senior Lender Claim.

                  "Senior Lender Documents" means the Senior Credit Agreement,
the Senior Collateral Documents, and each of the other agreements, documents and
instruments (including each agreement, document or instrument providing for or
evidencing a Senior Lender Hedging Obligation or Senior Lender Cash Management
Obligation) providing for or evidencing any other Obligation under the Credit
Agreement or any Future First-Lien Credit Facility or any Future Other
First-Lien Obligations, and any other related document or instrument executed or
delivered pursuant to any Senior Lender Document at any time or otherwise
evidencing any Senior Lender Claims.

                  "Senior Lender Hedging Obligations" means any Hedging
Obligations secured by any Common Collateral under the same Senior Collateral
Documents that secure Obligations under the Senior Credit Agreement.

                  "Senior Lenders" means the Persons holding Senior Lender
Claims, including the Credit Agent.

                  "Subsidiary" means any "Subsidiary" of either Company, as
defined in the Indenture or the Senior Credit Agreement.

                  "Trustee" means Wells Fargo Bank Minnesota, National
Association, in its capacity as trustee under the Indenture and collateral agent
under the Noteholder Collateral Documents, and also includes its successors
hereunder as collateral agent for the Noteholders under the Noteholder
Collateral Documents.

                  "Uniform Commercial Code" or "UCC" means the Uniform
Commercial Code as from time to time in effect in the State of New York.

                            (b) Terms Generally. The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
The word "will" shall be construed to have the same meaning and effect as the
word "shall". Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified, (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Sections shall be
construed to refer to Sections of this Agreement and (e) the words "asset" and
"property" shall be construed to have the same meaning and effect and to refer
to any and all tangible and intangible assets and properties, including cash,
securities, accounts and contract rights.

                                       7

                  SECTION 2. LIEN PRIORITIES.

                  2.1 Subordination. Notwithstanding the date, manner or order
of grant, attachment or perfection of any Liens granted to the Trustee or the
Noteholders on the Common Collateral or of any Liens granted to the Credit Agent
or the Senior Lenders on the Common Collateral and notwithstanding any provision
of the UCC, or any applicable law or the Noteholder Documents or the Senior
Lender Documents or any other circumstance whatsoever, the Trustee, on behalf of
itself and the Noteholders, hereby agrees that: (a) any Lien on the Common
Collateral securing any Senior Lender Claims now or hereafter held by or on
behalf of the Credit Agent or any Senior Lenders or any agent or trustee
therefor shall be senior in all respects and prior to any Lien on the Common
Collateral securing any of the Noteholder Claims; and (b) any Lien on the Common
Collateral now or hereafter held by or on behalf of the Trustee or any
Noteholders or any agent or trustee therefor regardless of how acquired, whether
by grant, statute, operation of law, subrogation or otherwise, shall be junior
and subordinate in all respects to all Liens on the Common Collateral securing
any Senior Lender Claims. All Liens on the Common Collateral securing any Senior
Lender Claims shall be and remain senior in all respects and prior to all Liens
on the Common Collateral securing any Noteholder Claims for all purposes,
whether or not such Liens securing any Senior Lender Claims are subordinated to
any Lien securing any other obligation of either Company, any other Grantor or
any other Person.

                  2.2 Prohibition on Contesting Liens. Each of the Trustee, for
itself and on behalf of each Noteholder, and the Credit Agent, for itself and on
behalf of each Senior Lender, agrees that it shall not (and hereby waives any
right to) contest or support any other Person in contesting, in any proceeding
(including any Insolvency or Liquidation Proceeding), the priority, validity or
enforceability of a Lien held by or on behalf of any of the Senior Lenders in
the Senior Lender Collateral or by or on behalf of any of the Noteholders in the
Common Collateral, as the case may be; provided that nothing in this Agreement
shall be construed to prevent or impair the rights of the Credit Agent or any
Senior Lender to enforce this Agreement, including the priority of the Liens
securing the Senior Lender Claims as provided in Section 2.1.

                  2.3 No New Liens. So long as the Discharge of Senior Lender
Claims has not occurred, (a) the parties hereto agree that, after the date
hereof, if the Trustee shall hold any Lien on any assets of either Company or
any other Grantor securing any Noteholder Claims that are not also subject to
the first-priority Lien of the Credit Agent under the Senior Lender Documents,
the Trustee, upon demand by the Credit Agent or the Companies, will either
release such Lien or assign it to the Credit Agent as security for the Senior
Lender Claims, and (b) each of the Companies agrees that it will not, and will
not permit any Subsidiary to, grant or permit to exist any Lien on any assets of
either Company or any of its Subsidiaries to secure any Noteholder Claim unless
a perfected prior Lien on the same assets has been granted to secure the Senior
Lender Claims.

                  SECTION 3. ENFORCEMENT.

                  3.1 Exercise of Remedies.

                  (a) So long as the Discharge of Senior Lender Claims has not
occurred, whether or not any Insolvency or Liquidation Proceeding has been
commenced by or against either


                                       8

Company or any other Grantor, (i) the Trustee and the Noteholders will not
exercise or seek to exercise any rights or remedies (including set-off) with
respect to any Common Collateral, institute any action or proceeding with
respect to such rights or remedies (including any action of foreclosure),
contest, protest or object to any foreclosure proceeding or action brought by
the Credit Agent or any Senior Lender, the exercise of any right under any
lockbox agreement, landlord waiver or bailee's letter or similar agreement or
arrangement to which the Trustee or any Noteholder is a party, or any other
exercise by any such party, of any rights and remedies relating to the Common
Collateral under the Senior Lender Documents or otherwise, or object to the
forbearance by the Senior Lenders from bringing or pursuing any foreclosure
proceeding or action or any other exercise of any rights or remedies relating to
the Common Collateral and (ii) the Credit Agent and the Senior Lenders shall
have the exclusive right to enforce rights, exercise remedies (including set-off
and the right to credit bid their debt) and make determinations regarding the
release, disposition, or restrictions with respect to the Common Collateral
without any consultation with or the consent of the Trustee or any Noteholder;
provided, that (A) in any Insolvency or Liquidation Proceeding commenced by or
against either Company or any Grantor, the Trustee may file a claim or statement
of interest with respect to the Noteholder Claims, and (B) the Trustee may take
any action (not adverse to the prior Liens on the Common Collateral securing the
Senior Lender Claims, or the rights of the Credit Agent or the Senior Lenders to
exercise remedies in respect thereof) in order to preserve or protect its Lien
on the Common Collateral. In exercising rights and remedies with respect to the
Common Collateral, the Credit Agent and the Senior Lenders may enforce the
provisions of the Senior Lender Documents and exercise remedies thereunder, all
in such order and in such manner as they may determine in the exercise of their
sole discretion. Such exercise and enforcement shall include the rights of an
agent appointed by them to sell or otherwise dispose of Common Collateral upon
foreclosure, to incur expenses in connection with such sale or disposition, and
to exercise all the rights and remedies of a secured lender under the Uniform
Commercial Code of any applicable jurisdiction and of a secured creditor under
Bankruptcy Laws of any applicable jurisdiction.

                  (b) The Trustee, on behalf of itself and the Noteholders,
agrees that it will not take or receive any Common Collateral or any proceeds of
Common Collateral in connection with the exercise of any right or remedy
(including set-off) with respect to any Common Collateral, unless and until the
Discharge of Senior Lender Claims has occurred. Without limiting the generality
of the foregoing, unless and until the Discharge of Senior Lender Claims has
occurred, except as expressly provided in the proviso in clause (ii) of Section
3.1(a) above, the sole right of the Trustee and the Noteholders with respect to
the Common Collateral is to hold a Lien on the Common Collateral pursuant to the
Noteholder Documents for the period and to the extent granted therein and to
receive a share of the proceeds thereof, if any, after the Discharge of the
Senior Lender Claims has occurred.

                  (c) Subject to the proviso in clause (ii) of Section 3.1(a)
above, (i) the Trustee, for itself or on behalf of the Noteholders, agrees that
the Trustee and the Noteholders will not take any action that would hinder any
exercise of remedies undertaken by the Credit Agent under the Senior Loan
Documents, including any sale, lease, exchange, transfer or other disposition of
the Common Collateral, whether by foreclosure or otherwise, and (ii) the
Trustee, for itself and on behalf of the Noteholders, hereby waives any and all
rights it or the Noteholders may have as a junior lien creditor or otherwise to
object to the manner in which the Credit Agent or the Senior

                                       9

Lenders seek to enforce or collect the Senior Lender Claims or the Liens granted
in any of the Senior Lender Collateral, regardless of whether any action or
failure to act by or on behalf of the Credit Agent or Senior Lenders is adverse
to the interest of the Noteholders.

                  (d) The Trustee hereby acknowledges and agrees that no
covenant, agreement or restriction contained in any Noteholder Document shall be
deemed to restrict in any way the rights and remedies of the Credit Agent or the
Senior Lenders with respect to the Common Collateral as set forth in this
Agreement and the Senior Lender Documents.

                  3.2 Cooperation. Subject to the proviso in clause (ii) of
Section 3.1(a) above, the Trustee, on behalf of itself and the Noteholders,
agrees that, unless and until the Discharge of Senior Lender Claims has
occurred, it will not commence, or join with any Person (other than the Senior
Lenders and the Credit Agent upon the request thereof) in commencing, any
enforcement, collection, execution, levy or foreclosure action or proceeding
with respect to any Lien held by it under any of the Noteholder Documents or
otherwise.

                  SECTION 4. PAYMENTS.

                  4.1 Application of Proceeds. As long as the Discharge of
Senior Lender Claims has not occurred, the Common Collateral or proceeds thereof
received in connection with the sale or other disposition of, or collection on,
such Common Collateral upon the exercise of remedies, shall be applied by the
Credit Agent to the Senior Lender Claims in such order as specified in the
relevant Senior Lender Documents until the Discharge of Senior Lender Claims has
occurred. Upon the Discharge of the Senior Lender Claims, the Credit Agent shall
deliver to the Trustee any proceeds of Common Collateral held by it in the same
form as received, with any necessary endorsements or as a court of competent
jurisdiction may otherwise direct to be applied by the Trustee to the Noteholder
Claims in such order as specified in the relevant Noteholder Documents.

                  4.2 Payments Over. Any Common Collateral or proceeds thereof
received by the Trustee or any Noteholder in connection with the exercise of any
right or remedy (including set-off) relating to the Common Collateral in
contravention of this Agreement shall be segregated and held in trust and
forthwith paid over to the Credit Agent for the benefit of the Senior Lenders in
the same form as received, with any necessary endorsements or as a court of
competent jurisdiction may otherwise direct. The Credit Agent is hereby
authorized to make any such endorsements as agent for the Trustee or any such
Noteholder. This authorization is coupled with an interest and is irrevocable.

                  SECTION 5. OTHER AGREEMENTS.

                  5.1 Releases.

                  (a) If in connection with:

                            (i) the exercise of the Credit Agent's remedies in
         respect of the Common Collateral provided for in Section 3.1, including
         any sale, lease, exchange, transfer or other disposition of any such
         Common Collateral;

                                       10

                            (ii) any sale, lease, exchange, transfer or other
         disposition of any Common Collateral permitted under the terms of the
         Senior Credit Agreement (whether or not an event of default thereunder,
         and as defined therein, has occurred and is continuing) and permitted
         or not prohibited under Section 4.06 of the Indenture (Asset Sales); or

                            (iii) any agreement between the Credit Agent and
         either Company or any other Grantor to release the Credit Agent's Lien
         on any portion of the Common Collateral or to release any Grantor from
         its obligations under its guaranty of the Senior Lender Claims,
         provided that after giving effect to the release, Obligations secured
         by the first priority Liens on the remaining Common Collateral remain
         outstanding;

the Credit Agent, for itself or on behalf of any of the Senior Lenders, releases
any of its Liens on any part of the Common Collateral (or any Grantor from its
obligations under its guaranty of the Senior Lender Claims), the Liens, if any,
of the Trustee, for itself or for the benefit of the Noteholders, on such Common
Collateral (and the obligations of such Grantor under its guaranty of the
Noteholder Claims) shall be automatically, unconditionally and simultaneously
released and the Trustee, for itself or on behalf of any such Noteholder,
promptly shall execute and deliver to the Credit Agent or such Grantor such
termination statements, releases and other documents as the Credit Agent or such
Grantor may request to effectively confirm such release; provided that a Grantor
shall not be released from its guaranty of the Noteholder Claims pursuant to
this Section if such Grantor will remain liable under a guaranty in respect of
the Senior Subordinated Notes (as defined in the Indenture).

                  (b) The Trustee, for itself and on behalf of the Noteholders,
hereby irrevocably constitutes and appoints the Credit Agent and any officer or
agent of the Credit Agent, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of the Trustee or such holder or in the Credit Agent's own name, from
time to time in the Credit Agent's discretion, for the purpose of carrying out
the terms of this Section 5.1, to take any and all appropriate action and to
execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Section 5.1, including any
termination statements, endorsements or other instruments of transfer or
release.

                  5.2 Insurance. Unless and until the Discharge of Senior Lender
Claims has occurred, the Credit Agent and the Senior Lenders shall have the sole
and exclusive right, subject to the rights of the Grantors under the Senior
Lender Documents, to adjust settlement for any insurance policy covering the
Common Collateral in the event of any loss thereunder and to approve any award
granted in any condemnation or similar proceeding affecting the Common
Collateral. Unless and until the Discharge of Senior Lender Claims has occurred,
all proceeds of any such policy and any such award if in respect to the Common
Collateral shall be paid to the Credit Agent for the benefit of the Senior
Lenders to the extent required under the Senior Lender Documents and thereafter
to the Trustee for the benefit of the Noteholders to the extent required under
the applicable Noteholder Documents and then to the owner of the subject
property or as a court of competent jurisdiction may otherwise direct. If the
Trustee or any Noteholder shall, at any time, receive any proceeds of any such
insurance policy or any such award in contravention of this Agreement, it shall
pay such proceeds over to the Credit Agent in accordance with the terms of
Section 4.2.

                                       11

                  5.3 Amendments to Noteholder Collateral Documents.

                  (a) Without the prior written consent of the Credit Agent and
the Required Lenders, no Noteholder Collateral Document may be amended,
supplemented or otherwise modified or entered into to the extent such amendment,
supplement or modification, or the terms of any new Noteholder Collateral
Document, would be prohibited by or inconsistent with any of the terms of the
Senior Lender Documents. The Trustee agrees that each Noteholder Collateral
Document shall include the following language (or language to similar effect
approved by the Credit Agent):

                  "Notwithstanding anything herein to the contrary, the lien and
                  security interest granted to the Trustee pursuant to this
                  Agreement and the exercise of any right or remedy by the
                  Trustee hereunder are subject to the provisions of the
                  Intercreditor Agreement, dated as of May 6, 2002 (as amended,
                  supplemented or otherwise modified from time to time, the
                  "Intercreditor Agreement"), among ON Semiconductor
                  Corporation, Semiconductor Components Industries, LLC,
                  JPMorgan Chase Bank, as Credit Agent, and Wells Fargo Bank
                  Minnesota, National Association, as Trustee. In the event of
                  any conflict between the terms of the Intercreditor Agreement
                  and this Agreement, the terms of the Intercreditor Agreement
                  shall govern."

In addition, the Trustee agrees that each Noteholder Mortgage covering any
Common Collateral shall contain such other language as the Credit Agent may
reasonably request to reflect the subordination of such Noteholder Mortgage to
the Senior Collateral Document covering such Common Collateral.

                  (b) In the event the Credit Agent or the Senior Lenders enter
into any amendment, waiver or consent in respect of any of the Senior Collateral
Documents for the purpose of adding to, or deleting from, or waiving or
consenting to any departures from any provisions of, any Senior Collateral
Document or changing in any manner the rights of the Credit Agent, the Senior
Lenders, either Company or any other Grantor thereunder, then such amendment,
waiver or consent shall apply automatically to any comparable provision of the
Indenture and the Comparable Noteholder Collateral Document without the consent
of the Trustee or the Noteholders and without any action by the Trustee, either
Company or any other Grantor, provided, that (A) no such amendment, waiver or
consent shall have the effect of removing assets subject to the Lien of the
Noteholder Collateral Documents, except to the extent that a release of such
Lien is permitted by Section 5.1 and (B) notice of such amendment, waiver or
consent shall have been given to the Trustee.

                  5.4 Rights As Unsecured Creditors. Notwithstanding anything to
the contrary in this Agreement, the Trustee and the Noteholders may exercise
rights and remedies as an unsecured creditor against either Company or any
Subsidiary that has guaranteed the Noteholder Claims in accordance with the
terms of the Noteholder Documents and applicable law. Nothing in this Agreement
shall prohibit the receipt by the Trustee or any Noteholders of the required
payments of interest and principal so long as such receipt is not the direct or
indirect result of the exercise by the Trustee or any Noteholder of rights or
remedies as a secured creditor or enforcement in contravention of this Agreement
of any Lien held by any of them. In the event the Trustee or any Noteholder
becomes a judgment lien creditor in respect of Common Collateral

                                       12

as a result of its enforcement of its rights as an unsecured creditor, such
judgment lien shall be subordinated to the Liens securing Senior Lender Claims
on the same basis as the other Liens securing the Noteholder Claims are so
subordinated to such Senior Lender Claims under this Agreement. Nothing in this
Agreement impairs or otherwise adversely affects any rights or remedies the
Credit Agent or the Senior Lenders may have with respect to the Senior Lender
Collateral.

                  5.5 Bailee for Perfection.

                  (a) The Credit Agent agrees to hold the Pledged Collateral
that is part of the Common Collateral in its possession or control (or in the
possession or control of its agents or bailees) as bailee for the Trustee and
any assignee solely for the purpose of perfecting the security interest granted
in such Pledged Collateral pursuant to the Noteholder Pledge Agreement, subject
to the terms and conditions of this Section 5.5.

                  (b) Until the Discharge of Senior Lender Claims has occurred,
the Credit Agent shall be entitled to deal with the Pledged Collateral in
accordance with the terms of the Senior Lender Documents as if the Liens of the
Trustee under the Noteholder Collateral Documents did not exist. The rights of
the Trustee shall at all times be subject to the terms of this Agreement and to
the Credit Agent's rights under the Senior Lender Documents.

                  (c) The Credit Agent shall have no obligation whatsoever to
the Trustee or any Noteholder to assure that the Pledged Collateral is genuine
or owned by any of the Grantors or to preserve rights or benefits of any Person
except as expressly set forth in this Section 5.5. The duties or
responsibilities of the Credit Agent under this Section 5.5 shall be limited
solely to holding the Pledged Collateral as bailee for the Trustee for purposes
of perfecting the Lien held by the Trustee.

                  (d) The Credit Agent shall not have by reason of the
Noteholder Collateral Documents or this Agreement or any other document a
fiduciary relationship in respect of the Trustee or any Noteholder.

                  (e) Upon the Discharge of Senior Lender Claims, the Credit
Agent shall deliver to the Trustee the remaining Pledged Collateral (if any)
together with any necessary endorsements (or otherwise allow the Trustee to
obtain control of such Pledged Collateral) or as a court of competent
jurisdiction may otherwise direct.

                  5.6 When Discharge of Senior Lender Claims Deemed to Not Have
Occurred. If at any time after the Discharge of Senior Lender Claims has
occurred the Companies designate any Future First-Lien Credit Facility to be the
"Senior Credit Agreement" hereunder, then such Discharge of Senior Lender Claims
shall automatically be deemed not to have occurred for all purposes of this
Agreement (other than with respect to any actions taken prior to the date of
such designation as a result of the occurrence of such first Discharge of Senior
Lender Claims), and such Future First-Lien Credit Facility shall automatically
be treated as the Senior Credit Agreement for all purposes of this Agreement,
including for purposes of the Lien priorities and rights in respect of Common
Collateral set forth herein. Upon receipt of notice of such designation
(including the identity of the new Credit Agent), the Trustee shall promptly (i)
enter

                                       13

into such documents and agreements (including amendments or supplements to this
Agreement) as either Company or such new Credit Agent shall request in order to
provide to the new Credit Agent the rights of the Credit Agent contemplated
hereby and (ii) deliver to the Credit Agent the Pledged Collateral together with
any necessary endorsements (or otherwise allow such Credit Agent to obtain
control of such Pledged Collateral).

                  SECTION 6. INSOLVENCY OR LIQUIDATION PROCEEDINGS.

                  6.1 Financing Issues. If either Company or any other Grantor
shall be subject to any Insolvency or Liquidation Proceeding and the Credit
Agent shall desire to permit the use of cash collateral or to permit either
Company or any other Grantor to obtain financing under Section 363 or Section
364 of Title 11 of the United States Code or any similar Bankruptcy Law ("DIP
Financing"), then the Trustee, on behalf of itself and the Noteholders, agrees
that it will raise no objection to such use of cash collateral or DIP Financing
and will not request adequate protection or any other relief in connection
therewith (except to the extent permitted by Section 6.3) and, to the extent the
Liens securing the Senior Lender Claims are subordinated or pari passu with such
DIP Financing, will subordinate its Liens in the Common Collateral to such DIP
Financing (and all Obligations relating thereto) on the same basis as the other
Liens securing the Noteholder Claims are so subordinated to Senior Lender Claims
under this Agreement.

                  6.2 Relief from the Automatic Stay. Until the Discharge of
Senior Lender Claims has occurred, the Trustee, on behalf of itself and the
Noteholders, agrees that none of them shall seek relief from the automatic stay
or any other stay in any Insolvency or Liquidation Proceeding in respect of the
Common Collateral, without the prior written consent of the Credit Agent and the
Required Lenders.

                  6.3 Adequate Protection. The Trustee, on behalf of itself and
the Noteholders, agrees that none of them shall contest (or support any other
Person contesting) (a) any request by the Credit Agent or the Senior Lenders for
adequate protection or (b) any objection by the Credit Agent or the Senior
Lenders to any motion, relief, action or proceeding based on the Credit Agent or
the Senior Lenders claiming a lack of adequate protection. Notwithstanding the
foregoing contained in this Section 6.3, in any Insolvency or Liquidation
Proceeding, (i) if the Senior Lenders (or any subset thereof) are granted
adequate protection in the form of additional collateral in connection with any
DIP Financing or use of cash collateral under Section 363 or Section 364 of
Title 11 of the United States Code or any similar Bankruptcy Law, then the
Trustee, on behalf of itself or any of the Noteholders, may seek or request
adequate protection in the form of a replacement Lien on such additional
collateral, which Lien is subordinated to the Liens securing the Senior Lender
Claims and such DIP Financing (and all Obligations relating thereto) on the same
basis as the other Liens securing the Noteholder Claims are so subordinated to
the Senior Lender Claims under this Agreement, and (ii) in the event the
Trustee, on behalf of itself and the Noteholders, seeks or requests adequate
protection and such adequate protection is granted in the form of additional
collateral, then the Trustee, on behalf of itself or any of the Noteholders,
agrees that the Credit Agent shall also be granted a senior Lien on such
additional collateral as security for the Senior Lender Claims and any such DIP
Financing and that any Lien on such additional collateral securing the
Noteholder Claims shall be subordinated to the Liens on such collateral securing
the Senior Lender Claims and any such DIP Financing (and all Obligations
relating thereto) and any other Liens granted to the Senior Lenders as adequate

                                       14

protection on the same basis as the other Liens securing the Noteholder Claims
are so subordinated to such Senior Lender Claims under this Agreement.

                  6.4 No Waiver. Nothing contained herein shall prohibit or in
any way limit the Credit Agent or any Senior Lender from objecting in any
Insolvency or Liquidation Proceeding or otherwise to any action taken by the
Trustee or any of the Noteholders, including the seeking by the Trustee or any
Noteholder of adequate protection or the asserting by the Trustee or any
Noteholder of any of its rights and remedies under the Noteholder Documents or
otherwise.

                  6.5 Preference Issues. If any Senior Lender is required in any
Insolvency or Liquidation Proceeding or otherwise to turn over or otherwise pay
to the estate of either Company or any other Grantor any amount (a "Recovery"),
then the Senior Lender Claims shall be reinstated to the extent of such Recovery
and the Senior Lenders shall be entitled to a Discharge of Senior Lender Claims
with respect to all such recovered amounts. If this Agreement shall have been
terminated prior to such Recovery, this Agreement shall be reinstated in full
force and effect, and such prior termination shall not diminish, release,
discharge, impair or otherwise affect the obligations of the parties hereto from
such date of reinstatement.

                  SECTION 7. RELIANCE; WAIVERS; ETC.

                  7.1 Reliance. The consent by the Senior Lenders to the
execution and delivery of the Noteholder Documents and the grant to the Trustee
on behalf of the Noteholders of a Lien on the Common Collateral and all loans
and other extensions of credit made or deemed made on and after the date hereof
by the Senior Lenders to either Company or any Grantor shall be deemed to have
been given and made in reliance upon this Agreement. The Trustee, on behalf of
itself and the Noteholders, acknowledges that it and the Noteholders have,
independently and without reliance on the Credit Agent or any Senior Lender, and
based on documents and information deemed by them appropriate, made their own
credit analysis and decision to enter into the Indenture, this Agreement and the
transactions contemplated hereby and thereby and they will continue to make
their own credit decision in taking or not taking any action under the Indenture
or this Agreement.

                  7.2 No Warranties or Liability. The Trustee, on behalf of
itself and Noteholders, acknowledges and agrees that each of the Credit Agent
and the Senior Lenders have made no express or implied representation or
warranty, including with respect to the execution, validity, legality,
completeness, collectibility or enforceability of any of the Senior Lender
Documents, the ownership of any Common Collateral or the perfection or priority
of any Liens thereon. The Senior Lenders will be entitled to manage and
supervise their respective loans and extensions of credit under the Senior
Lender Documents in accordance with law and as they may otherwise, in their sole
discretion, deem appropriate, and the Senior Lenders may manage their loans and
extensions of credit without regard to any rights or interests that the Trustee
or any of the Noteholders have in the Common Collateral or otherwise, except as
otherwise provided in this Agreement. Neither the Credit Agent nor any Senior
Lender shall have any duty to the Trustee or any of the Noteholders to act or
refrain from acting in a manner which allows, or results in, the occurrence or
continuance of an event of default or default under

                                       15

any agreements with either Company or any Subsidiary thereof (including the
Noteholder Documents), regardless of any knowledge thereof which they may have
or be charged with.

                  7.3 No Waiver of Lien Priorities.

                  (a) No right of the Senior Lenders, the Credit Agent or any of
them to enforce any provision of this Agreement or any Senior Lender Document
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of either Company or any other Grantor or by any act or failure
to act by any Senior Lender or the Credit Agent, or by any noncompliance by any
Person with the terms, provisions and covenants of this Agreement, any of the
Senior Lender Documents or any of the Noteholder Documents, regardless of any
knowledge thereof which the Credit Agent or the Senior Lenders, or any of them,
may have or be otherwise charged with;

                  (b) Without in any way limiting the generality of the
foregoing paragraph (but subject to the rights of the Companies and the other
Grantors under the Senior Lender Documents), the Senior Lenders, the Credit
Agent and any of them, may, at any time and from time to time, without the
consent of, or notice to, the Trustee or any Noteholder, without incurring any
liabilities to the Trustee or any Noteholder and without impairing or releasing
the Lien priorities and other benefits provided in this Agreement (even if any
right of subrogation or other right or remedy of the Trustee or any Noteholder
is affected, impaired or extinguished thereby) do any one or more of the
following:

                            (i) change the manner, place or terms of payment or
         change or extend the time of payment of, or amend, renew, exchange,
         increase or alter, the terms of any of the Senior Lender Claims or any
         Lien on any Senior Lender Collateral or guaranty thereof or any
         liability of either Company or any other Grantor, or any liability
         incurred directly or indirectly in respect thereof (including any
         increase in or extension of the Senior Lender Claims, without any
         restriction as to the amount, tenor or terms of any such increase or
         extension) or otherwise amend, renew, exchange, extend, modify or
         supplement in any manner any Liens held by the Credit Agent or any of
         the Senior Lenders, the Senior Lender Claims or any of the Senior
         Lender Documents;

                            (ii) sell, exchange, release, surrender, realize
         upon, enforce or otherwise deal with in any manner and in any order any
         part of the Senior Lender Collateral or any liability of either Company
         or any other Grantor to the Senior Lenders or the Credit Agent, or any
         liability incurred directly or indirectly in respect thereof;

                            (iii) settle or compromise any Senior Lender Claim
         or any other liability of either Company or any other Grantor or any
         security therefor or any liability incurred directly or indirectly in
         respect thereof and apply any sums by whomsoever paid and however
         realized to any liability (including the Senior Lender Claims) in any
         manner or order; and

                            (iv) exercise or delay in or refrain from exercising
         any right or remedy against either Company or any security or any other
         Grantor or any other Person, elect any remedy and otherwise deal freely
         with either Company, any other Grantor or any

                                       16

         Senior Lender Collateral and any security and any guarantor or any
         liability of either Company or any other Grantor to the Senior Lenders
         or any liability incurred directly or indirectly in respect thereof.

                  (c) The Trustee, on behalf of itself and the Noteholders, also
agrees that the Senior Lenders and the Credit Agent shall have no liability to
the Trustee or any Noteholder, and the Trustee, on behalf of itself and the
Noteholders, hereby waives any claim against any Senior Lender or the Credit
Agent, arising out of any and all actions which the Senior Lenders or the Credit
Agent may take or permit or omit to take with respect to: (i) the Senior Lender
Documents, (ii) the collection of the Senior Lender Claims or (iii) the
foreclosure upon, or sale, liquidation or other disposition of, any Senior
Lender Collateral. The Trustee, on behalf of itself and the Noteholders, agrees
that the Senior Lenders and the Credit Agent have no duty to them in respect of
the maintenance or preservation of the Senior Lender Collateral, the Senior
Lender Claims or otherwise; and

                  (d) The Trustee, on behalf of itself and the Noteholders,
agrees not to assert and hereby waives, to the fullest extent permitted by law,
any right to demand, request, plead or otherwise assert or otherwise claim the
benefit of, any marshalling, appraisal, valuation or other similar right that
may otherwise be available under applicable law or any other similar rights a
junior secured creditor may have under applicable law.

                  7.4 Obligations Unconditional. All rights, interests,
agreements and obligations of the Credit Agent and the Senior Lenders and the
Trustee and the Noteholders, respectively, hereunder shall remain in full force
and effect irrespective of:

                  (a) any lack of validity or enforceability of any Senior
Lender Documents or any Noteholder Documents;

                  (b) any change in the time, manner or place of payment of, or
in any other terms of, all or any of the Senior Lender Claims or Noteholder
Claims, or any amendment or waiver or other modification, including any increase
in the amount thereof, whether by course of conduct or otherwise, of the terms
of the Senior Credit Agreement or any other Senior Lender Document or of the
terms of the Indenture or any other Noteholder Document;

                  (c) any exchange of any security interest in any Common
Collateral or any other collateral, or any amendment, waiver or other
modification, whether in writing or by course of conduct or otherwise, of all or
any of the Senior Lender Claims or Noteholder Claims or any guarantee thereof;

                  (d) the commencement of any Insolvency or Liquidation
Proceeding in respect of either Company or any other Grantor; or

                  (e) any other circumstances which otherwise might constitute a
defense available to, or a discharge of, either Company or any other Grantor in
respect of the Senior Lender Claims, or of the Trustee or any Noteholder in
respect of this Agreement.

                                       17

                  SECTION 8. MISCELLANEOUS.

                  8.1 Conflicts. In the event of any conflict between the
provisions of this Agreement and the provisions of the Senior Lender Documents
or the Noteholder Documents, the provisions of this Agreement shall govern.

                  8.2 Continuing Nature of this Agreement; Severability. This
Agreement shall continue to be effective until the Discharge of Senior Lender
Claims shall have occurred. This is a continuing agreement of lien subordination
and the Senior Lenders may continue, at any time and without notice to the
Trustee or any Noteholder, to extend credit and other financial accommodations
and lend monies to or for the benefit of either Company or any Grantor
constituting Senior Lender Claims on reliance hereof. The Trustee, on behalf of
itself and the Noteholders, hereby waives any right it may have under applicable
law to revoke this Agreement or any of the provisions of this Agreement. The
terms of this Agreement shall survive, and shall continue in full force and
effect, in any Insolvency or Liquidation Proceeding. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall not
invalidate the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

                  8.3 Amendments; Waivers. No amendment, modification or waiver
of any of the provisions of this Agreement by the Trustee or the Credit Agent
shall be deemed to be made unless the same shall be in writing signed on behalf
of the party making the same or its authorized agent and each waiver, if any,
shall be a waiver only with respect to the specific instance involved and shall
in no way impair the rights of the parties making such waiver or the obligations
of the other parties to such party in any other respect or at any other time.
The Companies and other Grantors shall not have any right to consent to or
approve any amendment, modification or waiver of any provision of this Agreement
except to the extent their rights are directly affected.

                  8.4 Information Concerning Financial Condition of the
Companies and the Subsidiaries. The Credit Agent and the Senior Lenders, on the
one hand, and the Trustee and the Noteholders, on the other hand, shall each be
responsible for keeping themselves informed of (a) the financial condition of
the Companies and the Subsidiaries and all endorsers and/or guarantors of the
Noteholder Claims or the Senior Lender Claims and (b) all other circumstances
bearing upon the risk of nonpayment of the Noteholder Claims or the Senior
Lender Claims. The Credit Agent and the Senior Lenders shall have no duty to
advise the Trustee or any Noteholder of information known to it or them
regarding such condition or any such circumstances or otherwise. In the event
the Credit Agent or any of the Senior Lenders, in its or their sole discretion,
undertakes at any time or from time to time to provide any such information to
the Trustee or any Noteholder, it or they shall be under no obligation (w) to
make, and the Credit Agent and the Senior Lenders shall not make, any express or
implied representation or warranty, including with respect to the accuracy,
completeness, truthfulness or validity of any such information so provided, (x)
to provide any additional information or to provide any such information on any
subsequent occasion, (y) to undertake any investigation or (z) to disclose any
information which, pursuant to accepted or reasonable commercial finance
practices, such party wishes to maintain confidential or is otherwise required
to maintain confidential.

                                       18

                  8.5 Subrogation. The Trustee, on behalf of itself and the
Noteholders, hereby waives any rights of subrogation it may acquire as a result
of any payment hereunder until the Discharge of Senior Lender Claims has
occurred.

                  8.6 Application of Payments. All payments received by the
Senior Lenders may be applied, reversed and reapplied, in whole or in part, to
such part of the Senior Lender Claims as the Senior Lenders, in their sole
discretion, deem appropriate. The Trustee, on behalf of itself and the
Noteholders, assents to any extension or postponement of the time of payment of
the Senior Lender Claims or any part thereof and to any other indulgence with
respect thereto, to any substitution, exchange or release of any security which
may at any time secure any part of the Senior Lender Claims and to the addition
or release of any other Person primarily or secondarily liable therefor.

                  8.7 Consent to Jurisdiction; Waivers. The parties hereto
consent to the jurisdiction of any state or federal court located in New York,
New York, and consent that all service of process may be made by registered mail
directed to such party as provided in Section 8.8 below for such party. Service
so made shall be deemed to be completed three days after the same shall be
posted as aforesaid. The parties hereto waive any objection to any action
instituted hereunder based on forum non conveniens, and any objection to the
venue of any action instituted hereunder. Each of the parties hereto waives any
right it may have to trial by jury in respect of any litigation based on, or
arising out of, under or in connection with this Agreement or any other Loan
Document, or any course of conduct, course of dealing, verbal or written
statement or action of any party hereto.

                  8.8 Notices. All notices to the Noteholders and the Senior
Lenders permitted or required under this Agreement may be sent to the Trustee
and the Credit Agent, respectively. Unless otherwise specifically provided
herein, any notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, telecopied,
electronically mailed or sent by courier service or U.S. mail and shall be
deemed to have been given when delivered in person or by courier service, upon
receipt of a telecopy or electronic mail or four Business Days after deposit in
the U.S. mail (registered or certified, with postage prepaid and properly
addressed). For the purposes hereof, the addresses of the parties hereto shall
be as set forth below each party's name on the signature pages hereto, or, as to
each party, at such other address as may be designated by such party in a
written notice to all of the other parties.

                  8.9 Further Assurances. The Trustee, on behalf of itself and
the Noteholders, agrees that each of them shall take such further action and
shall execute and deliver to the Credit Agent and the Senior Lenders such
additional documents and instruments (in recordable form, if requested) as the
Credit Agent or the Senior Lenders may reasonably request to effectuate the
terms of and the lien priorities contemplated by this Agreement.

                  8.10 Governing Law. This Agreement has been delivered and
accepted at and shall be deemed to have been made at New York, New York and
shall be interpreted, and the rights and liabilities of the parties bound hereby
determined, in accordance with the laws of the State of New York.

                                       19

                  8.11 Binding on Successors and Assigns. This Agreement shall
be binding upon the Credit Agent, the Senior Lenders, the Trustee, the
Noteholders, the Companies and their respective permitted successors and
assigns.

                  8.12 Specific Performance. The Credit Agent may demand
specific performance of this Agreement. The Trustee, on behalf of itself and the
Noteholders, hereby irrevocably waives any defense based on the adequacy of a
remedy at law and any other defense which might be asserted to bar the remedy of
specific performance in any action which may be brought by the Credit Agent.

                  8.13 Section Titles; Time Periods. The section titles
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of this Agreement.

                  8.14 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be an original and all of which shall
together constitute one and the same document.

                  8.15 Authorization. By its signature, each Person executing
this Agreement on behalf of a party hereto represents and warrants to the other
parties hereto that it is duly authorized to execute this Agreement.

                  8.16 No Third Party Beneficiaries. This Agreement and the
rights and benefits hereof shall inure to the benefit of each of the parties
hereto and their respective successors and assigns and shall inure to the
benefit of each of the holders of Senior Lender Claims and Noteholder Claims. No
other Person shall have or be entitled to assert rights or benefits hereunder.

                  8.17 Effectiveness. This Agreement shall become effective when
executed and delivered by the parties hereto. This Agreement shall be effective
both before and after the commencement of any Insolvency or Liquidation
Proceeding. All references to the Companies or any other Grantor shall include
any Company or Grantor as debtor and debtor-in-possession and any receiver or
trustee for any Company or any other Grantor (as the case may be) in any
Insolvency or Liquidation Proceeding.

                  8.18 Credit Agent and Trustee. It is understood and agreed
that (a) JPMorgan Chase Bank is entering into this Agreement in its capacity as
Credit Agent and the provisions of Article VIII of the Existing Credit Agreement
applicable to JPMorgan Chase Bank as administrative agent thereunder shall also
apply to JPMorgan Chase Bank as Credit Agent hereunder, and (b) Wells Fargo Bank
Minnesota, National Association is entering in this Agreement in its capacity as
Trustee and the provisions of Article 7 of the Indenture applicable to the
Trustee thereunder shall also apply to the Trustee hereunder.

                  8.19 Designations. For purposes of the provisions hereof and
the Indenture requiring the Companies to designate Indebtedness for the purposes
of the term "Credit Agreement Obligations" under the Indenture, "First-Lien
Credit Facilities" or any other designations for any other purposes hereunder or
under the Indenture, any such designation shall

                                       20

be sufficient if the relevant designation is set forth in writing, signed on
behalf of the Companies by an officer thereof and delivered to the Trustee and
the Credit Agent. For all purposes hereof and the Indenture, the Companies
hereby designate the Credit Facilities provided pursuant to the Existing Credit
Agreement as the First-Lien Credit Facility and any Obligations in respect of
the Existing Credit Agreement as "Credit Agreement Obligations" under the
Indenture.

                                       21

               IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.

                            Credit Agent:

                            JPMORGAN CHASE BANK, as Credit Agent,

                            By: /s/ Edmund DeForest
                               -------------------------------------
                            Name: Edmund DeForest
                            Title: Vice President

                            Address:

                            270 Park Avenue
                            New York, New York 10017
                            Attention:  Corporate Banking
                            Telecopy No.:  (212) 270-4584

                            Trustee:

                            WELLS FARGO BANK, NATIONAL ASSOCIATION,
                            as Trustee,

                            By: /s/ Joseph P. O'Donnell
                               -------------------------------------
                            Name:  Joseph P. O'Donnell
                            Title: Corporate Trust Officer

                            Address:

                            213 Court Street
                            Suite 902
                            Middletown,  CT 06457
                            Attention:  Corporate Trust Services
                            Telecopy No.:  (860) 704-6219

                            ON SEMICONDUCTOR CORPORATION,

                            By: /s/ John T. Kurtzweil
                               -------------------------------------
                            Name: John T. Kurtzweil
                            Title: Senior Vice President, Chief Financial
                                   Officer, and Treasurer

                            Address:

                            5005 East McDowell Road
                            Phoenix, Arizona 85005
                            Attention:  General Counsel
                            Telecopy No.: (602) 244-5601

                                       22

SEMICONDUCTOR COMPONENTS INDUSTRIES,
LLC,

By: /s/ John T. Kurtzweil
   -------------------------------------
Name: John T. Kurtzweil
Title: Senior Vice President, Chief Financial
       Officer and Treasurer

Address:

5005 East McDowell Road
Phoenix, Arizona 85005
Attention:  General Counsel
Telecopy No.: (602) 244-5601


                                       23


                                                                    EXHIBIT 10.5


                                     SECURITY AGREEMENT dated as of May 6, 2002,



                        among SEMICONDUCTOR COMPONENTS INDUSTRIES, LLC, a
                        Delaware limited liability company ("SCI LLC"), ON
                        SEMICONDUCTOR CORPORATION, a Delaware corporation (the
                        "Company" and, together with SCI LLC, the "Issuers"),
                        each subsidiary of the Company listed on Schedule I
                        hereto (each such subsidiary individually a "Subsidiary"
                        or a "Guarantor" and, collectively, the "Subsidiaries"
                        or the "Guarantors"; the Guarantors and the Issuers are
                        referred to collectively herein as the "Grantors") and
                        WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, a
                        national banking association ("Wells Fargo Bank"), as
                        trustee under the Indenture referred to below and as
                        collateral agent (in such capacity, the "Collateral
                        Agent") for the Secured Parties (as defined herein).

                              W I T N E S S E T H:



            WHEREAS, pursuant to the terms, conditions and provisions of (a) the
Indenture dated as of the date hereof (as amended, restated, supplemented or
otherwise modified from time to time, the "Indenture"), among the Issuers, the
Guarantors and Wells Fargo Bank, as trustee (the "Trustee"), and (b) the
Purchase Agreement dated as of May 1, 2002, among the Issuers, the Guarantors
and Credit Suisse First Boston Corporation, Morgan Stanley & Co. Incorporated,
Salomon Smith Barney Inc. and J.P. Morgan Securities Inc. (the "Initial
Purchasers"), the Issuers are issuing $300,000,000 aggregate principal amount of
12% Senior Secured Notes due 2008 and may issue, from time to time, additional
notes in accordance with the provisions of the Indenture (collectively, the
"Notes") which will be guaranteed on a senior secured basis by each of the
Guarantors;

            WHEREAS, pursuant to the Security Agreement dated as of August 4,
1999 (as amended, supplemented or otherwise modified from time to time), among
the Issuers, each of the subsidiaries of the Company party thereto or which
becomes a party thereto pursuant to the Credit Agreement referred to below
(together with the Issuers, each a "Credit Agreement Grantor" and, collectively,
the "Credit Agreement Grantors") and JPMorgan Chase Bank (as successor to The
Chase Manhattan Bank), a New York banking corporation ("JPMorgan"), as
collateral agent, the Credit Agreement Grantors have granted to the Senior Agent
(as defined below) a first-priority lien and security interest in the Collateral
(as defined below) in connection with the Credit Agreement dated as of August 4,
1999, as amended and restated as of April 3, 2000 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among SCI LLC,
as borrower, the Company, the lenders from time to time party thereto (the
"Lenders"), JPMorgan, as administrative agent, collateral agent and syndication
agent (in such capacity, the "Senior Agent") for the Lenders, and Credit
Lyonnais New York Branch, Credit Suisse First Boston and Lehman Commercial Paper
Inc., as co-documentation agents;

            WHEREAS, the Issuers, the Collateral Agent and the Senior Agent have
entered into an Intercreditor Agreement, dated as of the date hereof (the
"Intercreditor Agreement"), pursuant to which the lien and security interest in
the Collateral granted by this Agreement are and shall be subordinated in all
respects to the lien and security interest in the Collateral granted pursuant
to, and all terms and conditions of, the Senior Lender Documents;

                                                                               2




            WHEREAS, each Grantor is executing and delivering this Agreement
pursuant to the terms of the Indenture to induce the Trustee to enter into the
Indenture and the Initial Purchasers to purchase the Notes; and

            WHEREAS, each Grantor has duly authorized the execution, delivery
and performance of this Agreement.

            NOW, THEREFORE, for and in consideration of the premises, and of the
mutual covenants herein contained, and in order to induce the Trustee to enter
into the Indenture and the Initial Purchasers to purchase the Notes, each
Grantor and the Collateral Agent, on behalf of itself and each Secured Party
(and each of their respective successors or assigns), hereby agree as follows:

                                    ARTICLE I

                                   Definitions

      SECTION 1.01. Definition of Terms Used Herein. Unless the context
otherwise requires, all capitalized terms used but not defined herein shall have
the meanings set forth in the Indenture.

      SECTION 1.02. Definition of Certain Terms Used Herein. As used herein, the
following terms shall have the following meanings:

      "Account Debtor" shall mean any Person who is or who may become obligated
to any Grantor under, with respect to or on account of an Account.

      "Accounts" shall mean all "accounts" (as defined in the Uniform Commercial
Code as in effect in the State of New York ("UCC")) of any Grantor and shall
include any and all right, title and interest of any Grantor to payment for
goods and services sold or leased, including any such right evidenced by chattel
paper, whether due or to become due, whether or not it has been earned by
performance, and whether now or hereafter acquired or arising in the future,
including accounts receivable from Affiliates of the Grantors.

      "Accounts Receivable" shall mean all Accounts and all right, title and
interest in any returned goods, together with all rights, titles, securities and
guarantees with respect thereto, including any rights to stoppage in transit,
replevin, reclamation and resales, and all related security interests, liens and
pledges, whether voluntary or involuntary, in each case whether now existing or
owned or hereafter arising or acquired.

      "Collateral" shall mean all (a) Accounts Receivable, (b) Documents, (c)
Equipment, (d) General Intangibles, (e) Inventory, (f) cash and cash accounts,
(g) Investment Property and (h) Proceeds.

      "Commodity Account" shall mean an account maintained by a Commodity
Intermediary in which a Commodity Contract is carried out for a Commodity
Customer.

      "Commodity Contract" shall mean a commodity futures contract, an option on
a commodity futures contract, a commodity option or any other contract that, in
each case, is (a) traded on or subject to the rules of a board of trade that has
been designated as a contract market for such a contract pursuant to the federal
commodities laws or (b) traded on a foreign commodity board of trade, exchange
or market, and is carried on the books of a Commodity Intermediary for a
Commodity Customer.

      "Commodity Customer" shall mean a Person for whom a Commodity Intermediary

                                                                               3




carries a Commodity Contract on its books.

      "Commodity Intermediary" shall mean (a) a Person who is registered as a
futures commission merchant under the federal commodities laws or (b) a Person
who in the ordinary course of its business provides clearance or settlement
services for a board of trade that has been designated as a contract market
pursuant to federal commodities laws.

      "Copyright License" shall mean any written agreement, now or hereafter in
effect, granting any right to any third party under any Copyright now or
hereafter owned by any Grantor or which such Grantor otherwise has the right to
license, or granting any right to such Grantor under any Copyright now or
hereafter owned by any third party, and all rights of such Grantor under any
such agreement.

      "Copyrights" shall mean all of the following: (a) all copyright rights in
any work subject to the copyright laws of the United States or any other
country, whether as author, assignee, transferee or otherwise, and (b) all
registrations and applications for registration of any such copyright in the
United States or any other country, including registrations, recordings,
supplemental registrations and pending applications for registration in the
United States Copyright Office, including those listed on Schedule II.

      "Credit Agreement" shall have the meaning assigned to such term in the
recitals of this Agreement.

      "Discharge of Senior Lender Claims" shall have the meaning assigned to
such term in the Intercreditor Agreement.

      "Documents" shall mean all instruments, files, records, ledger sheets and
documents covering or relating to any of the Collateral.

      "Entitlement Holder" shall mean a Person identified in the records of a
Securities Intermediary as the Person having a Security Entitlement against the
Securities Intermediary. If a Person acquires a Security Entitlement by virtue
of Section 8-501(b)(2) or (3) of the Uniform Commercial Code, such Person is the
Entitlement Holder.

      "Equipment" shall mean "equipment" (as defined in the UCC) of any Grantor
and shall include all equipment, furniture and furnishings, and all tangible
personal property similar to any of the foregoing, including tools, parts and
supplies of every kind and description, and all improvements, accessions or
appurtenances thereto, that are now or hereafter owned by any Grantor. The term
Equipment shall include Fixtures.

      "Financial Asset" shall mean (a) a Security, (b) an obligation of a Person
or a share, participation or other interest in a Person or in property or an
enterprise of a Person, which is, or is of a type, dealt with in or traded on
financial markets, or which is recognized in any area in which it is issued or
dealt in as a medium for investment or (c) any property that is held by a
Securities Intermediary for another Person in a Securities Account if the
Securities Intermediary has expressly agreed with the other Person that the
property is to be treated as a Financial Asset under Article 8 of the Uniform
Commercial Code. As the context requires, the term Financial Asset shall mean
either the interest itself or the means by which a Person's claim to it is
evidenced, including a certificated or uncertificated Security, a certificate
representing a Security or a Security Entitlement.

      "First-Lien Termination Date" shall mean, subject to Section 5.6 of the
Intercreditor Agreement, the date on which the Discharge of Senior Lender Claims
occurs.

      "Fixtures" shall mean all items of Equipment, whether now owned or
hereafter acquired, of any Grantor that become so related to particular real
estate that an interest in them arises under

                                                                               4




any real estate law applicable thereto.

      "General Intangibles" shall mean all "general intangibles" (as defined in
the UCC) of any Grantor and shall include choses in action and causes of action
and all other assignable intangible personal property of any Grantor of every
kind and nature (other than Accounts Receivable) now owned or hereafter acquired
by any Grantor, including corporate or other business records, indemnification
claims, contract rights (including rights under leases, whether entered into as
lessor or lessee, Hedging Agreements and other agreements), Intellectual
Property, goodwill, registrations, franchises, tax refund claims and any letter
of credit, guarantee, claim, security interest or other security held by or
granted to any Grantor to secure payment by an Account Debtor of any of the
Accounts Receivable.

      "Hedging Agreement" shall mean any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.

      "Indenture Documents" shall mean the Indenture, the Notes, this Agreement,
the other Security Documents and the Intercreditor Agreement, as such agreements
may be amended, supplemented or otherwise modified from time to time.

      "Intellectual Property" shall mean all intellectual and similar property
of any Grantor of every kind and nature now owned or hereafter acquired by any
Grantor, including inventions, designs, Patents, Copyrights, Licenses,
Trademarks, trade secrets, confidential or proprietary technical and business
information, know-how, show-how or other data or information, software and
databases and all embodiments or fixations thereof and related documentation,
registrations and franchises, and all additions, improvements and accessions to,
and books and records describing or used in connection with, any of the
foregoing.

      "Intercreditor Agreement" shall have the meaning assigned to such term in
the recitals of this Agreement.

      "Inventory" shall mean "inventory" (as defined in the UCC) of any Grantor
and shall include all goods of any Grantor, whether now owned or hereafter
acquired, held for sale or lease, or furnished or to be furnished by any Grantor
under contracts of service, or consumed in any Grantor's business, including raw
materials, intermediates, work in process, packaging materials, finished goods,
semi-finished inventory, scrap inventory, manufacturing supplies and spare
parts, and all such goods that have been returned to or repossessed by or on
behalf of any Grantor.

      "Investment Property" shall mean all Securities (whether certificated or
uncertificated), Security Entitlements, Securities Accounts, Commodity Contracts
and Commodity Accounts of any Grantor, whether now owned or hereafter acquired
by any Grantor; provided that Securities shall not include more than 65% of the
issued and outstanding voting stock of any Foreign Subsidiaries.

      "License" shall mean any Patent License, Trademark License, Copyright
License or other license or sublicense to which any Grantor is a party,
including those listed on Schedule III (other than those license agreements in
existence on the date hereof and listed on Schedule III and those license
agreements entered into after the date hereof, which by their terms prohibit
assignment or a grant of a security interest by such Grantor as licensee
thereunder).

      "Obligations" shall mean all obligations of the Issuers and the Guarantors
under the Indenture, the Notes and the other Indenture Documents, including
obligations to the Trustee and the Collateral Agent, whether for payment of
principal of, interest on or additional interest, if any, on the Notes and all
other monetary obligations of the Issuers and the Guarantors under the
Indenture, the Notes and the other Indenture Documents, whether for fees,
expenses,

                                                                               5




indemnification or otherwise.

      "Other Second-Lien Obligations" means any Indebtedness, other than the
Notes, that is secured by a Permitted Lien, described in clause (a) of the
definition thereof set forth in the Indenture, which is secured equally and
ratably with the Notes by a second-priority security interest in the Collateral,
and that is designated by the Company upon incurrence as "Other Second-Lien
Obligations".

      "Patent License" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to make, use or sell any invention
on which a Patent, now or hereafter owned by any Grantor or which any Grantor
otherwise has the right to license, is in existence, or granting to any Grantor
any right to make, use or sell any invention on which a Patent, now or hereafter
owned by any third party, is in existence, and all rights of any Grantor under
any such agreement.

      "Patents" shall mean all of the following now owned or hereafter acquired
by any Grantor: (a) all letters patent of the United States or any other
country, all registrations and recordings thereof, and all applications for
letters patent of the United States or any other country, including
registrations, recordings and pending applications in the United States Patent
and Trademark Office or any similar offices in any other country, including
those listed on Schedule IV, and (b) all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof, and the inventions
disclosed or claimed therein, including the right to make, use and/or sell the
inventions disclosed or claimed therein.

      "Perfection Certificate" shall mean a certificate substantially in the
form of Annex 2 hereto, completed and supplemented with the schedules and
attachments contemplated thereby, and duly executed by an Officer of the Company
and SCI LLC.

      "Proceeds" shall mean "proceeds" (as defined in the UCC) of any Grantor
and shall include any consideration received from the sale, exchange, license,
lease or other disposition of any asset or property that constitutes Collateral,
any value received as a consequence of the possession of any Collateral and any
payment received from any insurer or other Person or entity as a result of the
destruction, loss, theft, damage or other involuntary conversion of whatever
nature of any asset or property which constitutes Collateral, and shall include,
(a) any claim of any Grantor against any third party for (and the right to sue
and recover for and the rights to damages or profits due or accrued arising out
of or in connection with) (i) past, present or future infringement of any Patent
now or hereafter owned by any Grantor, or licensed under a Patent License, (ii)
past, present or future infringement or dilution of any Trademark now or
hereafter owned by any Grantor or licensed under a Trademark License or injury
to the goodwill associated with or symbolized by any Trademark now or hereafter
owned by any Grantor, (iii) past, present or future breach of any License and
(iv) past, present or future infringement of any Copyright now or hereafter
owned by any Grantor or licensed under a Copyright License and (b) any and all
other amounts from time to time paid or payable under or in connection with any
of the Collateral.

      "Secured Parties" shall mean the Trustee, the Collateral Agent, each
Holder and the successors and assigns of each of the foregoing.

      "Securities" shall mean any obligations of an issuer or any shares,
participations or other interests in an issuer or in property or an enterprise
of an issuer which (a) are represented by a certificate representing a security
in bearer or registered form, or the transfer of which may be registered upon
books maintained for that purpose by or on behalf of the issuer, (b) are one of
a class or series or by its terms is divisible into a class or series of shares,
participations, interests or obligations and (c)(i) are, or are of a type, dealt
with or traded on securities exchanges or securities markets or (ii) are a
medium for investment and by their terms expressly provide that they are a
security governed by Article 8 of the Uniform Commercial Code.

                                                                               6




      "Securities Account" shall mean an account to which a Financial Asset is
or may be credited in accordance with an agreement under which the Person
maintaining the account undertakes to treat the Person for whom the account is
maintained as entitled to exercise rights that comprise the Financial Asset.

      "Security Entitlements" shall mean the rights and property interests of an
Entitlement Holder with respect to a Financial Asset.

      "Security Interest" shall have the meaning assigned to such term in
Section 2.01.

      "Security Intermediary" shall mean (a) a clearing corporation or (b) a
Person, including a bank or broker, that in the ordinary course of its business
maintains securities accounts for others and is acting in that capacity.

      "Senior Lender Claims" shall have the meaning assigned to such term in the
Intercreditor Agreement.

      "Senior Lender Documents" shall have the meaning assigned to such term in
the Intercreditor Agreement.

      "Trademark License" shall mean any written agreement, now or hereafter in
effect, granting to any third party any right to use any Trademark now or
hereafter owned by any Grantor or which any Grantor otherwise has the right to
license, or granting to any Grantor any right to use any Trademark now or
hereafter owned by any third party, and all rights of any Grantor under any such
agreement.

      "Trademarks" shall mean all of the following: (a) all trademarks, service
marks, trade names, corporate names, company names, business names, fictitious
business names, trade styles, trade dress, logos, other source or business
identifiers, designs and general intangibles of like nature, now existing or
hereafter adopted or acquired, all registrations and recordings thereof, and all
registration and recording applications filed in connection therewith, including
registrations and registration applications in the United States Patent and
Trademark Office, any State of the United States or any similar offices in any
other country or any political subdivision thereof, and all extensions or
renewals thereof, including those listed on Schedule V, (b) all goodwill
associated therewith or symbolized thereby and (c) all other assets, rights and
interests that uniquely reflect or embody such goodwill.

      SECTION 1.03. Rules of Interpretation. The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
The word "will" shall be construed to have the same meaning and effect as the
word "shall". Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such
Person's successors and assigns, (c) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.

                                                                               7




                                   ARTICLE II

                                Security Interest

      SECTION 2.01. Security Interest. As security for the payment or
performance, as the case may be, in full of the Obligations, each Grantor hereby
bargains, sells, conveys, assigns, sets over, mortgages, pledges, hypothecates
and transfers to the Collateral Agent, its successors and assigns, for the
ratable benefit of the Secured Parties, and hereby grants to the Collateral
Agent, its successors and assigns, for the ratable benefit of the Secured
Parties, a security interest in, all of such Grantor's right, title and interest
in, to and under the Collateral (the "Security Interest"). Without limiting the
foregoing, in accordance with, and to the extent consistent with, the terms of
the Intercreditor Agreement, the Collateral Agent is hereby authorized to file
one or more financing statements (including fixture filings), continuation
statements, filings with the United States Patent and Trademark Office or United
States Copyright Office (or any successor office or any similar office in any
other country) or other documents for the purpose of perfecting, confirming,
continuing, enforcing or protecting the Security Interest granted by each
Grantor, without the signature of any Grantors, and naming any Grantor or the
Grantors as debtors and the Collateral Agent as secured party.

      SECTION 2.02. No Assumption of Liability. The Security Interest is granted
as security only and shall not subject the Collateral Agent or any other Secured
Party to, or in any way alter or modify, any obligation or liability of any
Grantor with respect to or arising out of the Collateral.

                                   ARTICLE III

                         Representations and Warranties

      The Grantors jointly and severally represent and warrant to the Collateral
Agent and the Secured Parties that:

      SECTION 3.01. Title and Authority. Each Grantor has good and valid rights
in and title to the Collateral with respect to which it has purported to grant a
Security Interest hereunder and has full power and authority to grant to the
Collateral Agent the Security Interest in such Collateral pursuant hereto and to
execute, deliver and perform its obligations in accordance with the terms of
this Agreement, without the consent or approval of any other Person other than
any consent or approval which has been obtained.

      SECTION 3.02. Filings. (a) The Perfection Certificate has been duly
prepared, completed and executed and the information set forth therein is
correct and complete in all material respects. Fully executed Uniform Commercial
Code financing statements (including fixture filings, as applicable) or other
appropriate filings, recordings or registrations containing a description of the
Collateral have been delivered to the Collateral Agent for filing in each
governmental, municipal or other office specified in Schedule 6 to the
Perfection Certificate, which are all the filings, recordings and registrations
(other than filings required to be made in the United States Patent and
Trademark Office and the United States Copyright Office in order to perfect the
Security Interest in Collateral consisting of United States Patents, Trademarks
and Copyrights) that are necessary to publish notice of and protect the validity
of and to establish a legal, valid and perfected second-priority security
interest in favor of the Collateral Agent (for the ratable benefit of the
Secured Parties) in respect of all Collateral in which the Security Interest may
be perfected by filing, recording or registration in the United States (or any
political subdivision thereof) and its territories and possessions, and no
further or subsequent filing, refiling, recording, rerecording, registration or
reregistration is necessary in any such jurisdiction, except as provided under
applicable law with respect to the filing of continuation statements.

                                                                               8




      (b) Each Grantor shall ensure that fully executed security agreements in
the form hereof (or short-form supplements to this Agreement in form and
substance satisfactory to the Collateral Agent) and containing a description of
all Collateral consisting of Intellectual Property shall have been received and
recorded within three months after the execution of this Agreement with respect
to United States Patents and United States registered Trademarks (and Trademarks
for which United States registration applications are pending) and within one
month after the execution of this Agreement with respect to United States
registered Copyrights have been delivered to the Collateral Agent for recording
by the United States Patent and Trademark Office and the United States Copyright
Office pursuant to 35 U.S.C. Section 261, 15 U.S.C. Section 1060 or 17 U.S.C.
Section 205 and the regulations thereunder, as applicable, and otherwise as may
be required pursuant to the laws of any other necessary jurisdiction in the
United States (or any political subdivision thereof) and its territories and
possessions, to protect the validity of and to establish a legal, valid and
perfected second-priority security interest in favor of the Collateral Agent
(for the ratable benefit of the Secured Parties) in respect of all Collateral
consisting of Patents, Trademarks and Copyrights in which a security interest
may be perfected by filing, recording or registration in the United States (or
any political subdivision thereof) and its territories and possessions, or in
any other necessary jurisdiction, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is necessary in any such
jurisdiction (other than such actions as are necessary to perfect the Security
Interest with respect to any Collateral consisting of Patents, Trademarks and
Copyrights (or registration or application for registration thereof) acquired or
developed after the date hereof).

      SECTION 3.03. Validity of Security Interest. The Security Interest
constitutes (a) a legal and valid second-priority security interest in all the
Collateral securing the payment and performance of the Obligations, (b) subject
to the filings described in Section 3.02 above, a perfected second-priority
security interest in all Collateral in which a security interest may be
perfected by filing, recording or registering a financing statement or analogous
document in the United States (or any political subdivision thereof) and its
territories and possessions pursuant to the UCC or other analogous applicable
law in such jurisdictions and (c) a second-priority security interest that shall
be perfected in all Collateral in which a security interest may be perfected
upon the receipt and recording of this Agreement with the United States Patent
and Trademark Office and the United States Copyright Office, as applicable,
within the three month period (commencing as of the date hereof) pursuant to 35
U.S.C. Section 261 or 15 U.S.C. Section 1060 or the one month period (commencing
as of the date hereof) pursuant to 17 U.S.C. Section 205 and otherwise as may be
required to pursuant to the laws of any other necessary jurisdiction in the
United States (or any political subdivision thereof) and its territories and
possessions. The Security Interest is and shall be a second-priority Security
Interest, prior to any other Lien on any of the Collateral, other than (x) Liens
securing Senior Lender Claims or (y) any other Permitted Liens.

      SECTION 3.04. Absence of Other Liens. The Collateral is owned by the
Grantors free and clear of any Lien, except for (x) Liens securing Senior Lender
Claims and (y) any other Permitted Liens to exist under the Indenture. The
Grantor has not filed or consented to the filing of (a) any financing statement
or analogous document under the UCC or any other applicable laws covering any
Collateral, (b) any assignment in which any Grantor assigns any Collateral or
any security agreement or similar instrument covering any Collateral with the
United States Patent and Trademark Office or the United States Copyright Office
or (c) any assignment in which any Grantor assigns any Collateral or any
security agreement or similar instrument covering any Collateral with any
foreign governmental, municipal or other office, which financing statement or
analogous document, assignment, security agreement or similar instrument is
still in effect, except, in each case, for (x) Liens securing Senior Lender
Claims and (y) any other Permitted Liens.

                                   ARTICLE IV

                                    Covenants

                                                                               9




      SECTION 4.01. Records. Each Grantor agrees to maintain, at its own cost
and expense, such complete and accurate records with respect to the Collateral
owned by it as is consistent with its current practices, but in any event to
include complete accounting records indicating all payments and proceeds
received with respect to any part of the Collateral, and, at such time or times
as the Collateral Agent may reasonably request, promptly to prepare and deliver
to the Collateral Agent an updated Perfection Certificate, noting all material
changes, if any, since the date of the most recent Perfection Certificate.

      SECTION 4.02. Protection of Security. Each Grantor shall, at its own cost
and expense, take any and all actions necessary to defend title to the
Collateral against all Persons and to defend the Security Interest of the
Collateral Agent in the Collateral and the priority thereof against any Lien
other than Permitted Liens.

      SECTION 4.03. Further Assurances. Each Grantor agrees, at its own expense,
to execute, acknowledge, deliver and cause to be duly filed all such further
instruments and documents and take all such actions as the Collateral Agent, in
accordance with, and to the extent consistent with, the terms of the
Intercreditor Agreement, may from time to time request to better assure,
preserve, protect and perfect the Security Interest and the rights and remedies
created hereby, including the payment of any fees and taxes required in
connection with the execution and delivery of this Agreement, the granting of
the Security Interest and the filing of any financing statements (including
fixture filings) or other documents in connection herewith or therewith. If any
amount payable under or in connection with any of the Collateral shall be or
become evidenced by any promissory note or other instrument, such note or
instrument shall be immediately pledged and delivered to the Senior Agent (or,
if the First-Lien Termination Date has occurred, the Collateral Agent) to be
held as Collateral pursuant to this Agreement and the Intercreditor Agreement,
duly endorsed in a manner satisfactory to the Senior Agent (or, if the
First-Lien Termination Date has occurred, the Collateral Agent).

      SECTION 4.04. Inspection and Verification. The Collateral Agent and such
Persons as the Collateral Agent may reasonably designate shall have the right to
inspect the Collateral, all records related thereto (and to make extracts and
copies from such records) and the premises upon which any of the Collateral is
located, at reasonable times and intervals during normal business hours upon
reasonable advance notice to the respective Grantor and to verify under
reasonable procedures the validity, amount, quality, quantity, value, condition
and status of the Collateral.

      SECTION 4.05. Taxes; Encumbrances. In accordance with, and to the extent
consistent with, the terms of the Intercreditor Agreement, at its option, the
Collateral Agent may discharge past due taxes, assessments, charges, fees,
Liens, security interests or other encumbrances at any time levied or placed on
the Collateral and not permitted under the Indenture, and may pay for the
maintenance and preservation of the Collateral, in each case to the extent any
Grantor fails to do so as required by the Indenture or this Agreement, and each
Grantor jointly and severally agrees to reimburse the Collateral Agent on demand
for any payment made or any expense incurred by the Collateral Agent pursuant to
the foregoing authorization; provided, however, that nothing in this Section
4.05 shall be interpreted as excusing any Grantor from the performance of, or
imposing any obligation on the Collateral Agent or any Secured Party to cure or
perform, any covenants or other promises of any Grantor with respect to taxes,
assessments, charges, fees, liens, security interests or other encumbrances and
maintenance as set forth herein or in the other Indenture Documents.

      SECTION 4.06. Assignment of Security Interest. If at any time any Grantor
shall take a security interest in any property of an Account Debtor or any other
Person to secure payment and performance of an Account, such Grantor shall
promptly assign such security interest to the Collateral Agent to the extent
permitted by any contracts or arrangements to which such property is subject.
Such assignment need not be filed of public record unless necessary to continue
the perfected status of the security interest against creditors of and
transferees from the Account

                                                                              10




Debtor or other Person granting the security interest.

      SECTION 4.07. Continuing Obligations of the Grantors. Each Grantor shall
remain liable to observe and perform all the conditions and obligations to be
observed and performed by it under each contract, agreement or instrument
relating to the Collateral, all in accordance with the terms and conditions
thereof, and each Grantor jointly and severally agrees to indemnify and hold
harmless the Collateral Agent and the Secured Parties from and against any and
all liability for such performance.

      SECTION 4.08. Use and Disposition of Collateral. None of the Grantors
shall make or permit to be made an assignment, pledge or hypothecation of the
Collateral or shall grant any other Lien in respect of the Collateral, except as
expressly permitted by the Indenture. None of the Grantors shall make or permit
to be made any transfer of the Collateral and each Grantor shall remain at all
times in possession of the Collateral owned by it, except that (a) Inventory may
be sold in the ordinary course of business and (b) unless and until the
Collateral Agent shall notify the Grantors that an Event of Default shall have
occurred and be continuing and that during the continuance thereof the Grantors
shall not sell, convey, lease, assign, transfer or otherwise dispose of any
Collateral (which notice may be given by telephone if promptly confirmed in
writing), the Grantors may use and dispose of the Collateral in any lawful
manner not inconsistent with the provisions of this Agreement, the Indenture or
any other Indenture Document. Without limiting the generality of the foregoing,
each Grantor agrees that it shall not permit any material Inventory to be in the
possession or control of any warehouseman, bailee, agent or processor at any
time unless such warehouseman, bailee, agent or processor shall have been
notified of the Security Interest and shall have agreed in writing to hold the
Inventory subject to the Security Interest and the instructions of the Senior
Agent (or, if the First-Lien Termination Date has occurred, the Collateral
Agent) and to waive and release any Lien held by it with respect to such
Inventory, whether arising by operation of law or otherwise.

      SECTION 4.09. Limitation on Modification of Accounts. None of the Grantors
will, without the prior written consent of the Senior Agent (or, if the
First-Lien Termination Date has occurred, the Collateral Agent) grant any
extension of the time of payment of any of the Accounts Receivable, compromise,
compound or settle the same for less than the full amount thereof, release,
wholly or partly, any Person liable for the payment thereof or allow any credit
or discount whatsoever thereon, other than extensions, credits, discounts,
compromises or settlements granted or made in the ordinary course of business
and consistent with its current practices.

      SECTION 4.10. Insurance. The Grantors, at their own expense, shall
maintain or cause to be maintained insurance covering physical loss or damage to
the Inventory and Equipment with financially sound and reputable insurance
companies in such amounts (with no greater risk retention) and against such
risks as are customarily maintained by companies of established repute engaged
in the same or similar businesses operating in the same or similar locations.
Subject to the Intercreditor Agreement, each Grantor irrevocably makes,
constitutes and appoints the Collateral Agent (and all officers, employees or
agents designated by the Collateral Agent) as such Grantor's true and lawful
agent (and attorney-in-fact) for the purpose, during the continuance of an Event
of Default, of making, settling and adjusting claims in respect of Collateral
under policies of insurance, endorsing the name of such Grantor on any check,
draft, instrument or other item of payment for the proceeds of such policies of
insurance and for making all determinations and decisions with respect thereto.
Subject to the Intercreditor Agreement, in the event that any Grantor at any
time or times shall fail to obtain or maintain any of the policies of insurance
required hereby or to pay any premium in whole or part relating thereto, the
Collateral Agent may, without waiving or releasing any obligation or liability
of the Grantors hereunder or any Event of Default, in its sole discretion,
obtain and maintain such policies of insurance and pay such premium and take any
other actions with respect thereto as the Collateral Agent deems advisable.
Subject to the Intercreditor Agreement, all sums disbursed by the Collateral
Agent in connection with this Section 4.10, including reasonable attorneys'
fees,

                                                                              11




court costs, expenses and other charges relating thereto, shall be payable, upon
demand, by the Grantors to the Collateral Agent and shall be additional
Obligations secured hereby.

      SECTION 4.11. Legend. If any Accounts Receivable of any Grantor are
evidenced by chattel paper, such Grantor shall legend, in form and manner
satisfactory to the Senior Agent (or, if the First-Lien Termination Date has
occurred, the Collateral Agent), such Accounts Receivable and its books, records
and documents evidencing or pertaining thereto with an appropriate reference to
the fact that such Accounts Receivable have been assigned to the Senior Agent
(or, if the First-Lien Termination Date has occurred, the Collateral Agent) for
the benefit of the Secured Parties and that the Senior Agent has a security
interest therein.

      SECTION 4.12. Covenants Regarding Patent, Trademark and Copyright
Collateral. (a) Each Grantor agrees that it will not, nor will it permit any of
its licensees to, do any act, or omit to do any act, whereby any Patent which is
material to the conduct of such Grantor's business may become invalidated or
dedicated to the public, and agrees that it shall continue to mark any products
covered by a Patent with the relevant patent number as necessary and sufficient
to establish and preserve its maximum rights under applicable patent laws
pursuant to which each such Patent is issued.

      (b) Each Grantor (either itself or through its licensees or its
sublicensees) will, for each Trademark material to the conduct of such Grantor's
business, (i) maintain such Trademark in full force free from any claim of
abandonment or invalidity for non-use, (ii) maintain the quality of products and
services offered under such Trademark sufficient to preclude any findings of
abandonment, (iii) display such Trademark with notice of Federal or foreign
registration to the extent necessary and sufficient to establish and preserve
its maximum rights under applicable law pursuant to which each such Trademark is
issued and (iv) not knowingly use or knowingly permit the use of such Trademark
in violation of any third party rights.

      (c) Each Grantor (either itself or through licensees) will, for each work
covered by a material Copyright, continue to publish, reproduce, display, adopt
and distribute the work with appropriate copyright notice as necessary and
sufficient to establish and preserve its maximum rights under applicable
copyright laws pursuant to which each such Copyright is issued.

      (d) Each Grantor shall notify the Collateral Agent immediately if it knows
or has reason to know that any Patent, Trademark or Copyright material to the
conduct of its business may become abandoned, lost or dedicated to the public,
or of any adverse determination or development (including the institution of, or
any such determination or development in, any proceeding in the United States
Patent and Trademark Office, United States Copyright Office or any court or
similar office of any country) regarding such Grantor's ownership of any Patent,
Trademark or Copyright, its right to register the same, or to keep and maintain
the same.

      (e) In no event shall any Grantor, either itself or through any agent,
employee, licensee or designee, file an application for any Patent, Trademark or
Copyright (or for the registration of any Trademark or Copyright) with the
United States Patent and Trademark Office, United States Copyright Office or any
office or agency in any political subdivision of the United States or in any
other country or any political subdivision thereof, unless it promptly informs
the Collateral Agent, and, in accordance with, and to the extent consistent
with, the terms of the Intercreditor Agreement, upon request of the Collateral
Agent, executes and delivers any and all agreements, instruments, documents and
papers as the Collateral Agent may request to evidence and perfect the
Collateral Agent's security interest in such Patent, Trademark or Copyright, and
each Grantor hereby appoints the Collateral Agent as its attorney-in-fact to
execute and file such writings for the foregoing purposes, all acts of such
attorney being hereby ratified and confirmed; such power, being coupled with an
interest, is irrevocable.

      (f) Each Grantor will take all necessary steps that are consistent with
the practice in any proceeding before the United States Patent and Trademark
Office, United States Copyright

                                                                              12




Office or any office or agency in any political subdivision of the United States
or in any other country or any political subdivision thereof, to maintain and
pursue each material application relating to the Patents, Trademarks and/or
Copyrights (and to obtain the relevant grant or registration) and to maintain
each issued Patent and each registration of the Trademarks and Copyrights that
is material to the conduct of any Grantor's business, including timely filings
of applications for renewal, affidavits of use, affidavits of incontestability
and payment of maintenance fees, and, if consistent with good business judgment,
to initiate opposition, interference and cancelation proceedings against third
parties.

      (g) In the event that any Grantor has reason to believe that any
Collateral consisting of a Patent, Trademark or Copyright material to the
conduct of any Grantor's business has been or is about to be infringed,
misappropriated or diluted by a third party, such Grantor promptly shall notify
the Collateral Agent and shall, if consistent with good business judgment,
promptly sue for infringement, misappropriation or dilution and to recover any
and all damages for such infringement, misappropriation or dilution, and take
such other actions as are appropriate under the circumstances to protect such
Collateral.

      (h) Upon and during the continuance of an Event of Default, each Grantor
shall use its best efforts to obtain all requisite consents or approvals from
the licensor of each Copyright License, Patent License or Trademark License to
effect the assignment of all of such Grantor's right, title and interest
thereunder to the Senior Agent (or, if the First-Lien Termination Date has
occurred, the Collateral Agent) or its designee for the benefit of the Secured
Parties in accordance with the Intercreditor Agreement.

                                    ARTICLE V

                                Power of Attorney

      Each Grantor irrevocably makes, constitutes and appoints the Collateral
Agent (and all officers, employees or agents designated by the Collateral Agent)
as such Grantor's true and lawful agent and attorney-in-fact, and in such
capacity the Collateral Agent shall have the right, with power of substitution
for each Grantor and in each Grantor's name or otherwise, for the use and
benefit of the Collateral Agent and the Secured Parties, upon the occurrence and
during the continuance of an Event of Default (a) to receive, endorse, assign
and/or deliver any and all notes, acceptances, checks, drafts, money orders or
other evidences of payment relating to the Collateral or any part thereof; (b)
to demand, collect, receive payment of, give receipt for and give discharges and
releases of all or any of the Collateral; (c) to sign the name of any Grantor on
any invoice or bill of lading relating to any of the Collateral; (d) to send
verifications of Accounts Receivable to any Account Debtor; (e) to commence and
prosecute any and all suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect or otherwise realize on all or any of
the Collateral or to enforce any rights in respect of any Collateral; (f) to
settle, compromise, compound, adjust or defend any actions, suits or proceedings
relating to all or any of the Collateral; (g) to notify, or to require any
Grantor to notify, Account Debtors to make payment directly to the Collateral
Agent; and (h) to use, sell, assign, transfer, pledge, make any agreement with
respect to or otherwise deal with all or any of the Collateral, and to do all
other acts and things necessary to carry out the purposes of this Agreement, as
fully and completely as though the Collateral Agent were the absolute owner of
the Collateral for all purposes; provided, however, that nothing herein
contained shall be construed as requiring or obligating the Collateral Agent or
any Secured Party to make any commitment or to make any inquiry as to the nature
or sufficiency of any payment received by the Collateral Agent or any Secured
Party, or to present or file any claim or notice, or to take any action with
respect to the Collateral or any part thereof or the moneys due or to become due
in respect thereof or any property covered thereby, and no action taken or
omitted to be taken by the Collateral Agent or any Secured Party with respect to
the Collateral or any part thereof shall give rise to any defense, counterclaim
or offset in favor of any Grantor or to any claim or action

                                                                              13




against the Collateral Agent or any Secured Party. It is understood and agreed
that the appointment of the Collateral Agent as the agent and attorney-in-fact
of the Grantors for the purposes set forth above is coupled with an interest and
is irrevocable. The provisions of this Section shall in no event relieve any
Grantor of any of its obligations hereunder or under any other Indenture
Document with respect to the Collateral or any part thereof or impose any
obligation on the Collateral Agent or any Secured Party to proceed in any
particular manner with respect to the Collateral or any part thereof, or in any
way limit the exercise by the Collateral Agent or any Secured Party of any other
or further right which it may have on the date of this Agreement or hereafter,
whether hereunder, under any other Indenture Document, by law or otherwise.

      Notwithstanding anything in this Article V to the contrary, the Collateral
Agent agrees that it will not exercise any rights under the power of attorney
provided for in this Article V unless it does so in accordance with, and to the
extent consistent with, the terms of the Intercreditor Agreement.

                                   ARTICLE VI

                                    Remedies

      SECTION 6.01. Remedies upon Default. In accordance with, and to the extent
consistent with, the terms of the Intercreditor Agreement, upon the occurrence
and during the continuance of an Event of Default, each Grantor agrees to
deliver each item of Collateral to the Collateral Agent on demand, and it is
agreed that the Collateral Agent shall have the right to take any of or all the
following actions at the same or different times: (a) with respect to any
Collateral consisting of Intellectual Property, on demand, to cause the Security
Interest to become an assignment, transfer and conveyance of any of or all such
Collateral by the applicable Grantors to the Collateral Agent (except to the
extent assignment, transfer or conveyance thereof would result in a loss of said
Intellectual Property), or to license or sublicense, whether general, special or
otherwise, and whether on an exclusive or non-exclusive basis, any such
Collateral throughout the world on such terms and conditions and in such manner
as the Collateral Agent shall determine (other than in violation of any
then-existing licensing arrangements to the extent that waivers cannot be
obtained), and (b) with or without legal process and with or without prior
notice or demand for performance, to take possession of the Collateral and
without liability for trespass to enter any premises where the Collateral may be
located for the purpose of taking possession of or removing the Collateral and,
generally, to exercise any and all rights afforded to a secured party under the
UCC or other applicable law. Without limiting the generality of the foregoing,
in accordance with, and to the extent consistent with, the terms of the
Intercreditor Agreement, each Grantor agrees that the Collateral Agent shall
have the right, subject to the mandatory requirements of applicable law, to sell
or otherwise dispose of all or any part of the Collateral, at public or private
sale or at any broker's board or on any securities exchange, for cash, upon
credit or for future delivery as the Collateral Agent shall deem appropriate.
The Collateral Agent shall be authorized at any such sale (if it deems it
advisable to do so) to restrict the prospective bidders or purchasers to Persons
who will represent and agree that they are purchasing the Collateral for their
own account for investment and not with a view to the distribution or sale
thereof, and upon consummation of any such sale the Collateral Agent shall have
the right to assign, transfer and deliver to the purchaser or purchasers thereof
the Collateral so sold. Each such purchaser at any such sale shall hold the
property sold absolutely, free from any claim or right on the part of any
Grantor, and each Grantor hereby waives (to the extent permitted by law) all
rights of redemption, stay and appraisal which such Grantor now has or may at
any time in the future have under any rule of law or statute now existing or
hereafter enacted.

      The Collateral Agent shall give the Grantors 10 days' written notice
(which each Grantor agrees is reasonable notice within the meaning of Section
9-611 of the Uniform Commercial

                                                                              14




Code as in effect in the State of New York or its equivalent in other
jurisdictions) of the Collateral Agent's intention to make any sale of
Collateral. Such notice, in the case of a public sale, shall state the time and
place for such sale and, in the case of a sale at a broker's board or on a
securities exchange, shall state the board or exchange at which such sale is to
be made and the day on which the Collateral, or portion thereof, will first be
offered for sale at such board or exchange. Any such public sale shall be held
at such time or times within ordinary business hours and at such place or places
as the Collateral Agent may fix and state in the notice (if any) of such sale.
At any such sale, the Collateral, or portion thereof, to be sold may be sold in
one lot as an entirety or in separate parcels, as the Collateral Agent may (in
its sole and absolute discretion) determine. The Collateral Agent shall not be
obligated to make any sale of any Collateral if it shall determine not to do so,
regardless of the fact that notice of sale of such Collateral shall have been
given. The Collateral Agent may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Collateral Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Collateral Agent shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again upon like
notice. At any public (or, to the extent permitted by law, private) sale made
pursuant to this Section, any Secured Party may bid for or purchase, free (to
the extent permitted by law) from any right of redemption, stay, valuation or
appraisal on the part of any Grantor (all said rights being also hereby waived
and released to the extent permitted by law), the Collateral or any part thereof
offered for sale and may make payment on account thereof by using any Obligation
then due and payable to such Secured Party from any Grantor as a credit against
the purchase price, and such Secured Party may, upon compliance with the terms
of sale, hold, retain and dispose of such property without further
accountability to any Grantor therefor. For purposes hereof a written agreement
to purchase the Collateral or any portion thereof shall be treated as a sale
thereof; the Collateral Agent shall be free to carry out such sale pursuant to
such agreement and no Grantor shall be entitled to the return of the Collateral
or any portion thereof subject thereto, notwithstanding the fact that after the
Collateral Agent shall have entered into such an agreement all Events of Default
shall have been remedied and the Obligations paid in full. As an alternative to
exercising the power of sale herein conferred upon it, the Collateral Agent may
proceed by a suit or suits at law or in equity to foreclose this Agreement and
to sell the Collateral or any portion thereof pursuant to a judgment or decree
of a court or courts having competent jurisdiction or pursuant to a proceeding
by a court-appointed receiver.

      SECTION 6.02. Application of Proceeds. In accordance with, and to the
extent consistent with, the terms of the Intercreditor Agreement, the Collateral
Agent shall apply the proceeds of any collection or sale of the Collateral, as
well as any Collateral consisting of cash, as follows:

            FIRST, to the payment of all costs and expenses incurred by Trustee
      or the Collateral Agent (in its capacity as such hereunder or under any
      other Indenture Document) in connection with such collection or sale or
      otherwise in connection with this Agreement or any of the Obligations,
      including all court costs and the reasonable fees and expenses of its
      agents and legal counsel, the repayment of all advances made by the
      Trustee or the Collateral Agent hereunder or under any other Indenture
      Document on behalf of any Grantor and any other costs or expenses incurred
      in connection with the exercise of any right or remedy hereunder or under
      any other Indenture Document and any other amounts due to the Trustee or
      the Collateral Agent under Section 7.07 of the Indenture;

            SECOND, to the payment in full of the Obligations owed to the
      Holders and any Other Second-Lien Obligations owed to holders of such
      Indebtedness (the amounts so

                                                                              15




      applied to be distributed among the Holders and any holders of Other
      Second-Lien Obligations pro rata in accordance with the amounts of the
      Obligations owed to Holders and Other Second-Lien Obligations owed to
      holders of such Indebtedness on the date of any such distribution); and

            THIRD, to the Grantors, their successors or assigns, or as a court
      of competent jurisdiction may otherwise direct.

      The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. The Collateral Agent may fix a record date and payment date for any
payment to Holders pursuant to this Section 6.02. At least 15 days before such
record date, the Collateral Agent shall mail to each Holder and the Issuers a
notice that states the record date, the payment and amount to be paid. Upon any
sale of the Collateral by the Collateral Agent (including pursuant to a power of
sale granted by statute or under a judicial proceeding), the receipt of the
Collateral Agent or of the officer making the sale shall be a sufficient
discharge to the purchaser or purchasers of the Collateral so sold and such
purchaser or purchasers shall not be obligated to see to the application of any
part of the purchase money paid over to the Collateral Agent or such officer or
be answerable in any way for the misapplication thereof.

      SECTION 6.03. Grant of License to Use Intellectual Property. In accordance
with, and to the extent consistent with, the Intercreditor Agreement, for the
purpose of enabling the Collateral Agent to exercise rights and remedies under
this Article at such time as the Collateral Agent shall be lawfully entitled to
exercise such rights and remedies, each Grantor hereby grants to the Collateral
Agent an irrevocable, non-exclusive license (exercisable without payment of
royalty or other compensation to the Grantors) to use, license or sub-license
any of the Collateral consisting of Intellectual Property now owned or hereafter
acquired by such Grantor, and wherever the same may be located, and including in
such license reasonable access to all media in which any of the licensed items
may be recorded or stored and to all computer software and programs used for the
compilation or printout thereof. The use of such license by the Collateral Agent
shall be exercised, at the option of the Collateral Agent (if the First-Lien
Termination Date has occurred), upon the occurrence and during the continuation
of an Event of Default; provided that any license, sub-license or other
transaction entered into by the Collateral Agent in accordance herewith shall be
binding upon the Grantors notwithstanding any subsequent cure of an Event of
Default.

                                   ARTICLE VII

                                  Miscellaneous

      SECTION 7.01. Notices. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given as
provided in Section 12.02 of the Indenture. All communications and notices
hereunder to any Guarantor shall be given to it at its address or telecopy
number set forth on Schedule I, with a copy to the Company.

      SECTION 7.02. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the Security Interest and all obligations of the Grantors
hereunder shall be absolute and unconditional irrespective of (a) any lack of
validity or enforceability of the Indenture, any other Indenture Document, any
agreement with respect to any of the Obligations or any other agreement or
instrument relating to any of the foregoing, (b) any change in the time, manner
or place of payment of, or in any other term of, all or any of the Obligations,
or any other amendment or waiver of or any consent to any departure from the
Indenture, any other Indenture Document or any other agreement or instrument,
(c) any exchange, release or non-perfection of any Lien on other collateral, or
any release or amendment or waiver of or consent under or departure from any
guarantee, securing or guaranteeing all or any of the Obligations, or (d) any

                                                                              16




other circumstance that might otherwise constitute a defense available to, or a
discharge of, any Grantor in respect of the Obligations or this Agreement.

      SECTION 7.03. Survival of Agreement. All covenants, agreements,
representations and warranties made by any Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement shall be considered to have been relied upon by the
Secured Parties and shall survive the purchase and resale of the Notes by the
Initial Purchasers, regardless of any investigation made by the Initial
Purchasers or on their behalf, and shall continue in full force and effect until
this Agreement shall terminate.

      SECTION 7.04. Binding Effect; Several Agreement. This Agreement shall
become effective as to any Grantor when a counterpart hereof executed on behalf
of such Grantor shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral Agent,
and thereafter shall be binding upon such Grantor and the Collateral Agent and
their respective successors and assigns, and shall inure to the benefit of such
Grantor, the Collateral Agent and the other Secured Parties and their respective
successors and assigns, except that no Grantor shall have the right to assign or
transfer its rights or obligations hereunder or any interest herein or in the
Collateral (and any such assignment or transfer shall be void) except as
expressly contemplated by this Agreement or the other Indenture Documents. This
Agreement shall be construed as a separate agreement with respect to each
Grantor and may be amended, modified, supplemented, waived or released with
respect to any Grantor without the approval of any other Grantor and without
affecting the obligations of any other Grantor hereunder.

      SECTION 7.05. Successors and Assigns. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of any Grantor or the Collateral Agent that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns.

      SECTION 7.06. Collateral Agent's Fees and Expenses; Indemnification. In
accordance with, and to the extent consistent with, the terms of the
Intercreditor Agreement, (a) each Grantor jointly and severally agrees to pay
upon demand to the Collateral Agent the amount of any and all reasonable
expenses, including the reasonable fees, disbursements and other charges of its
counsel and of any experts or agents, which the Collateral Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from or other realization upon any
of the Collateral, (iii) the exercise, enforcement or protection of any of the
rights of the Collateral Agent hereunder or (iv) the failure of any Grantor to
perform or observe any of the provisions hereof applicable to it.

      (b) Without limitation of its indemnification obligations under the other
Indenture Documents, each Grantor jointly and severally agrees to indemnify the
Collateral Agent, the Trustee, the Holders and each Affiliate of the foregoing
Persons (each such Person being called an "Indemnitee") against, and hold each
of them harmless from, any and all losses, claims, damages, liabilities and
related expenses, including reasonable fees, disbursements and other charges of
counsel, incurred by or asserted against any of them arising out of, in any way
connected with, or as a result of, the execution, delivery or performance of
this Agreement or any claim, litigation, investigation or proceeding relating
hereto or to the Collateral, whether or not any Indemnitee is a party thereto;
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses
are determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee.

      (c) Any such amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 7.06 shall remain operative and in full force and effect
regardless of the termination of this Agreement or

                                                                              17




any other Indenture Document, the consummation of the transactions contemplated
hereby, the repayment of any of the Notes, the invalidity or unenforceability of
any term or provision of this Agreement or any other Indenture Document, or any
investigation made by or on behalf of the Collateral Agent or any Holder. All
amounts due under this Section 7.06 shall be payable on written demand therefor.

      SECTION 7.07. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

      SECTION 7.08. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the Collateral Agent, the Trustee and the Holders under the other
Indenture Documents are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. No waiver of any provisions of this
Agreement or any other Indenture Document or consent to any departure by any
Grantor therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on any Grantor in any case shall entitle such Grantor or any
other Grantor to any other or further notice or demand in similar or other
circumstances.

      (b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except (i) in accordance with the Indenture pursuant to an agreement
or agreements in writing entered into by the Collateral Agent and the Grantor or
Grantors with respect to which such waiver, amendment or modification is to
apply, or (ii) as otherwise provided in the Intercreditor Agreement.

      SECTION 7.09. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER INDENTURE
DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER INDENTURE DOCUMENTS, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 7.09.

      SECTION 7.10. Severability. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired thereby
(it being understood that the invalidity of a particular provision in a
particular jurisdiction shall not in and of itself affect the validity of such
provision in any other jurisdiction). The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.

      SECTION 7.11 Counterparts. This Agreement 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 contract (subject to Section 7.04), and
shall become effective as provided in

                                                                              18




Section 7.04. Delivery of an executed signature page to this Agreement by
facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof.

      SECTION 7.12. Headings. Article and Section headings used herein are for
the purpose of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.

      SECTION 7.13. Jurisdiction; Consent to Service of Process. (a) Each
Grantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Indenture Documents, or for recognition
or enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such New York State or, to
the extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Collateral Agent, the Trustee or any Holder may otherwise have to
bring any action or proceeding relating to this Agreement or the other Indenture
Documents against any Grantor or its properties in the courts of any
jurisdiction.

      (b) Each Grantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Indenture Documents in
any New York State or Federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.

      (c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 7.01. Nothing in this
Agreement will affected the right of any party to this Agreement to serve
process in any other manner permitted by law.

      SECTION 7.14. Termination. (a) This Agreement and the Security Interest
shall terminate at the time provided in Section 10.08 of the Indenture at which
time the Collateral Agent shall execute and deliver to the Grantors, at the
Grantors' expense, all Uniform Commercial Code termination statements and
similar documents, including, without limitation, authorization for the Grantors
to file Uniform Commercial Code termination statements, which the Grantors shall
reasonably request to evidence such termination. Any execution and delivery of
termination statements or documents pursuant to this Section 7.14 shall be
without recourse to or warranty by the Collateral Agent. A Grantor shall
automatically be released from its obligations hereunder and the Security
Interest in the Collateral of such Grantor shall be automatically released in
the event that such Grantor ceases to be a Guarantor pursuant to a transaction
permitted under the Indenture, at which time the Collateral Agent shall execute
and deliver to any Grantor, at such Grantor's expense, all documents that such
Grantor shall reasonably request to evidence such release.

      (b) If any of the Collateral shall become subject to the release
provisions set forth in Section 10.03 of the Indenture or Section 5.1 of the
Intercreditor Agreement, such Collateral shall be automatically released from
the Security Interest to the extent provided in Section 10.03 of the Indenture
or Section 5.1 of the Intercreditor Agreement, as applicable. The Collateral
Agent shall execute and deliver to the Grantors, at the Grantors' expense, all
Uniform Commercial Code termination statements and similar documents which the
Grantor shall reasonable request to evidence the termination of the Security
Interest in such Collateral.

      SECTION 7.15. Additional Grantors. If, pursuant to Sections 4.11 and 11.06
of the

                                                                              19




Indenture, the Company is required to cause any Subsidiary of the Company that
is not a Grantor to enter in to this Agreement as a Grantor, upon execution and
delivery by the Collateral Agent and such Subsidiary of an instrument in the
form of Annex 3 hereto, such Subsidiary shall become a Grantor hereunder with
the same force and effect as if originally named as a Grantor herein. The
execution and delivery of any such instrument shall not require the consent of
any Grantor hereunder. The rights and obligations of each Grantor hereunder
shall remain in full force and effect notwithstanding the addition of any new
Grantor as a party to this Agreement.

      SECTION 7.16. Subject to Intercreditor Agreement. Notwithstanding anything
herein to the contrary, the lien and security interest granted to the Collateral
Agent pursuant to this Agreement and the exercise of any right or remedy by the
Collateral Agent hereunder are subject to the provisions of the Intercreditor
Agreement. In the event of any conflict between the terms of the Intercreditor
Agreement and this Agreement, the terms of the Intercreditor Agreement shall
govern.

      IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.

                                     SEMICONDUCTOR COMPONENTS
                                     INDUSTRIES, LLC,


                                     By /s/ John T. Kurtzweil
                                       ---------------------------------
                                       Name: John T. Kurtzweil
                                       Title: Chief Financial Officer



                                     ON SEMICONDUCTOR CORPORATION,


                                     By /s/ John T. Kurtzweil
                                       ---------------------------------
                                       Name: John T. Kurtzweil
                                       Title: Chief Financial Officer



                                     EACH OF THE OTHER GUARANTORS
                                     LISTED ON SCHEDULE I HERETO,


                                     By /s/ John T. Kurtzweil
                                       ------------------------------
                                       Name: John T. Kurtzweil
                                       Title: Chief Financial Officer



                                     WELLS FARGO BANK MINNESOTA,
                                     NATIONAL ASSOCIATION, as Collateral
                                     Agent,

                                     By /s/ Joseph P. O'Donnell
                                       --------------------------
                                       Name: Joseph P. O'Donnell
                                       Title: Corporate Trust Officer

                                                               Schedule I to the
                                                              Security Agreement

                                   GUARANTORS



                Guarantors                                 Address
                ----------                                 -------
                                                  

SCG International Development LLC                    5005 East McDowell Road
                                                     Phoenix, AZ 85008

SCG (Malaysia SMP) Holding Corporation               5005 East McDowell Road
                                                     Phoenix, AZ 85008

SCG (Czech) Holding Corporation                      5005 East McDowell Road
                                                     Phoenix, AZ 85008

SCG (China) Holding Corporation                      5005 East McDowell Road
                                                     Phoenix, AZ 85008

Semiconductor Components Industries Puerto Rico,     5005 East McDowell Road
Inc.                                                 Phoenix, AZ 85008

Semiconductor Components Industries of Rhode         2000 South County Trail
Island, Inc.                                         East Greenwich, RI 02818

Semiconductor Components Industries International    2000 South County Trail
of Rhode Island, Inc.                                East Greenwich, RI 02818


                                                              Schedule II to the
                                                              Security Agreement



                                   COPYRIGHTS

                                                             Schedule III to the
                                                              Security Agreement



                                    LICENSES

                                                              Schedule IV to the
                                                              Security Agreement



                                     PATENTS

                                                               Schedule V to the
                                                              Security Agreement



                                   TRADEMARKS

                                                                  Annex 2 to the
                                                              Security Agreement

                                    [Form of]

                             PERFECTION CERTIFICATE

      Reference is made to (a) the Indenture dated as of May 6, 2002 (as
amended, supplemented or otherwise modified from time to time, the "Indenture"),
among ON Semiconductor Corporation, a Delaware corporation (the "Company"), and
Semiconductor Components Industries, LLC, a Delaware limited liability company
("SCI LLC " and, together with the Company, the "Issuers"), the Guarantors and
Wells Fargo Bank Minnesota, National Association, a national banking association
("Wells Fargo Bank"), as trustee, (b) the Security Agreement dated as of May 6,
2002, among the Company, SCI LLC, the Guarantors and Wells Fargo Bank, as
collateral agent (in such capacity, the "Collateral Agent"), and (c) the
Intercreditor Agreement dated as of May 6, 2002 (as amended, supplemented or
otherwise modified from time to time, the "Intercreditor Agreement"), among the
Issuers, the Collateral Agent and the Senior Agent. Capitalized terms used but
not defined herein have the meanings assigned to them in the Indenture or the
Security Agreement, as applicable.

            The undersigned, an Officer of the Issuers, hereby certifies to the
Collateral Agent and each other Secured Party as follows:

1.    Names.

(a) The exact legal name of each Grantor, as such name appears in its respective
certificate of formation, is as follows:

(b) Set forth below is each other legal name each Grantor has had in the past
five years, together with the date of the relevant change:

(c) Except as set forth in Schedule 1 hereto, no Grantor has changed its
identity or corporate structure in any way within the past five years. Changes
in identity or corporate structure would include mergers, consolidations and
acquisitions, as well as any change in the form, nature or jurisdiction of
corporate organization. If any such change has occurred, include in Schedule 1
the information required by Sections 1 and 2 of this certificate as to each
acquiree or constituent party to a merger or consolidation.

(d) The following is a list of all other names (including trade names or similar
appellations) used by each Grantor or any of its divisions or other business
units in connection with the conduct of its business or the ownership of its
properties at any time during the past five years:

(e) Set forth below is the organizational identification number, if any, issued
by the jurisdiction of formation of each Grantor that is a registered
organization:



                                            Organizational Identification
     Grantor                                            Number
     -------                                            ------
                                         



                                                                               2




(f) Set forth below is the Federal Taxpayer Identification Number of each
Grantor:




                                           Federal Taxpayer Identification
     Grantor                                            Number
     -------                                            ------
                                        




2. Current Locations. (a) The chief executive office of each Grantor is located
at the address set forth opposite its name below:




         Grantor              Mailing Address        County        State
         -------              ---------------        ------        -----
                                                          





(b) Set forth below opposite the name of each Grantor are all locations where
such Grantor maintains any books or records relating to any Accounts Receivable
or General Intangibles (with each location at which Chattel Paper, if any, is
kept being indicated by an "*"):




         Grantor              Mailing Address        County        State
         -------              ---------------        ------        -----
                                                          





(c) The jurisdiction of formation of each Grantor that is a registered
organization is set forth opposite its name below:



         Grantor                                       Jurisdiction
         -------                                       ------------
                                                    




(d) Set forth below opposite the name of each Grantor are all the locations
where such Grantor maintains any Inventory or Equipment or other Collateral not
identified above:



         Grantor              Mailing Address        County        State
         -------              ---------------        ------        -----
                                                          





(e) Set forth below opposite the name of each Grantor are all the places of
business of such Grantor not identified in paragraph (a), (b), (c) or (d) above:



(f) Set forth below opposite the name of each Grantor are the names and
addresses of all Persons other than such Grantor that have possession of any of
the Collateral of such Grantor:



3. Unusual Transactions. All Accounts have been originated by the Grantors and
all Inventory has

                                                                               3

been acquired by the Grantors in the ordinary course of business.


4. File Search Reports. File search reports have been obtained from each Uniform
Commercial Code filing office identified with respect to such Grantor in Section
2 hereof, and such search reports reflect no liens against any of the Collateral
other than those permitted under the Indenture.


5. UCC Filings. UCC financing statements in substantially the form of Schedule 5
hereto have been prepared for filing in the proper Uniform Commercial Code
filing office in the jurisdiction in which each Grantor is located and, to the
extent any of the Collateral is comprised of fixtures in the proper local
jurisdiction, as set forth with respect to such Grantor in Section 2 hereof.


6. Schedule of Filings. Attached hereto as Schedule 6 is a schedule setting
forth, with respect to the filings described in Section 5 above, each filing and
the filing office in which such filing is to be made.


7. Stock Ownership and other Equity Interests. Attached hereto as Schedule 7 is
a true and correct list of all the issued and outstanding stock, partnership
interests, limited liability company membership interests or other equity
interests owned by the Company and each Subsidiary of the Company (including SCI
LLC). Also set forth on Schedule 7 is each equity investment of the Company or
any Subsidiary of the Company (including SCI LLC) that represents 50% or less of
the equity of the entity in which such investment was made.


8. Debt Instruments. Attached hereto as Schedule 8 is a true and correct list of
all instruments, including any promissory notes, and other evidence of
indebtedness held by the Company and each Subsidiary of the Company (including
SCI LLC), including all intercompany notes between the Company and each
Subsidiary of the Company (including SCI LLC) and each Subsidiary of the Company
(including SCI LLC) and each other such Subsidiary (including SCI LLC).


9. Advances. Attached hereto as Schedule 9 is (a) a true and correct list of all
advances made by the Company to any Subsidiary of the Company (including SCI
LLC) or made by any Subsidiary of the Company (including SCI LLC) to the Company
or to any other Subsidiary of the Company (including SCI LLC) (other than those
identified on Schedule 8), which advances will be on and after the date hereof
evidenced by one or more intercompany notes pledged to the Collateral Agent
under the Pledge Agreement and (b) a true and correct list of all unpaid
intercompany transfers of goods sold and delivered by or to the Company or any
Subsidiary of the Company (including SCI LLC).


10. Mortgage Filings. Attached hereto as Schedule 10 is a schedule setting
forth, with respect to each Mortgaged Property, (a) the exact name of the Person
that owns such property as such name appears in its certificate of incorporation
or other organizational document, (b) if different from the name identified
pursuant to clause (a), the exact name of the current record owner of such
property reflected in the records of the filing office for such property
identified pursuant to the following clause and (c) the filing office in which a
Mortgage with respect to such property must be filed or recorded in order for
the Collateral Agent to obtain a perfected security interest therein.


11. Intellectual Property.
Attached hereto as Schedule 11(A) is a schedule setting forth all of each
Grantor's Patents and registered Trademarks and Patent and Trademark
applications, including the name of the registered owner or applicant, as
applicable, and the registration or application number, as

                                                                               4




applicable, of each Patent and registered Trademark or Patent or Trademark
application owned by any Grantor, in proper form for filing with the United
States Patent and Trademark Office, and a schedule setting forth all of each
Grantor's material Patent Licenses and material Trademark Licenses. Attached
hereto as Schedule 11(B) is a schedule setting forth all of each Grantor's
registered Copyrights, including the name of the registered owner and the
registration number of each Copyright owned by any Grantor, in proper form for
filing with the United States Copyright Office, and a schedule setting forth all
of each Grantor's material Copyright Licenses that grant rights with respect to
registered Copyrights.

                                                                               5




            IN WITNESS WHEREOF, the undersigned have duly executed this
certificate on this [ ]th day of May, 2002.

                                      ON SEMICONDUCTOR CORPORATION,

                                       by
                                          --------------------------
                                          Name:
                                          Title:



                                      SEMICONDUCTOR COMPONENTS
                                      INDUSTRIES, LLC,

                                       by
                                          --------------------------
                                          Name:
                                          Title:

                                                                  Annex 3 to the
                                                              Security Agreement

                                      SUPPLEMENT NO. [ ] dated as of [ ], to the




                        Security Agreement dated as of May 6, 2002, among
                        SEMICONDUCTOR COMPONENTS INDUSTRIES, LLC, a Delaware
                        limited liability company ("SCI LLC"), ON SEMICONDUCTOR
                        CORPORATION, a Delaware corporation (the "Company" and,
                        together with SCI LLC, the "Issuers"), each subsidiary
                        of the Company listed on Schedule I thereto (each such
                        subsidiary individually a "Subsidiary" or a "Guarantor"
                        and, collectively, the "Subsidiaries" or the
                        "Guarantors"; the Guarantors and the Issuers are
                        referred to collectively herein as the "Grantors") and
                        WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, a
                        national banking association ("Wells Fargo Bank"), as
                        trustee under the Indenture referred to below and as
                        collateral agent (in such capacity, the "Collateral
                        Agent") for the Secured Parties (as defined therein).



      A. Reference is made to (a) the Indenture dated as of May 6, 2002 (as
amended, supplemented or otherwise modified from time to time, the "Indenture"),
among the Company, SCI LLC, the Guarantors and Wells Fargo Bank, as trustee, and
(b) the Intercreditor Agreement dated as of May 6, 2002 (as amended,
supplemented or otherwise modified from time to time, the "Intercreditor
Agreement"), among the Issuers, the Collateral Agent and the Senior Agent.

      B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Security Agreement and the
Indenture.

      C. The Grantors have entered into the Security Agreement in order to
induce the Trustee to enter into the Indenture and the Initial Purchasers to
purchase the Notes. Pursuant to Section 4.11 of the Indenture, the Company is
required to cause certain of its Subsidiaries that are not Grantors to enter in
to this Agreement as Grantors. Section 7.15 of the Security Agreement provides
that such Subsidiaries may become Grantors under the Security Agreement by
execution and delivery of an instrument in the form of this Supplement. The
undersigned Subsidiary (the "New Grantor") is executing this Supplement in
accordance with the requirements of the Indenture to become a Grantor under
the Security Agreement as consideration for the purchase of the Notes by the
Initial Purchasers and the Holders.

      Accordingly, the Collateral Agent and the New Grantor agree as follows:

      SECTION 1. In accordance with Section 7.15 of the Security Agreement, the
New Grantor by its signature below becomes a Grantor under the Security
Agreement with the same force and effect as if originally named therein as a
Grantor and the New Grantor hereby (a) agrees to all the terms and provisions of
the Security Agreement applicable to it as a Grantor thereunder and (b)
represents and warrants that the representations and warranties made by it as a
Grantor thereunder are true and correct on and as of the date hereof except to
the extent a representation and warranty expressly relates solely to a specific
date in which case such representation and warranty shall be true and correct on
such date. In furtherance of the foregoing, the New Grantor, as security for the
payment and performance in full of the Obligations (as defined in the Security
Agreement), does hereby create and grant to the Collateral Agent, its successors
and assigns, for the benefit of the Secured Parties, their successors and
assigns, a security interest in and lien on all of the New Grantor's right,
title and interest in and to the Collateral of the New Grantor. Each reference
to a "Grantor" in the Security Agreement shall be deemed to include the New
Grantor. The Security Agreement is hereby incorporated herein by reference.

                                                                               2



      SECTION 2. The New Grantor represents and warrants to the Collateral Agent
and the other Secured Parties that this Supplement has been duly authorized,
executed and delivered by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms.

      SECTION 3. This Supplement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Collateral
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Grantor and the Collateral Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.

      SECTION 4. The New Grantor hereby represents and warrants that (a) set
forth on Schedule I attached hereto is a true and correct schedule of the
location of any and all Collateral of the New Grantor and (b) set forth under
its signature hereto, is the true and correct location of the chief executive
office of the New Grantor.

      SECTION 5. Except as expressly supplemented hereby, the Security Agreement
shall remain in full force and effect.

      SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

      SECTION 7. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Security Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties hereto shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

      SECTION 8. All communications and notices hereunder shall be in writing
and given as provided in Section 7.01 of the Security Agreement. All
communications and notices hereunder to the New Grantor shall be given to it at
the address set forth under its signature below, with a copy to the Company.

      SECTION 9. The New Grantor agrees to reimburse the Collateral Agent for
its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Collateral Agent.

                                                                               3




      IN WITNESS WHEREOF, the New Grantor and the Collateral Agent have duly
executed this Supplement to the Security Agreement as of the day and year first
above written.

                                    [NAME OF NEW GRANTOR],



                                    By
                                       ------------------------------------
                                       Name:
                                       Title:
                                       Address:



                                       WELLS FARGO BANK MINNESOTA,
                                       NATIONAL ASSOCIATION, as Collateral
                                       Agent,



                                    By
                                       ------------------------------------
                                       Name:
                                       Title:

                                                                      Schedule I
                                                           to Supplement No. [ ]
                                                       to the Security Agreement

                             LOCATION OF COLLATERAL



Description                                          Location
- -----------                                          --------


                                                                    Exhibit 10.6



                                    PLEDGE AGREEMENT dated as of May 6, 2002,
                           among SEMICONDUCTOR COMPONENTS INDUSTRIES, LLC, a
                           Delaware limited liability company (the "SCI LLC"),
                           ON SEMICONDUCTOR CORPORATION, a Delaware corporation
                           (the "Company" and, together with SCI LLC, the
                           "Issuers"), each subsidiary of the Company listed on
                           Schedule I hereto (each such subsidiary individually
                           a "Subsidiary Pledgor" and collectively, the
                           "Subsidiary Pledgors"; SCI LLC, the Company and the
                           Subsidiary Pledgors are referred to herein
                           individually as a "Pledgor" and collectively as the
                           "Pledgors") and WELLS FARGO BANK MINNESOTA, NATIONAL
                           ASSOCIATION, a national banking association ("Wells
                           Fargo Bank"), as trustee under the Indenture referred
                           to below and as collateral agent (in such capacity,
                           the "Collateral Agent") for the Secured Parties (as
                           defined in the Security Agreement). Capitalized terms
                           used but not defined herein shall have the meanings
                           assigned to such terms in the Indenture (as defined
                           below).



                                   WITNESSETH:


                  WHEREAS, pursuant to the terms, conditions and provisions of
the (a) Indenture dated as of the date hereof (as amended, restated,
supplemented or otherwise modified from time to time, the "Indenture"), among
the Issuers, the Subsidiary Pledgors and Wells Fargo Bank, as trustee (the
"Trustee"), and (b) the Purchase Agreement dated as of May 1, 2002, among the
Issuers, the Subsidiary Pledgors and Credit Suisse First Boston Corporation,
Morgan Stanley Co. Incorporated, Salomon Smith Barney Inc. and J.P. Morgan
Securities Inc. (the "Initial Purchasers"), the Issuers are issuing $300,000,000
aggregate principal amount of 12% Senior Secured Notes due 2008 and may issue,
from time to time, additional notes in accordance with the provisions of the
Indenture (collectively, the "Notes") which will be guaranteed on a senior
secured basis by each of the Pledgors;

                  WHEREAS, pursuant to the Pledge Agreement dated as of August
4, 1999 (as amended, supplemented or otherwise modified from time to time),
among the Issuers, each of the subsidiaries of the Company party thereto or
which becomes a party thereto pursuant to the Credit Agreement referred to below
(together with the Issuers, each a "Credit Agreement Pledgor" and, collectively,
the "Credit Agreement Pledgors") and JPMorgan Chase Bank (as successor to The
Chase Manhattan Bank), a New York banking corporation ("JPMorgan"), as
collateral agent, the Credit Agreement Pledgors have granted to the Senior Agent
(as defined below) a first-priority lien and security interest in the Collateral
(as defined below) in connection with the Credit Agreement dated as of August 4,
1999, as amended and restated as of April 3, 2000 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among SCI LLC, as
borrower, the Company, the lenders from time to time party thereto (the
"Lenders"), JPMorgan, as administrative agent, collateral agent and syndication
agent (in such capacity, the "Senior Agent") for the Lenders, and Credit
Lyonnais New York

                                                                               2

Branch, Credit Suisse First Boston and Lehman Commercial Paper Inc., as
co-documentation agents;

                  WHEREAS, the Issuers, the Collateral Agent and the Senior
Agent have entered into an Intercreditor Agreement, dated as of the date hereof
(the "Intercreditor Agreement"), pursuant to which the lien and security
interest in the Collateral granted by this Agreement are and shall be
subordinated in all respects to the lien and security interest in the Collateral
granted pursuant to, and all terms and conditions of, the Senior Lender
Documents (as defined in the Intercreditor Agreement);

                  WHEREAS, each Pledgor is executing and delivering this
Agreement pursuant to the terms of the Indenture to induce the Trustee to enter
into the Indenture and the Initial Purchasers to purchase the Notes; and

                  WHEREAS, each Pledgor has duly authorized the execution,
delivery and performance of this Agreement.

                  NOW, THEREFORE, for and in consideration of the premises, and
of the mutual covenants herein contained, and in order to induce the Trustee to
enter into the Indenture and the Initial Purchasers to purchase the Notes, each
Pledgor and the Collateral Agent, on behalf of itself and each Secured Party (as
defined in the Security Agreement) (and each of their respective successors or
assigns), hereby agree as follows:

         SECTION 1. Pledge. As security for the payment and performance, as the
case may be, in full of all obligations of the Issuers and the Subsidiary
Pledgors under the Indenture, the Notes and the other Indenture Documents,
including obligations to the Trustee and the Collateral Agent, whether for
payment of principal of, interest on or additional interest, if any, on the
Notes and all other monetary obligations of the Issuers and the Subsidiary
Pledgors under the Indenture, the Notes and the other Indenture Documents,
whether for fees, expenses, indemnification or otherwise (referred to
collectively as the "Obligations"), each Pledgor hereby pledges and grants to
the Collateral Agent, its successors and assigns, and hereby grants to the
Collateral Agent, its successors and assigns, for the ratable benefit of the
Secured Parties, a second-priority security interest in all of such Pledgor's
right, title and interest in, to and under (a) the shares of capital stock,
partnership interests, membership interests in a limited liability company,
beneficial interests in a trust or other equity ownership interests in a Person
(collectively, the "Equity Interests") owned by it which are listed on Schedule
II hereto and any Equity Interests obtained in the future by such Pledgor and
the certificates representing all such Equity Interests (the "Pledged
Interests"); provided that (i) the Pledged Interests shall not include more than
65% of the issued and outstanding voting stock of any Foreign Subsidiary, (ii)
the Pledged Interests shall not include any Equity Interests in any Foreign
Joint Venture Company (as defined in the Credit Agreement) to the extent that
such a Pledge is prohibited by the constitutive documents of such Foreign Joint
Venture Company or (iii) to the extent that applicable law requires that a
Subsidiary of such Pledgor issue directors' qualifying shares, such qualifying
shares; (b)(i) the debt securities owned by it which are listed opposite the
name of such Pledgor on Schedule II hereto, (ii) any debt securities in the
future issued to such Pledgor and (iii) the promissory notes and any other
instruments evidencing such debt securities (the "Pledged Debt Securities"); (c)
all other property that has been or may be delivered to and held by the Senior
Agent (or, if the First-Lien Termination Date (as defined in the Security
Agreement) has occurred, the Collateral Agent) pursuant to the terms hereof; (d)
subject

                                                                               3


to Section 5, all payments of principal or interest, dividends, cash,
instruments and other property from time to time received, receivable or
otherwise distributed, in respect of, in exchange for or upon the conversion of
the securities referred to in clauses (a) and (b) above; (e) subject to Section
5, all rights and privileges of such Pledgor with respect to the securities and
other property referred to in clauses (a), (b), (c) and (d) above; and (f) all
proceeds of any of the foregoing (the items referred to in clauses (a) through
(f) above being collectively referred to as the "Collateral"). Upon delivery to
the Senior Agent (or, if the First-Lien Termination Date has occurred, the
Collateral Agent), (a) any Pledged Interests, any Pledged Debt Securities or any
stock certificates, notes or other securities now or hereafter included in the
Collateral (the "Pledged Securities") have been or shall be accompanied by stock
powers duly executed in blank or other instruments of transfer satisfactory to
the Senior Agent (or, if the First-Lien Termination Date has occurred, the
Collateral Agent) and by such other instruments and documents as the Senior
Agent (or, if the First-Lien Termination Date has occurred, the Collateral
Agent) may reasonably request and (b) all other property comprising part of the
Collateral shall be accompanied by proper instruments of assignment duly
executed by the applicable Pledgor and such other instruments or documents as
the Senior Agent (or, if the First-Lien Termination Date has occurred, the
Collateral Agent) may reasonably request. Each delivery of Pledged Securities
shall be accompanied by a schedule describing the securities theretofore and
then being pledged hereunder, which schedule shall be attached hereto as
Schedule II and made a part hereof. Each schedule so delivered shall supersede
any prior schedules so delivered.

         TO HAVE AND TO HOLD the Collateral, in accordance with, and to the
extent consistent with, the terms of the Intercreditor Agreement, together with
all right, title, interest, powers, privileges and preferences pertaining or
incidental thereto, unto the Collateral Agent, its successors and assigns, for
the ratable benefit of the Secured Parties, forever; subject, however, to the
terms, covenants and conditions hereinafter set forth.

         SECTION 2. Delivery of the Collateral. (a) Each Pledgor agrees promptly
to deliver or cause to be delivered to the Senior Agent (or, if the First-Lien
Termination Date has occurred, the Collateral Agent) any and all Pledged
Securities, and any and all certificates or other instruments or documents
representing the Collateral unless such Pledged Securities, certificates or
other instruments or documents have previously been delivered to the Senior
Agent.

         (b) Each Pledgor will cause any Indebtedness for borrowed money owed to
the Pledgor by any Person to be evidenced by a duly executed promissory note
that is pledged to the Collateral Agent and delivered to the Senior Agent (or,
if the First-Lien Termination Date has occurred, the Collateral Agent) for the
benefit of the Secured Parties pursuant to the terms thereof.

         SECTION 3. Representations, Warranties and Covenants. Each Pledgor
hereby represents, warrants and covenants, as to itself and the Collateral
pledged by it hereunder, to and with the Collateral Agent that:

                  (a) the Pledged Interests represent that percentage as set
         forth on Schedule II of the issued and outstanding shares of each class
         of the Equity Interests of the issuer with respect thereto;

                                                                               4



                  (b) except for the security interest granted hereunder and the
         security interest granted under the Senior Lender Documents (as defined
         in the Intercreditor Agreement), such Pledgor (i) is and will at all
         times continue to be the direct owner, beneficially and of record, of
         the Pledged Securities indicated on Schedule II, (ii) holds the same
         free and clear of all Liens other than Permitted Liens, (iii) will make
         no assignment, pledge, hypothecation or transfer of, or create or
         permit to exist any security interest in or other Lien on, the
         Collateral, other than pursuant hereto or the Senior Lender Documents
         in accordance with the Intercreditor Agreement, and (iv) subject to
         Section 5 and the Intercreditor Agreement, will cause any and all
         Collateral, whether for value paid by such Pledgor or otherwise, to be
         forthwith deposited (unless such Collateral previously was deposited
         with the Senior Agent) with the Senior Agent (or, if the First-Lien
         Termination Date has occurred, the Collateral Agent) and pledged or
         assigned hereunder;

                  (c) such Pledgor (i) has the power and authority to pledge the
         Collateral in the manner hereby done or contemplated and (ii) will
         defend its title or interest thereto or therein against any and all
         Liens other than Permitted Liens, however arising, of all Persons
         whomsoever;

                  (d) no consent of any other Person (including stockholders or
         creditors of any Pledgor) and no consent or approval of any
         Governmental Authority or any securities exchange was or is necessary
         to the validity of the pledge effected hereby;

                  (e) by virtue of the execution and delivery by the Pledgors of
         this Agreement, upon delivery to the Senior Agent of the Pledged
         Securities, certificates or other documents representing or evidencing
         the Collateral in accordance with this Agreement, and, in the case of
         Pledged Securities not constituting certificated securities or
         instruments, the filing of UCC financing statements in the appropriate
         filing office, the Collateral Agent will have a valid and perfected
         second-priority lien upon and security interest in such Pledged
         Securities as security for the payment and performance of the
         Obligations;

                  (f) the pledge effected hereby is effective to vest in the
         Collateral Agent, on behalf of the Secured Parties, the rights of the
         Collateral Agent in the Collateral as set forth herein;

                  (g) all of the Pledged Interests have been duly authorized and
         validly issued and are fully paid and nonassessable;

                  (h) all information set forth herein relating to the Pledged
         Interests is accurate and complete in all material respects as of the
         date hereof;

                  (i) the pledge of the Pledged Interests pursuant to this
         Agreement does not violate Regulation T, U or X of the Federal Reserve
         Board or any successor thereto as of the date hereof; and

                  (j) all Collateral consisting of Pledged Securities,
         certificates or other documents representing or evidencing the
         Collateral has been delivered to the

                                                                               5


         Senior Agent (or, if the First-Lien Termination Date has occurred, the
         Collateral Agent) in accordance with Section 2.

         SECTION 4. Registration in Nominee Name; Denominations. The Senior
Agent (or, if the First-Lien Termination Date has occurred, the Collateral
Agent), on behalf of the Secured Parties, shall have the right (in its sole and
absolute discretion) to hold the Pledged Securities in its own name as pledgee,
the name of its nominee (as pledgee or as sub-agent) or the name of the
Pledgors, endorsed or assigned in blank or in favor of the Senior Agent (or, if
the First-Lien Termination Date has occurred, the Collateral Agent). Each
Pledgor will promptly give to the Collateral Agent copies of any notices or
other communications received by it with respect to Pledged Securities
registered in the name of such Pledgor. The Senior Agent (or, if the First-Lien
Termination Date has occurred, the Collateral Agent) shall at all times have the
right to exchange the certificates representing Pledged Securities for
certificates of smaller or larger denominations for any purpose consistent with
this Agreement and the Intercreditor Agreement.

         SECTION 5. Voting Rights; Dividends and Interest, etc. (a) Unless and
until an Event of Default shall have occurred and be continuing:

                  (i) Each Pledgor shall be entitled to exercise any and all
         voting and/or other consensual rights and powers inuring to an owner of
         Pledged Securities or any part thereof for any purpose consistent with
         the terms of this Agreement, the Indenture and the other Indenture
         Documents; provided, however, that such Pledgor will not be entitled to
         exercise any such right if the result thereof could materially and
         adversely affect the rights inuring to a holder of the Pledged
         Securities or the rights and remedies of any of the Secured Parties
         under this Agreement or the Indenture or any other Indenture Document
         or the ability of the Secured Parties to exercise the same.

                (ii) The Collateral Agent shall execute and deliver to each
         Pledgor, or cause to be executed and delivered to each Pledgor, all
         such proxies, powers of attorney and other instruments as such Pledgor
         may reasonably request for the purpose of enabling such Pledgor to
         exercise the voting and/or consensual rights and powers it is entitled
         to exercise pursuant to subparagraph (i) above and to receive the cash
         dividends it is entitled to receive pursuant to subparagraph (iii)
         below.

               (iii) Each Pledgor shall be entitled to receive and retain any
         and all cash dividends, interest and principal paid on the Pledged
         Securities to the extent and only to the extent that such cash
         dividends, interest and principal are permitted by, and otherwise paid
         in accordance with, the terms and conditions of the Indenture, the
         other Indenture Documents and applicable laws. All noncash dividends,
         interest and principal, and all dividends, interest and principal paid
         or payable in cash or otherwise in connection with a partial or total
         liquidation or dissolution, return of capital, capital surplus or
         paid-in surplus, and all other distributions (other than distributions
         referred to in the preceding sentence) made on or in respect of the
         Pledged Securities, whether paid or payable in cash or otherwise,
         whether resulting from a subdivision, combination or reclassification
         of the outstanding capital stock of the issuer of any Pledged
         Securities or received in exchange for Pledged Securities or any part
         thereof, or in redemption thereof, or as a result of any merger,
         consolidation, acquisition or other exchange of assets to which such
         issuer may be a party or otherwise, shall be and become part of the

                                       6


         Collateral, and, if received by any Pledgor, shall not be commingled by
         such Pledgor with any of its other funds or property but shall be held
         separate and apart therefrom, shall be held in trust for the benefit of
         the Collateral Agent and shall be forthwith delivered to the Senior
         Agent (or, if the First-Lien Termination Date has occurred, the
         Collateral Agent) for the benefit of the Secured Parties in the same
         form as so received (with any necessary endorsement).

         (b) In accordance with, and to the extent consistent with, the terms of
the Intercreditor Agreement, upon the occurrence and during the continuance of
an Event of Default, all rights of any Pledgor to dividends, interest or
principal that such Pledgor is authorized to receive pursuant to paragraph
(a)(iii) above shall cease, and all such rights shall thereupon become vested in
the Collateral Agent, which shall subject to the provisions of this paragraph
(b) have the sole and exclusive right and authority to receive and retain such
dividends, interest or principal. All dividends, interest or principal received
by the Pledgor contrary to the provisions of this Section 5 shall be held in
trust for the benefit of the Collateral Agent, shall be segregated from other
property or funds of such Pledgor and shall be forthwith delivered to the
Collateral Agent upon demand in the same form as so received (with any necessary
endorsement). Any and all money and other property paid over to or received by
the Collateral Agent pursuant to the provisions of this paragraph (b) shall be
retained by the Collateral Agent in an account to be established by the
Collateral Agent upon receipt of such money or other property and shall be
applied in accordance with the provisions of Section 7. After all Events of
Default have been cured or waived, the Collateral Agent shall promptly repay to
each Pledgor all cash dividends, interest or principal (without interest), that
such Pledgor would otherwise be permitted to retain pursuant to the terms of
paragraph (a)(iii) above and which remain in such account.

         (c) In accordance with, and to the extent consistent with, the terms of
the Intercreditor Agreement, upon the occurrence and during the continuance of
an Event of Default, all rights of any Pledgor to exercise the voting and
consensual rights and powers it is entitled to exercise pursuant to paragraph
(a)(i) of this Section 5, and the obligations of the Collateral Agent under
paragraph (a)(ii) of this Section 5, shall cease, and all such rights shall
thereupon become vested in the Collateral Agent, which shall have the sole and
exclusive right and authority to exercise such voting and consensual rights and
powers, provided that, unless the Collateral Agent shall have received written
objections from Holders of at least 25% in principal amount of the Notes, the
Collateral Agent shall have the right from time to time following and during the
continuance of an Event of Default to permit the Pledgors to exercise such
rights. After all Events of Default have been cured or waived, each Pledgor will
have the right to exercise the voting and consensual rights and powers that it
would otherwise be entitled to exercise pursuant to the terms of paragraph
(a)(i) above.

         SECTION 6. Remedies upon Default. In accordance with, and to the extent
consistent with, the terms of the Intercreditor Agreement, upon the occurrence
and during the continuance of an Event of Default, subject to applicable
regulatory and legal requirements, the Collateral Agent may sell the Collateral,
or any part thereof, at public or private sale or at any broker's board or on
any securities exchange, for cash, upon credit or for future delivery as the
Collateral Agent shall deem appropriate. The Collateral Agent shall be
authorized at any such sale (if it deems it advisable to do so) to restrict the
prospective bidders or purchasers to Persons who will represent and agree that
they are purchasing the Collateral for their own account for investment and not
with a view to the

                                                                               7


distribution or sale thereof, and upon consummation of any such sale the
Collateral Agent shall have the right to assign, transfer and deliver to the
purchaser or purchasers thereof the Collateral so sold. Each such purchaser at
any such sale shall hold the property sold absolutely free from any claim or
right on the part of any Pledgor, and, to the extent permitted by applicable
law, the Pledgors hereby waive all rights of redemption, stay, valuation and
appraisal any Pledgor now has or may at any time in the future have under any
rule of law or statute now existing or hereafter enacted.

         The Collateral Agent shall give a Pledgor 10 days' prior written notice
(which each Pledgor agrees is reasonable notice within the meaning of Section
9-611 of the Uniform Commercial Code as in effect in the State of New York or
its equivalent in other jurisdictions) of the Collateral Agent's intention to
make any sale of such Pledgor's Collateral. Such notice, in the case of a public
sale, shall state the time and place for such sale and, in the case of a sale at
a broker's board or on a securities exchange, shall state the board or exchange
at which such sale is to be made and the day on which the Collateral, or portion
thereof, will first be offered for sale at such board or exchange. Any such
public sale shall be held at such time or times within ordinary business hours
and at such place or places as the Collateral Agent may fix and state in the
notice of such sale. At any such sale, the Collateral, or portion thereof, to be
sold may be sold in one lot as an entirety or in separate parcels, as the
Collateral Agent may (in its sole and absolute discretion) determine. The
Collateral Agent shall not be obligated to make any sale of any Collateral if it
shall determine not to do so, regardless of the fact that notice of sale of such
Collateral shall have been given. The Collateral Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case any sale of all or any part of the
Collateral is made on credit or for future delivery, the Collateral so sold may
be retained by the Collateral Agent until the sale price is paid in full by the
purchaser or purchasers thereof, but the Collateral Agent shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and pay
for the Collateral so sold and, in case of any such failure, such Collateral may
be sold again upon like notice. At any public (or, to the extent permitted by
applicable law, private) sale made pursuant to this Section 6, any Secured Party
may bid for or purchase, free from any right of redemption, stay or appraisal on
the part of any Pledgor (all said rights being also hereby waived and released),
the Collateral or any part thereof offered for sale and may make payment on
account thereof by using any Obligation then due and payable to it from such
Pledgor as a credit against the purchase price, and it may, upon compliance with
the terms of sale, hold, retain and dispose of such property without further
accountability to such Pledgor therefor. For purposes hereof, (a) a written
agreement to purchase the Collateral or any portion thereof shall be treated as
a sale thereof, (b) the Collateral Agent shall be free to carry out such sale
pursuant to such agreement and (c) such Pledgor shall not be entitled to the
return of the Collateral or any portion thereof subject thereto, notwithstanding
the fact that after the Collateral Agent shall have entered into such an
agreement all Events of Default shall have been remedied and the Obligations
paid in full. As an alternative to exercising the power of sale herein conferred
upon it, the Collateral Agent may proceed by a suit or suits at law or in equity
to foreclose upon the Collateral and to sell the Collateral or any portion
thereof pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver.

                                                                               8


         SECTION 7. Application of Proceeds of Sale. In accordance with, and to
the extent consistent with, the terms of the Intercreditor Agreement, the
Collateral Agent shall apply the proceeds of any collection or sale of the
Collateral, as well as any Collateral consisting of cash, as follows:

                  FIRST, to the payment of all costs and expenses incurred by
         the Trustee or the Collateral Agent (in its capacity as such hereunder
         or under any other Indenture Document) in connection with such
         collection or sale or otherwise in connection with this Agreement or
         any of the Obligations, including all court costs and the reasonable
         fees and expenses of its agents and legal counsel, the repayment of all
         advances made by the Trustee or the Collateral Agent hereunder or under
         any other Indenture Document on behalf of any Pledgor and any other
         costs or expenses incurred in connection with the exercise of any right
         or remedy hereunder or under any other Indenture Document and any other
         amounts due to the Trustee or the Collateral Agent under Section 7.07
         of the Indenture;

                  SECOND, to the payment in full of the Obligations owed to the
         Holders and any Other Second-Lien Obligations owed to holders of such
         Indebtedness (the amounts so applied to be distributed among the
         Holders and any holders of Other Second-Lien Obligations pro rata in
         accordance with the amounts of the Obligations owed to Holders and
         Other Second-Lien Obligations owed to holders of such Indebtedness on
         the date of any such distribution); and

                  THIRD, to the Pledgors, their successors or assigns, or as a
         court of competent jurisdiction may otherwise direct.

         The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. The Collateral Agent may fix a record date and payment date for any
payment to Holders pursuant to this Section 7. At least 15 days before such
record date, the Collateral Agent shall mail to each Holder and the Issuers a
notice that states the record date, the payment and amount to be paid. Upon any
sale of the Collateral by the Collateral Agent (including pursuant to a power of
sale granted by statute or under a judicial proceeding), the receipt of the
purchase money by the Collateral Agent or of the officer making the sale shall
be a sufficient discharge to the purchaser or purchasers of the Collateral so
sold and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Collateral Agent
or such officer or be answerable in any way for the misapplication thereof.

         SECTION 8. Reimbursement of Collateral Agent. In accordance with, and
to the extent consist with, the terms of the Intercreditor Agreement, (a) each
Pledgor agrees to pay upon demand to the Collateral Agent the amount of any and
all reasonable expenses, including the reasonable fees, other charges and
disbursements of its counsel and of any experts or agents, that the Collateral
Agent may incur in connection with (i) the administration of this Agreement,
(ii) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of the Collateral Agent hereunder or (iv) the failure by such
Pledgor to perform or observe any of the provisions hereof.

         (b) Without limitation of its indemnification obligations under the
other Indenture Documents, each Pledgor agrees to indemnify the Collateral
Agent, the Trustee, the

                                                                               9


Holders and each Affiliate of the foregoing Persons (each such Person being
called an "Indemnitee") against, and hold each Indemnitee harmless from, any and
all losses, claims, damages, liabilities and related expenses, including
reasonable counsel fees, other charges and disbursements, incurred by or
asserted against any Indemnitee arising out of, in any way connected with, or as
a result of (i) the execution or delivery of this Agreement or any other
Indenture Document or any agreement or instrument contemplated hereby or
thereby, the performance by the parties hereto of their respective obligations
thereunder or the consummation of the other transactions contemplated thereby or
(ii) any claim, litigation, investigation or proceeding relating to any of the
foregoing, whether or not any Indemnitee is a party thereto, provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or wilful misconduct of such Indemnitee.

         (c) Any amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 8 shall remain operative and in full force and effect regardless
of the termination of this Agreement, the consummation of the transactions
contemplated hereby, the repayment of any of the Obligations, the invalidity or
unenforceability of any term or provision of this Agreement or any other
Indenture Document or any investigation made by or on behalf of the Collateral
Agent or any other Secured Party. All amounts due under this Section 8 shall be
payable on written demand therefor and shall bear interest at the rate specified
in the Notes.

         SECTION 9. Collateral Agent Appointed Attorney-in-Fact. Each Pledgor
hereby appoints the Collateral Agent the attorney-in-fact of such Pledgor for
the purpose of carrying out the provisions of this Agreement and taking any
action and executing any instrument that the Collateral Agent may deem necessary
or advisable to accomplish the purposes hereof, which appointment is irrevocable
and coupled with an interest. Without limiting the generality of the foregoing,
the Collateral Agent shall have the right, upon the occurrence and during the
continuance of an Event of Default, with full power of substitution either in
the Collateral Agent's name or in the name of such Pledgor, to ask for, demand,
sue for, collect, receive and give acquittance for any and all moneys due or to
become due under and by virtue of any Collateral, to endorse checks, drafts,
orders and other instruments for the payment of money payable to the Pledgor
representing any interest or dividend or other distribution payable in respect
of the Collateral or any part thereof or on account thereof and to give full
discharge for the same, to settle, compromise, prosecute or defend any action,
claim or proceeding with respect thereto, and to sell, assign, endorse, pledge,
transfer and to make any agreement respecting, or otherwise deal with, the same;
provided, however, that nothing herein contained shall be construed as requiring
or obligating the Collateral Agent to make any commitment or to make any inquiry
as to the nature or sufficiency of any payment received by the Collateral Agent,
or to present or file any claim or notice, or to take any action with respect to
the Collateral or any part thereof or the moneys due or to become due in respect
thereof or any property covered thereby. The Collateral Agent and the other
Secured Parties shall be accountable only for amounts actually received as a
result of the exercise of the powers granted to them herein, and neither they
nor their officers, directors, employees or agents shall be responsible to any
Pledgor for any act or failure to act hereunder, except for their own gross
negligence or wilful misconduct.

                                                                              10


         Notwithstanding anything in this Section 9 to the contrary, the
Collateral Agent agrees that it will not exercise any rights under the power of
attorney provided for in this Section 9 unless it does so in accordance with,
and to the extent consistent with, the terms of the Intercreditor Agreement.

         SECTION 10. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the Collateral Agent and the other Secured Parties under the other
Indenture Documents are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. No waiver of any provisions of this
Agreement or consent to any departure by any Pledgor therefrom shall in any
event be effective unless the same shall be permitted by paragraph (b) below,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No notice or demand on any Pledgor in any
case shall entitle such Pledgor to any other or further notice or demand in
similar or other circumstances.

         (b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except (i) in accordance with the Indenture pursuant to a
written agreement entered into between the Collateral Agent and the Pledgor or
Pledgors with respect to which such waiver, amendment or modification is to
apply, or (ii) as otherwise provided in the Intercreditor Agreement.

         SECTION 11. Securities Act, etc. In view of the position of the
Pledgors in relation to the Pledged Securities, or because of other current or
future circumstances, a question may arise under the Securities Act of 1933, as
now or hereafter in effect, or any similar statute hereafter enacted analogous
in purpose or effect (such Act and any such similar statute as from time to time
in effect being called the "Federal Securities Laws") with respect to any
disposition of the Pledged Securities permitted hereunder. Each Pledgor
understands that compliance with the Federal Securities Laws might very strictly
limit the course of conduct of the Collateral Agent if the Collateral Agent were
to attempt to dispose of all or any part of the Pledged Securities, and might
also limit the extent to which or the manner in which any subsequent transferee
of any Pledged Securities could dispose of the same. Similarly, there may be
other legal restrictions or limitations affecting the Collateral Agent in any
attempt to dispose of all or part of the Pledged Securities under applicable
Blue Sky or other state securities laws or similar laws analogous in purpose or
effect. Each Pledgor recognizes that in light of such restrictions and
limitations the Collateral Agent may, with respect to any sale of the Pledged
Securities, limit the purchasers to those who will agree, among other things, to
acquire such Pledged Securities for their own account, for investment, and not
with a view to the distribution or resale thereof. Each Pledgor acknowledges and
agrees that in light of such restrictions and limitations, the Collateral Agent,
in its sole and absolute discretion, (a) may proceed to make such a sale whether
or not a registration statement for the purpose of registering such Pledged
Securities or part thereof shall have been filed under the Federal Securities
Laws and (b) may approach and negotiate with a single potential purchaser to
effect such sale, in either case in accordance with a valid exemption from
registration under the Federal Securities Laws. Each Pledgor acknowledges and
agrees that any such sale might result in prices and other terms less favorable
to the seller than if such sale were a public sale without such restrictions. In
the event of any such sale, the

                                                                              11


Collateral Agent shall incur no responsibility or liability for selling all or
any part of the Pledged Securities at a price that the Collateral Agent, in its
sole and absolute discretion, may in good faith deem reasonable under the
circumstances, notwithstanding the possibility that a substantially higher price
might have been realized if the sale were deferred until after registration as
aforesaid or if more than a single purchaser were approached. The provisions of
this Section 11 will apply notwithstanding the existence of a public or private
market upon which the quotations or sales prices may exceed substantially the
price at which the Collateral Agent sells.

         SECTION 12. Registration, etc. Each Pledgor agrees that, upon the
occurrence and during the continuance of an Event of Default, if, in accordance
with, and to the extent consistent with, the terms of the Intercreditor
Agreement, for any reason the Collateral Agent desires to sell any of the
Pledged Securities at a public sale, it will, at any time and from time to time,
upon the written request of the Collateral Agent, use its reasonable best
efforts to take or to cause the issuer of such Pledged Securities to take such
action and prepare, distribute and/or file such documents, as are required or
advisable in the reasonable opinion of counsel for the Collateral Agent to
permit the public sale of such Pledged Securities. Each Pledgor further agrees
to indemnify, defend and hold harmless the Collateral Agent, each other Secured
Party, any underwriter and their respective officers, directors, affiliates and
controlling Persons from and against all loss, liability, expenses, costs of
counsel (including, without limitation, reasonable fees and expenses to the
Collateral Agent of legal counsel), and claims (including the costs of
investigation) that they may incur insofar as such loss, liability, expense or
claim arises out of or is based upon any alleged untrue statement of a material
fact contained in any prospectus (or any amendment or supplement thereto) or in
any notification or offering circular, or arises out of or is based upon any
alleged omission to state a material fact required to be stated therein or
necessary to make the statements in any thereof not misleading, except insofar
as the same may have been caused by any untrue statement or omission based upon
information furnished in writing to such Pledgor or the issuer of such Pledged
Securities by the Collateral Agent or any other Secured Party expressly for use
therein. Each Pledgor further agrees, upon such written request referred to
above, to use its reasonable best efforts to qualify, file or register, or cause
the issuer of such Pledged Securities to qualify, file or register, any of the
Pledged Securities under the Blue Sky or other securities laws of such states as
may be requested by the Collateral Agent and keep effective, or cause to be kept
effective, all such qualifications, filings or registrations. Each Pledgor
will bear all costs and expenses of carrying out its obligations under this
Section 12. Each Pledgor acknowledges that there is no adequate remedy at law
for failure by it to comply with the provisions of this Section 12 and that such
failure would not be adequately compensable in damages, and therefore agrees
that its agreements contained in this Section 12 may be specifically enforced.

         SECTION 13. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the grant of a security interest in the Collateral and all
obligations of each Pledgor hereunder, shall be absolute and unconditional
irrespective of (a) any lack of validity or enforceability of the Indenture, any
other Indenture Document, any agreement with respect to any of the Obligations
or any other agreement or instrument relating to any of the foregoing, (b) any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Obligations, or any other amendment or waiver of or any consent to
any departure from the Indenture, any other Indenture Document or any other
agreement or instrument relating to any of the foregoing, (c) any exchange,
release or nonperfection of any other collateral, or any release or amendment or
waiver of or

                                                                              12


consent to or departure from any guaranty, for all or any of the Obligations or
(d) any other circumstance that might otherwise constitute a defense available
to, or a discharge of, any Pledgor in respect of the Obligations or in respect
of this Agreement (other than the indefeasible payment in full of all the
Obligations).

         SECTION 14. Termination or Release. (a) This Agreement and the security
interests granted hereby shall terminate at the time provided in Section 10.08
of the Indenture.

         (b) Upon any sale or other transfer by any Pledgor of any Collateral
that is permitted under the Indenture or the Intercreditor agreement to any
Person that is not a Pledgor, or, if any of the Collateral shall otherwise
become subject to the release provisions set forth in Section 10.03 of the
Indenture or Section 5.1 of the Intercreditor Agreement, such Collateral shall
be automatically released from the Security Interest to the extent provided in
Section 10.03 of the Indenture or Section 5.1 of the Intercreditor Agreement, as
applicable.

         (c) In connection with any termination or release pursuant to paragraph
(a) or (b) or Section 17, the Collateral Agent shall execute and deliver to any
Pledgor, at such Pledgor's expense, all documents that such Pledgor shall
reasonably request to evidence such termination or release. Any execution and
delivery of documents pursuant to this Section 14 shall be without recourse to
or warranty by the Collateral Agent.

         SECTION 15. Notices. All communications and notices hereunder shall be
in writing and given as provided in Section 12.02 of the Indenture. All
communications and notices hereunder to any Subsidiary Pledgor shall be given to
it at the address or telecopy number set forth on Schedule I, with a copy to the
Company.

         SECTION 16. Further Assurances. Each Pledgor agrees to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments, agreements and instruments, as the Collateral Agent, in accordance
with, and to the extent consistent with, the terms of the Intercreditor
Agreement, may at any time reasonably request in connection with the
administration and enforcement of this Agreement or with respect to the
Collateral or any part thereof or in order better to assure and confirm unto the
Collateral Agent its rights and remedies hereunder.

         SECTION 17. Binding Effect; Several Agreement; Assignments. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of any Pledgor that are contained in
this Agreement shall bind and inure to the benefit of its successors and
assigns. This Agreement shall become effective as to any Pledgor when a
counterpart hereof executed on behalf of such Pledgor shall have been delivered
to the Collateral Agent and a counterpart hereof shall have been executed on
behalf of the Collateral Agent, and thereafter shall be binding upon such
Pledgor and the Collateral Agent and their respective successors and assigns,
and shall inure to the benefit of such Pledgor, the Collateral Agent and the
other Secured Parties, and their respective successors and assigns, except that
no Pledgor shall have the right to assign its rights hereunder or any interest
herein or in the Collateral (and any such attempted assignment shall be void),
except as expressly contemplated by this Agreement or the other Indenture
Documents. In the event that a Pledgor ceases to be a Subsidiary of the Company
pursuant to a transaction permitted under the Indenture Documents, such

                                                                              13


Pledgor shall be released from its obligations under this Agreement without
further action. This Agreement shall be construed as a separate agreement with
respect to each Pledgor and may be amended, modified, supplemented, waived or
released with respect to any Pledgor without the approval of any other Pledgor
and without affecting the obligations of any other Pledgor hereunder.

         SECTION 18. Survival of Agreement; Severability. (a) All covenants,
agreements, representations and warranties made by each Pledgor herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Indenture Document shall be
considered to have been relied upon by the Collateral Agent and the other
Secured Parties and shall survive the purchase of the Notes by the Initial
Purchasers, regardless of any investigation made by the Secured Parties or on
their behalf, and shall continue in full force and effect as long as any
Obligation remains unpaid.

         (b) In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby (it being understood
that the invalidity of a particular provision in a particular jurisdiction shall
not in and of itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.

         SECTION 19. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

         SECTION 20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute a single contract, and shall become effective
as provided in Section 17. Delivery of an executed counterpart of a signature
page to this Agreement by facsimile transmission shall be as effective as
delivery of a manually executed counterpart of this Agreement.

         SECTION 21. Rules of Interpretation. The rules of interpretation
specified in Section 1.03 of the Security Agreement shall be applicable to this
Agreement. Section headings used herein are for convenience of reference only,
are not part of this Agreement and are not to affect the construction of, or to
be taken into consideration in interpreting this Agreement.

         SECTION 22. Jurisdiction; Consent to Service of Process. (a) Each
Pledgor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Indenture Documents, or for recognition
or enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that, to the extent permitted by
applicable law, all claims in respect of any such action or proceeding may be
heard and determined in such New York State or, to the extent permitted by law,
in such

                                                                              14


Federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Collateral Agent or
any other Secured Party may otherwise have to bring any action or proceeding
relating to this Agreement or the other Indenture Documents against any Pledgor
or its properties in the courts of any jurisdiction.

         (b) Each Pledgor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Indenture Documents in
any New York State or Federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.

         (c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 15. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.

         SECTION 23. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INDENTURE DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER INDENTURE DOCUMENTS, AS APPLICABLE, BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 23.

         SECTION 24. Additional Pledgors. If, pursuant to Sections 4.11 and
11.06 of the Indenture, the Company is required to cause any Subsidiary of the
Company that is not a Subsidiary Pledgor to become a Subsidiary Pledgor, upon
execution and delivery by the Collateral Agent and such Subsidiary of an
instrument in the form of Annex 1, such Subsidiary shall become a Subsidiary
Pledgor hereunder with the same force and effect as if originally named as a
Subsidiary Pledgor herein. The execution and delivery of such instrument shall
not require the consent of any Pledgor hereunder. The rights and obligations of
each Pledgor hereunder shall remain in full force and effect notwithstanding the
addition of any new Subsidiary Pledgor as a party to this Agreement.

         SECTION 25. Subject to Intercreditor Agreement. Notwithstanding
anything herein to the contrary, the lien and security interest granted to the
Collateral Agent pursuant to this Agreement and the exercise of any right or
remedy by the Collateral Agent hereunder are subject to the provisions of the
Intercreditor Agreement. In the event of any conflict between the terms of the
Intercreditor Agreement and this Agreement, the terms of the Intercreditor
Agreement shall govern.

                                                                              15



         IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.



                                        SEMICONDUCTOR COMPONENTS
                                        INDUSTRIES, LLC,


                                        By /s/ John T. Kurtzweil
                                           ------------------------------------
                                             Name John T. Kurtzweil
                                             Title: Chief Financial Officer



                                        ON SEMICONDUCTOR CORPORATION,



                                        By /s/ John T. Kurtzweil
                                           ------------------------------------
                                             Name: John T. Kurtzweil
                                             Title: Chief Financial Officer



                                        EACH OF THE OTHER SUBSIDIARIES
                                        LISTED ON SCHEDULE I HERETO,



                                        By /s/ John T. Kurtzweil
                                           ------------------------------------
                                             Name: John T. Kurtzweil
                                             Title: Chief Financial Officer



                                        WELLS FARGO BANK MINNESOTA,
                                        NATIONAL ASSOCIATION, as Collateral
                                        Agent,



                                        By /s/ Joseph P. O'Donnell
                                           ------------------------------------
                                             Name: Joseph P. O'Donnell
                                             Title: Corporate Trust Officer

                                                               Schedule I to the
                                                                Pledge Agreement


                               SUBSIDIARY PLEDGORS




                  Name                                                          Address
                  ----                                                          -------
                                                                    
SCG International Development LLC                                      5005 East McDowell Road
                                                                       Phoenix, AZ 85008

SCG (Malaysia SMP) Holding Corporation                                 5005 East McDowell Road
                                                                       Phoenix, AZ 85008

SCG (Czech) Holding Corporation                                        5005 East McDowell Road
                                                                       Phoenix, AZ 85008

SCG (China) Holding Corporation                                        5005 East McDowell Road
                                                                       Phoenix, AZ 85008

Semiconductor Components Industries Puerto Rico, Inc.                  5005 East McDowell Road
                                                                       Phoenix, AZ 85008

Semiconductor Components Industries of Rhode Island,                   2000 South County Trail
Inc.                                                                   East Greenwich, RI 02818

Semiconductor Components Industries International of                   2000 South County Trail
Rhode Island, Inc.                                                     East Greenwich, RI 02818


                                                              Schedule II to the
                                                                Pledge Agreement

                    CAPITAL STOCK OR OTHER EQUITY INTERESTS



                                                                 Number and           Percentage
                                                                 Class of             of
                                                                 Shares               Shares
                                                                 or Other             or Other
                      Number of            Registered            Equity               Equity
Issuer                Certificate             Owner              Interests            Interests
- ------                -----------             -----              ---------            ---------
                                                                          




                                         DEBT SECURITIES



                               Principal
Issuer                           Amount                   Date of Note                Maturity Date
- ------                           ------                   ------------                -------------
                                                                             



                                                                  Annex 1 to the
                                                                Pledge Agreement

                                          SUPPLEMENT NO. [ ] dated as of [ ], to



                           the PLEDGE AGREEMENT dated as of May 6, 2002, among
                           SEMICONDUCTOR COMPONENTS INDUSTRIES, LLC, a Delaware
                           limited liability company (the "SCI LLC"), ON
                           SEMICONDUCTOR CORPORATION, a Delaware corporation
                           (the "Company" and, together with SCI LLC, the
                           "Issuers"), and each subsidiary of the Company listed
                           on Schedule I thereto (each such subsidiary
                           individually a "Subsidiary Pledgor" and collectively,
                           the "Subsidiary Pledgors"; the Subsidiary Pledgors
                           and the Issuers are referred to herein individually
                           as a "Pledgor" and collectively as the "Pledgors")
                           and WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,
                           a national banking association ("Wells Fargo Bank"),
                           as trustee under the Indenture referred to below and
                           as collateral agent (in such capacity, the
                           "Collateral Agent") for the Secured Parties (as
                           defined in the Security Agreement )

         A. Reference is made to (a) the Indenture dated as of May 6, 2002 (as
amended, supplemented or otherwise modified from time to time, the "Indenture"),
among the Company, SCI LLC, the Guarantors and Wells Fargo Bank, as trustee, and
(b) the Intercreditor Agreement dated as of May 6, 2002 (as amended,
supplemented or otherwise modified from time to time, the "Intercreditor
Agreement"), among the Issuers, the Collateral Agent and the Senior Agent.

         B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Pledge Agreement and the
Indenture.

         C. The Pledgors have entered into the Pledge Agreement in order to
induce the Trustee to enter into the Indenture and the Initial Purchasers to
purchase the Notes. Pursuant to Section 4.11 of the Indenture, the Company is
required to cause certain of its Subsidiaries to enter into the Pledge Agreement
as a Subsidiary Pledgor. Section 24 of the Pledge Agreement provides that such
Subsidiaries may become Subsidiary Pledgors under the Pledge Agreement by
execution and delivery of an instrument in the form of this Supplement. The
undersigned Subsidiary (the "New Pledgor") is executing this Supplement in
accordance with the requirements of the Indenture to become a Subsidiary Pledgor
under the Pledge Agreement as consideration for the purchase of the Notes by the
Initial Purchasers and the Holders.

         Accordingly, the Collateral Agent and the New Pledgor agree as follows:

         SECTION 1. In accordance with Section 24 of the Pledge Agreement, the
New Pledgor by its signature below becomes a Pledgor under the Pledge Agreement
with the same force and effect as if originally named therein as a Pledgor and
the New Pledgor hereby agrees (a) to all the terms and provisions of the Pledge
Agreement applicable to it as a Pledgor thereunder and (b) represents and
warrants that the representations and warranties made by it as a Pledgor
thereunder are true and correct on and as of the date hereof except to the
extent a representation and warranty expressly relates solely to a specific date
in which case such representation and warranty shall be true and correct on such
date. In furtherance of the foregoing, the New Pledgor, as security for the
payment

                                                                               2

and performance in full of the Obligations (as defined in the Pledge Agreement),
does hereby create and grant to the Collateral Agent, its successors and
assigns, for the benefit of the Secured Parties, their successors and assigns, a
security interest in and lien on all of the New Pledgor's right, title and
interest in and to the Collateral (as defined in the Pledge Agreement) of the
New Pledgor. Each reference to a "Subsidiary Pledgor" or a "Pledgor" in the
Pledge Agreement shall be deemed to include the New Pledgor. The Pledge
Agreement is hereby incorporated herein by reference.

         SECTION 2. The New Pledgor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms.

         SECTION 3. This Supplement may be executed in counterparts, each of
which shall constitute an original, but all of which when taken together shall
constitute a single contract. This Supplement shall become effective when the
Collateral Agent shall have received counterparts of this Supplement that, when
taken together, bear the signatures of the New Pledgor and the Collateral Agent.
Delivery of an executed signature page to this Supplement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Supplement.

         SECTION 4. The New Pledgor hereby represents and warrants that set
forth on Schedule I attached hereto is a true and correct schedule of all its
Pledged Securities.

         SECTION 5. Except as expressly supplemented hereby, the Pledge
Agreement shall remain in full force and effect.

         SECTION 6. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

         SECTION 7. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Pledge Agreement shall not in any way be affected or impaired
(it being understood that the invalidity of a particular provision in a
particular jurisdiction shall not in and of itself affect the validity of such
provision in any other jurisdiction). The parties hereto shall endeavor in
good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close
as possible to that of the invalid, illegal or unenforceable provisions.

         SECTION 8. All communications and notices hereunder shall be in writing
and given as provided in Section 15 of the Pledge Agreement. All communications
and notices hereunder to the New Pledgor shall be given to it at the address set
forth under its signature hereto, below, with a copy to the Company.

         SECTION 9. The New Pledgor agrees to reimburse the Collateral Agent for
its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursements of counsel for
the Collateral Agent.

                                                                               3

         IN WITNESS WHEREOF, the New Pledgor and the Collateral Agent have duly
executed this Supplement to the Pledge Agreement as of the day and year first
above written.



                                           [NAME OF NEW PLEDGOR],



                                           By
                                             ----------------------------------
                                                Name:
                                                Title:
                                                Address:



                                           WELLS FARGO BANK MINNESOTA,
                                           NATIONAL ASSOCIATION, as Collateral
                                           Agent,



                                           By
                                             ----------------------------------
                                                Name:
                                                Title:

                                                                   Schedule I to
                                                              Supplement No. [ ]
                                                         to the Pledge Agreement


                      Pledged Securities of the New Pledgor


                    CAPITAL STOCK OR OTHER EQUITY INTERESTS



                                                                 Number and           Percentage
                                                                 Class of             of
                                                                 Shares               Shares
                                                                 or Other             or Other
                      Number of            Registered            Equity               Equity
Issuer                Certificate             Owner              Interests            Interests
- ------                -----------             -----              ---------            ---------
                                                                          




                                 DEBT SECURITIES




                               Principal
Issuer                           Amount                   Date of Note                Maturity Date
- ------                           ------                   ------------                -------------


                                                                    Exhibit 10.7


                                                                  EXECUTION COPY




                         COLLATERAL ASSIGNMENT dated as of May 6, 2002, between
                    SEMICONDUCTOR COMPONENTS INDUSTRIES, LLC, a Delaware limited
                    liability company ("SCI LLC"), and WELLS FARGO BANK
                    MINNESOTA, NATIONAL ASSOCIATION, a national banking
                    association ("Wells Fargo Bank"), as trustee under the
                    Indenture referred to below and as collateral agent (in such
                    capacity, the " Collateral Agent") for the Secured Parties
                    (as defined in the Security Agreement). Capitalized terms
                    used but not defined herein shall have the meanings assigned
                    to such terms in the Indenture (as defined below).

                              W I T N E S S E T H:

            WHEREAS, pursuant to the terms, conditions and provisions of (a) the
Indenture dated as of the date hereof (as amended, restated, supplemented or
otherwise modified from time to time, the "Indenture"), among SCI LLC, ON
Semiconductor Corporation, a Delaware Corporation (the "Company "), the
Guarantors (as defined in the Indenture) and Wells Fargo Bank, as trustee (the
"Trustee"), and (b) the Purchase Agreement dated as of May 1, 2002, among the
Issuers, the Guarantors and Credit Suisse First Boston Corporation, Morgan
Stanley & Co. Incorporated, Salomon Smith Barney Inc. and J.P. Morgan Securities
Inc. (the " Initial Purchasers"), the Issuers are issuing $300,000,000 aggregate
principal amount of 12% Senior Secured Notes due 2008 and may issue, from time
to time, additional notes in accordance with the provisions of the Indenture
(collectively, the "Notes") which will be guaranteed on a senior secured basis
by each of the Guarantors;

            WHEREAS, pursuant to the Collateral Assignment dated as of August 4,
1999 (as amended, supplemented or otherwise modified from time to time), between
SCI LLC and JPMorgan Chase Bank (as successor to The Chase Manhattan Bank), a
New York banking corporation ("JPMorgan"), as collateral agent, the Company has
granted to the Senior Agent (as defined below) a first-priority lien and
security interest in the Assigned Contracts (as defined below) in connection
with the Credit Agreement dated as of August 4, 1999, as amended and restated as
of April 3, 2000 (as amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among SCI LLC, as borrower, the Company, the
lenders from time to time party thereto (the "Lenders"), JPMorgan, as
administrative agent, collateral agent and syndication agent (in such capacity,
the "Senior Agent") for the Lenders, and Credit Lyonnais New York Branch, Credit
Suisse First Boston and Lehman Commercial Paper Inc., as co-documentation
agents;

            WHEREAS, the Company, SCI LLC, the Collateral Agent and the Senior
Agent have entered into an Intercreditor Agreement, dated as of the date hereof
(the " Intercreditor Agreement"), pursuant to which the lien and security
interest in the Assigned Contracts granted by this Agreement are and shall be
subordinated in all respects to the lien and security interest in the Assigned
Contracts granted pursuant to, and all terms and conditions of, the Senior
Lender Documents (as defined in the Intercreditor Agreement);

            WHEREAS, SCI LLC is executing and delivering this Agreement pursuant
to the terms of the Indenture to induce the Trustee to enter into the Indenture
and the Initial Purchasers to purchase the Notes; and

            WHEREAS, SCI LLC has duly authorized the execution, delivery and
performance of this Agreement.

                                                                               2


            NOW, THEREFORE, for and in consideration of the premises, and of the
mutual covenants herein contained, and in order to induce the Trustee to enter
into the Indenture and the Initial Purchasers to purchase the Notes, SCI LLC and
the Collateral Agent, on behalf of itself and each Secured Party (and each of
their respective successors or assigns), hereby agree as follows:

            SECTION 1. Collateral Assignment. As collateral security for the
Obligations (as defined in the Security Agreement), SCI LLC hereby assigns to
the Collateral Agent, its successors and assigns, for the ratable benefit of the
Secured Parties, and hereby grants to the Collateral Agent, its successors and
assigns, for the ratable benefit of the Secured Parties a security interest in,
all of SCI LLC's right, title and interest in, to and under the following
contracts and instruments, as the same may be modified, amended or supplemented
from time to time:

            (a) the Transition Agreements (as defined in the Credit Agreement);
      and

            (b) such other contracts and instruments of SCI LLC as the Senior
      Agent (or, if the First-Lien Termination Date (as defined in the Security
      Agreement) has occurred, the Collateral Agent) shall designate from time
      to time to SCI LLC in writing unless such assignment is prohibited (i) by
      the terms thereof, and SCI LLC cannot reasonably obtain a waiver or an
      amendment of such prohibition or (ii) by applicable law.

The contracts and instruments listed in clauses (a) and (b), as amended and in
effect from time to time, are referred to collectively as the "Assigned
Contracts". The security interest assigned by this Section 1 shall include (a)
any and all rights to receive and demand payments under any and all Assigned
Contracts, (b) any and all rights to receive and compel performance under any
and all Assigned Contracts, (c) the right to make all waivers, amendments,
determinations and agreements of or under any and all Assigned Contracts, (d)
the right to take such action, including commencement, conduct and consummation
of legal, administrative or other proceedings, as shall be permitted by the
Assigned Contracts or by law and (e) any and all other rights, interests and
claims now existing or hereafter arising under or in connection with any and all
Assigned Contracts.

            SECTION 2. Agreements, Representations and Warranties. SCI LLC
further agrees, represents and warrants to the Collateral Agent and the Secured
Parties that:

            (a) as of the date hereof, the Assigned Contracts are in full force
and effect, there being no default thereunder by SCI LLC. SCI LLC will not
permit any waiver, supplement, amendment, change or modification to be made to
the Assigned Contracts, without the written consent of the Senior Agent (or, if
the First-Lien Termination Date has occurred, the Collateral Agent), except as
permitted in accordance with Section 6.11(b) of the Credit Agreement and the
Indenture (to the extent consistent with the Intercreditor Agreement); and

            (b) it has the right, power and authority to grant to the Collateral
Agent a security interest in its right, title and interest in and to the
Assigned Contracts. It has not heretofore hypothecated, assigned, mortgaged,
pledged, encumbered or otherwise transferred its right, title or interest under
the Assigned Contracts in any manner to any person other than the Senior Agent
and the Collateral Agent, nor will it do so at any time hereafter without the
Collateral Agent's prior written consent in each instance. Any such assignment,
mortgage, pledge or encumbrance without the Collateral Agent's consent shall be
void and of no force or effect.

            SECTION 3. No Obligations for Collateral Agent. SCI LLC specifically
acknowledges and agrees that the Collateral Agent does not assume, and shall
have no responsibility for, the performance of any obligations to be performed
under or with respect to the Assigned Contracts or by it and it hereby agrees to
indemnify and hold harmless the

                                                                               3


Collateral Agent with respect to any and all claims by any person relating to
such obligations. The Collateral Agent, in its discretion, may file or record
this Agreement. The Collateral Agent agrees to notify SCI LLC promptly after any
such filing or recording.

            SECTION 4. Remedies upon Default. In accordance with, and to the
extent consistent with, the terms of the Intercreditor Agreement, upon the
commencement and during the continuance of an Event of Default, the Collateral
Agent may, at its option, without notice to or demand upon SCI LLC (both of
which are hereby waived for the purpose of this Section 4), in addition to all
other rights and remedies provided under any of the Indenture Documents, in its
own name or the name of SCI LLC, demand, sue upon or otherwise enforce the
Assigned Contracts to the same extent as if the Collateral Agent were the party
named in the Assigned Contracts, and exercise all other rights of SCI LLC under
the Assigned Contracts in such manner as it may determine. Any moneys actually
received by the Collateral Agent pursuant to the exercise of any of the rights
and remedies granted in this Collateral Assignment shall be applied as provided
in the Security Agreement.

            SECTION 5. Reimbursement of Collateral Agent. In accordance with,
and to the extent consistent with, the terms of the Intercreditor Agreement, (a)
SCI LLC agrees to pay upon demand to the Collateral Agent the amount of any and
all reasonable expenses, including the reasonable fees, disbursements and other
charges of its counsel and of any experts or agents, that the Collateral Agent
may incur in connection with (i) the administration of this Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise, enforcement or
protection of any of the rights of the Collateral Agent hereunder or (iv) the
failure of SCI LLC to perform or observe any of the provisions hereof applicable
to it.

            (b) Without limitation of its indemnification obligations under the
other Indenture Documents, SCI LLC agrees to indemnify the Collateral Agent and
the other Indemnitees (as defined in the Security Agreement) against, and hold
each of them harmless from, any and all losses, claims, damages, liabilities and
related expenses, including reasonable fees, disbursements and other charges of
counsel, incurred by or asserted against any of them arising out of, in any way
connected with, or as a result of the execution, delivery or performance of this
Agreement or any claim, litigation, investigation or proceeding relating hereto
or to any of the Assigned Contracts, whether or not any Indemnitee is a party
thereto, provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related expenses are determined by a court of competent jurisdiction by final
and nonappealable judgment to have resulted from the gross negligence or wilful
misconduct of such Indemnitee or any Affiliate of such Indemnitee.

            (c) Any such amounts payable as provided hereunder shall be
additional Obligations secured hereby and by the other Security Documents. The
provisions of this Section 5 shall remain operative and in full force and effect
regardless of the termination of this Agreement or any other Indenture Document,
the consummation of the transactions contemplated hereby, the repayment of any
of the Notes, the invalidity or unenforceability of any term or provision of
this Agreement or any other Indenture Document, or any investigation made by or
on behalf of the Collateral Agent or any other Secured Party. All amounts due
under this Section 5 shall be payable upon written demand therefor.

            SECTION 6. Collateral Agent Appointed Attorney-in-Fact. Upon the
occurrence and during the continuation of an Event of Default, the Collateral
Agent shall have the right, as the true and lawful attorney-in-fact and agent of
SCI LLC, with power of substitution for SCI LLC and in the SCI LLC's name, the
Collateral Agent's name or otherwise for the use and benefit of the Collateral
Agent (a) to receive, endorse, assign and/or deliver any and all notes,
acceptances, checks, drafts, money orders or other evidences of payment relating
to the Assigned Contracts or any part thereof; (b) to demand, collect, receive
payment of, give receipt for and give discharges and releases of all or any of
the Assigned Contracts; (c) to sign

                                                                               4


the name of SCI LLC on any invoice or bill of lading relating to any of the
Assigned Contracts; (d) to commence and prosecute any and all suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect or otherwise realize on all or any of the Assigned Contracts or to
enforce any rights in respect of any Assigned Contracts; (e) to settle,
compromise, compound, adjust or defend any actions, suits or proceedings
relating to all or any of the Assigned Contracts; and (f) to use, sell, assign,
transfer, pledge, make any agreement with respect to or otherwise deal with all
or any of the Assigned Contracts, and to do all other acts and things necessary
to carry out the purposes of this Collateral Assignment, as fully and completely
as though the Collateral Agent were SCI LLC named in the Assigned Contracts;
provided, however, that nothing herein contained shall be construed as requiring
or obligating the Collateral Agent or any Secured Party to make any commitment
or to make any inquiry as to the nature or sufficiency of any payment received
by the Collateral Agent or any Secured Party, or to present or file any claim or
notice, or to take any action with respect to the Assigned Contracts or any part
thereof or the moneys due or to become due in respect thereof or any property
covered thereby, and no action taken or omitted to be taken by the Collateral
Agent or any Secured Party with respect to the Assigned Contracts or any part
thereof shall give rise to any defense, counterclaim or offset in favor of SCI
LLC or to any claim or action against the Collateral Agent or any Secured Party.
It is understood and agreed that the appointment of the Collateral Agent as the
agent and attorney-in-fact of SCI LLC for the purposes set forth above is
coupled with an interest and is irrevocable. The provisions of this Section 6
shall in no event relieve SCI LLC of any of its obligations hereunder or under
the other Indenture Documents with respect to the Assigned Contracts or any part
thereof or impose any obligation on the Collateral Agent or any Secured Party to
proceed in any particular manner with respect to the Assigned Contracts or any
part thereof, or in any way limit the exercise by the Collateral Agent or any
Secured Party of any other or further right that it may have on the date of this
Collateral Assignment or hereafter, whether hereunder, under any other Indenture
Document, by law or otherwise.

      Notwithstanding anything in this Section 6 to the contrary, the Collateral
Agent agrees that it will not exercise any rights under the power of attorney
provided for in this Section 6 unless it does so in accordance with, and to the
extent consistent with, the terms of the Intercreditor Agreement.

            SECTION 7. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Collateral Agent hereunder
and of the Collateral Agent and the other Secured Parties under the other
Indenture Documents are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. No waiver of any provisions of this
Agreement or any other Indenture Document or consent to any departure by SCI LLC
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on SCI LLC in any case shall entitle SCI LLC to any other or further
notice or demand in similar or other circumstances.

            (b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except (i) in accordance with the Indenture pursuant to an
agreement or agreements in writing entered into by the Collateral Agent and SCI
LLC with respect to which such waiver, amendment or modification is to apply, or
(ii) as otherwise provided in the Intercreditor Agreement.

            SECTION 8. Security Interest Absolute. All rights of the Collateral
Agent hereunder and all obligations of SCI LLC hereunder shall be absolute and
unconditional irrespective of (a) any lack of validity or enforceability of the
Indenture, any other Indenture Document, any agreement with respect to any of
the Obligations or any other agreement or

                                                                               5


instrument relating to any of the foregoing, (b) any change in the time, manner
or place of payment of, or in any other term of, all or any of the Obligations,
or any other amendment or waiver of or any consent to any departure from the
Indenture, any other Indenture Document or any other agreement or instrument,
(c) any exchange, release or non-perfection of any Lien (as defined in the
Intercreditor Agreement) on other collateral, or any release or amendment or
waiver of or consent under or departure from any guarantee, securing or
guaranteeing all or any of the Obligations, or (d) any other circumstance that
might otherwise constitute a defense available to, or a discharge of, SCI LLC in
respect of the Obligations or this Agreement.

            SECTION 9. Termination. This Agreement shall terminate at the time
provided in Section 10.08 of the Indenture. Upon such termination, the
Collateral Agent shall take such action as SCI LLC shall reasonably request at
the expense of SCI LLC to reassign and deliver to SCI LLC, without recourse or
warranty, the Assigned Contracts and related documents, if any, in which the
Collateral Agent shall have any interest under this Collateral Assignment and
which shall then be held by the Collateral Agent or be in its possession and the
SCI LLC's obligations hereunder and the security interest of the Collateral
Agent in the Assigned Contracts shall terminate. In connection with any
termination or release, the Collateral Agent shall execute and deliver to SCI
LLC, at SCI LLC's expense, all Uniform Commercial Code termination statements
and similar documents, including, without limitation, authorization for the
Grantors to file Uniform Commercial Code termination statements, that the SCI
LLC shall reasonably request to evidence such termination. Any execution and
delivery of termination statements or documents pursuant to this Section 9 shall
be without recourse to or warranty by the Collateral Agent.

            SECTION 10. Notices. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given as
provided in Section 12.02 of the Indenture.

            SECTION 11. Further Assurances. SCI LLC covenants to execute and
deliver to the Collateral Agent, promptly after demand, such additional
assurances, writings or other instruments as may reasonably be required by the
Collateral Agent to effectuate the purposes hereof.

            SECTION 12. Binding Effect: Several Agreement; Assignments. Whenever
in this Agreement any of the parties hereto is referred to, such reference shall
be deemed to include the successors and assigns of such party, and all
covenants, promises and agreements by or on behalf of SCI LLC that are contained
in this Agreement shall bind and inure to the benefit of its successors and
assigns. This Agreement shall become effective as to SCI LLC when a counterpart
hereof executed on behalf of SCI LLC shall have been delivered to the Collateral
Agent and a counterpart hereof shall have been executed on behalf of the
Collateral Agent, and thereafter shall be binding upon SCI LLC and the
Collateral Agent and their respective successors and assigns, and shall inure to
the benefit of SCI LLC, the Collateral Agent and the other Secured Parties and
their respective successors and assigns, except that SCI LLC shall have no right
to assign or transfer its rights or obligations hereunder or any interest herein
(and any such assignment or transfer shall be void) except as expressly
contemplated by this Agreement or the other Indenture Documents.

            SECTION 13. Survival of Agreement: Severability. (a) All covenants.
agreements, representations and warranties made by SCI LLC herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Indenture Document shall be considered
to have been relied upon by the Secured Parties and shall survive the purchase
of the Notes by the Initial Purchasers, regardless of any investigation made by
the Initial Purchasers or on their behalf, and shall continue in full force and
effect until this Agreement shall terminate.

            (b) In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and

                                                                               6


enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby (it being understood that the invalidity of a
particular provision in a particular jurisdiction shall not in and of itself
affect the validity of such provision in any other jurisdiction). The parties
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

            SECTION 14. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

            SECTION 15. Counterparts. This Agreement 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 contract (subject to Section 12),
and shall become effective as provided in Section 12. Delivery of an executed
signature page to this Agreement by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof.

            SECTION 16. Jurisdiction; Consent to Service of Process. (a) SCI LLC
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or Federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Indenture Documents, or for recognition or enforcement of
any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Collateral Agent or any other Secured Party may otherwise have to bring any
action or proceeding relating to this Agreement or the other Indenture Documents
against SCI LLC or its properties in the courts of any jurisdiction.

            (b) SCI LLC irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection that it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement or the other Indenture Documents in any New
York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.

            (c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 10. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.

            SECTION 17. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER INDENTURE
DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER INDENTURE DOCUMENTS, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 17.

                                                                               7


            SECTION 18. Rules of Interpretation. The rules of interpretation
specified in Section 1.03 of the Security Agreement shall be applicable to this
Agreement.

      SECTION 19. Subject to Intercreditor Agreement. Notwithstanding anything
herein to the contrary, the lien and security interest granted to the Collateral
Agent pursuant to this Agreement and the exercise of any right or remedy by the
Collateral Agent hereunder are subject to the provisions of the Intercreditor
Agreement. In the event of any conflict between the terms of the Intercreditor
Agreement and this Agreement, the terms of the Intercreditor Agreement shall
govern.

            IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.


                                            SEMICONDUCTOR COMPONENTS
                                            INDUSTRIES, LLC,

                                              by /s/ John T. Kurtzweil
                                                 _______________________________
                                                 Name: John T. Kurtzweil
                                                 Title: Senior Vice President,
                                                        Chief Financial Officer,
                                                        and Treasurer


                                            WELLS FARGO BANK MINNESOTA,
                                            NATIONAL ASSOCIATION, as Collateral
                                            Agent,

                                              by /s/ Joseph P. O'Donnell
                                                 _______________________________
                                                 Name: Joseph P. O'Donnell
                                                 Title: Corporate Trust Officer


                                                                    Exhibit 10.8






                             JOINT VENTURE CONTRACT




                                       FOR




                  LESHAN-PHOENIX SEMICONDUCTOR COMPANY LIMITED







                           (AMENDED ON JUNE 25, 2002)

                                TABLE OF CONTENTS




                                                                            Page
                                                                            ----
                                                                         
PRELIMINARY STATEMENT.....................................................    1

ARTICLE 1 - DEFINITIONS AND INTERPRETATION................................    1

ARTICLE 2 - PARTIES TO THE CONTRACT.......................................    3

ARTICLE 3 - ESTABLISHMENT OF THE JOINT VENTURE COMPANY....................    5

ARTICLE 4 - PURPOSE, SCOPE AND SCALE OF PRODUCTION........................    6

ARTICLE 5 - TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL.............    6

ARTICLE 6 - RESPONSIBILITIES OF THE PARTIES...............................   11

ARTICLE 7 - TECHNOLOGY AND TRADEMARKS.....................................   12

ARTICLE 8 - SALE OF JOINT VENTURE PRODUCTS................................   13

ARTICLE 9 - BOARD OF DIRECTORS............................................   15

ARTICLE 10 - OPERATION AND MANAGEMENT.....................................   17

ARTICLE 11 - SITE.........................................................   19

ARTICLE 12 - MATERIALS, EQUIPMENT AND SERVICES............................   19

ARTICLE 13 - LABOR MANAGEMENT.............................................   20

ARTICLE 14 - FINANCIAL AFFAIRS AND ACCOUNTING.............................   21

ARTICLE 15 - TAXATION AND INSURANCE.......................................   24

ARTICLE 16 - CONFIDENTIALITY..............................................   25

ARTICLE 17 - JOINT VENTURE TERM...........................................   26

ARTICLE 18 - TERMINATION AND LIQUIDATION..................................   26

ARTICLE 19 - BREACH OF CONTRACT...........................................   31

ARTICLE 20 - FORCE MAJEURE................................................   31

ARTICLE 21 - SETTLEMENT OF DISPUTES.......................................   32

ARTICLE 22 - APPLICABLE LAW...............................................   33

ARTICLE 23 - MISCELLANEOUS PROVISIONS.....................................   34



Appendices

      A     List of the Joint Venture Products
      B     Schedule of Capital Contributions


                                       i

                             JOINT VENTURE CONTRACT

            THIS Amended JOINT VENTURE CONTRACT (this "Contract") is made in
Phoenix, Arizona, U.S.A. on the 25th day of June, 2002 among LESHAN RADIO
COMPANY LTD., an enterprise legal person established and existing under the laws
of the People's Republic of China with its legal address at 27 West People's
Road, Leshan, Sichuan Province 614000, People's Republic of China ("Party A"),
MOTOROLA (CHINA) INVESTMENT LIMITED, a company established and existing under
the laws of People's Republic of China, with its legal address at No. 108 Jian
Guo Road, Chao Yang District, Beijing 100022, People's Republic of China ("Party
B"), and SCG (CHINA) HOLDING CORPORATION, a company established and existing
under the laws of the State of Delaware, U.S.A., with its legal address at 5005
East McDowell Road, Phoenix, Arizona 85008, U.S.A. ("Party C"). Each of Party A,
Party B and Party C shall hereinafter individually be referred to as a "Party"
and collectively as the "Parties".

                              PRELIMINARY STATEMENT

            WHEREAS, Party A, Party B and Party C are parties to the restated
Joint Venture Contract dated September 6, 1999, for the establishment of
Leshan-Phoenix Semiconductor Company Limited (the "Company") and desire that,
when this Contract becomes effective in accordance with its terms and
conditions, such Joint Venture Contract shall be amended and restated in its
entirety by this Contract;

            WHEREAS, Party A, Party B and Party C desire that the Company add IC
and Discrete Wafer Fab products to the scope of its business ("New Products");

            NOW THEREFORE, after friendly consultations conducted in accordance
with the principle of equality and mutual benefit, the Parties have agreed to
amend the Amended and Restated Joint Venture Contract of 1999 as follows:

                   ARTICLE 1 - DEFINITIONS AND INTERPRETATION

1.01  Definitions

      Unless the terms or context of this Contract otherwise provide, the
      following terms shall have the meanings set out below:

      (a)   "Motorola" means Party B or any of its Affiliates.

      (b)   "Affiliate" means, in relation to Party A, any enterprise or other
            entity which, directly or indirectly, is controlled by Party A; the
            term "control" meaning ownership of fifty percent (50%) or more of
            the registered capital or the power to appoint the general manager,
            factory chief or other principal person in charge of an enterprise
            or other entity.

            "Affiliate" means, in relation to Party B or Party C, any company
            which, through ownership of voting stock (shares) or otherwise,
            directly or indirectly, is controlled by, under common control with,
            or in control of, Party B or Party C, as the case may be; the term
            "control" meaning ownership of fifty percent (50%) or more of the
            voting stock (shares) of a company, or the power to appoint or elect
            a majority of the directors of a company, or the power to direct the
            management of a company.


                                       1                  JOINT VENTURE CONTRACT

            For purposes of this Contract, the Company shall not be deemed as an
            Affiliate of any Party hereto.

      (c)   "Articles of Association" means the Articles of Association of the
            Company executed on March 1, 1995 and as amended and restated.

      (d)   "Board" and "Board of Directors" mean the board of directors of the
            Company.

      (e)   "Business License" means the business license of the Company issued
            by the SAIC dated March 28, 1995 and any amendment to or renewal,
            replacement or extension of such license.

      (f)   "China" and "PRC" mean the People's Republic of China excluding Hong
            Kong, Macau and Taiwan for purposes of this Contract.

      (g)   "Company" means Leshan-Phoenix Semiconductor Company Limited.

      (h)   "Effective Date" means the effective date of this Contract, which
            shall be the date on which this Contract and the Articles of
            Association have been approved by the Examination and Approval
            Authority without varying their terms or imposing any additional
            conditions, unless otherwise agreed by the Parties in writing.

      (i)   "Examination and Approval Authority" means the authority entrusted
            by the Chinese government to approve this Contract, the Appendices
            attached hereto and the Articles of Association.

      (j)   "Export-oriented Enterprise" means the status of the Company to be
            granted by the Examination and Approval Authority under PRC law.

      (k)   "Feasibility Study" means the Feasibility Study Report dated
            November 4, 1994 regarding the feasibility of the joint venture and
            the establishment of the Company, together with the Capital Increase
            and Expansion Plan for the Wafer Fab Products dated June 2002.

      (l)   "Joint Venture Products" means the products listed in Appendix A
            attached hereto and any other similar, related or complementary
            products that the Board approves for production by the Company.

      (m)   "Joint Venture Term" means the term of this Contract as set forth in
            Article 17.01 hereof including any extensions of such term pursuant
            to Article 17.02 hereof.

      (n)   "Land Use Rights Grant Contract" means the relevant contract or
            contracts for the grant of the land use rights over the Site between
            the Company and the Municipality of Leshan.

      (o)   "Management Personnel" means the Company's General Manager, Deputy
            General Manager and other management personnel designated by the
            Board.

      (p)   "ON" means Party C or any of its Affiliates.


                                       2                  JOINT VENTURE CONTRACT

      (q)   "Plant" means the Company's manufacturing facilities located at the
            Site where the Joint Venture Products will be produced.

      (r)   "Renminbi" or "RMB" means the lawful currency of China.

      (s)   "SAFE" means the State Administration of Foreign Exchange of the
            People's Republic of China and/or a local branch thereof, as
            appropriate to the context.

      (t)   "SAIC" means the State Administration for Industry and Commerce of
            the People's Republic of China and/or a local branch thereof, as
            appropriate to the context.

      (u)   "Services Contract" means the contract for the provision of services
            between the Company and Party A.

      (v)   "Site" means the parcels of land located in Leshan, Sichuan
            Province, on which the facilities of the Company are situated.

      (w)   "Technologically Advanced Enterprise" means the status of the
            Company to be granted by the Chinese government under PRC law

      (x)   "Technology" has the meaning as defined in the Technology License
            Contract, as amended.

      (y)   "Technology License Contract" means the technology license contract
            dated February 24, 1995 as amended so far under which the Company is
            the licensee.

      (z)   "Third Party" means any entity or person other than the Parties or
            their Affiliates.

      (aa)  "United States Dollars" or "US$" means the lawful currency of the
            United States of America.

      (bb)  "Working Personnel" means all employees and staff of the Company,
            other than the Management Personnel.

      (cc)  "Wafer Fab Products" means the wafer fab products as listed in
            Appendix A.

1.02  Interpretation

      Article headings are inserted for the purposes of convenience and
      reference only and shall not affect the interpretation or construction of
      this Contract. Words denoting the singular shall, where applicable,
      include the plural and vice versa. Reference to the masculine gender
      shall, where applicable, include the feminine gender and the neuter gender
      and vice versa.

                      ARTICLE 2 - PARTIES TO THE CONTRACT

2.01  The Parties

      The Parties to this Contract are:


                                       3                  JOINT VENTURE CONTRACT

      (a)   Party A, Leshan Radio Company, Ltd., a Chinese limited liability
            company registered in Leshan, Sichuan Province, China, with its
            legal address at 27 West People's Road, Leshan, Sichuan Province,
            China.

            Legal Representative of Party A:

            Name:          Mr. Pan Min-Zhi
            Position:      Chairman of the Board
            Nationality:   Chinese

      (b)   Party B, Motorola (China) Investment Limited, a company established
            and existing under the laws of the PRC, with its legal address at
            No. 108 Jian Guo Road, Chao Yang District, Beijing 100022, People's
            Republic of China.

            Legal Representative of Party B:

            Name:          Mr. Pin Yong Lai
            Position:      Chairman of the Board
            Nationality:   Malaysia

      (c)   Party C, SCG (China) Holding Corporation, a company established and
            existing under the laws of the State of Delaware, U.S.A., with its
            legal address at 5005 McDowell Road, Phoenix, Arizona 85008, U.S.A.

            Legal Representative of Party C:

            Name:          Henry Leung
            Position:      Chairman of the Board
            Nationality:   American

2.02  Representations, Warranties and Undertakings

      (a)   Each of Party A, Party B and Party C hereby represents, warrants and
            undertakes to the other Parties that, as of the date of execution
            hereof and as of the Effective Date:

            (i)         it is duly organized, validly existing and in good
                        standing under the laws of the place of its
                        establishment or incorporation;

            (ii)        it has all requisite power, authority and approval
                        required to enter into this Contract and upon the
                        Effective Date will have all requisite power, authority
                        and approval to perform fully each and every one of its
                        obligations hereunder;

            (iii)       it has taken all action necessary to authorize it to
                        enter into this Contract and such Party's representative
                        whose signature is affixed hereto is fully authorized in
                        writing to sign this Contract and to bind such Party
                        thereby;

            (iv)        upon the Effective Date, this Contract shall constitute
                        its legal, valid and binding obligation;


                                       4                  JOINT VENTURE CONTRACT

            (v)         neither the execution of this Contract, nor the
                        performance of such Party's obligations hereunder, will
                        conflict with, or result in a breach of, or constitute a
                        default under, any provision of its business license or
                        articles of association, or any law, rule, regulation,
                        authorization or approval of any government agency or
                        body, or of any contract or agreement to which it is a
                        party or is subject; and

            (vi)        all material documents, statements and information of or
                        provided by any governmental body in its possession
                        relating to the transactions contemplated in this
                        Contract have been disclosed to the other Parties, and
                        no document previously provided by it to the other
                        Parties contains any untrue statement of material fact.

      (b)   If any Party does not perform the above undertakings and
            representations, it shall be considered a breach of this Contract.

      (c)   At the time of the execution of this Contract, each Party shall
            provide the other Parties with a certified copy of its business
            license.

2.03  Change of Legal Representative

      Each Party shall have the right to change its legal representative and
      shall promptly notify the other Parties of such change and the name,
      position and nationality of its new legal representative.

             ARTICLE 3 - ESTABLISHMENT OF THE JOINT VENTURE COMPANY

3.01  Name and Address of the Company; Branches

      (a)   The name of the Company shall be "?????????????????" in Chinese, and
            "Leshan-Phoenix Semiconductor Company Limited" in English.

      (b)   The legal address of the Company shall be 27A West People's Road,
            Leshan, Sichuan Province, China.

      (c)   In accordance with its business needs, the Company may establish
            branch offices within or outside China upon the decision of the
            Board and approval by the relevant governmental authorities.

3.02  Limited Liability Company

      The form of organization of the Company shall be a limited liability
      company. Except as otherwise provided herein, once a Party has paid in
      full its contribution to the registered capital of the Company, it shall
      not be required to provide any further funds to or on behalf of the
      Company by way of capital contribution, loan, advance, guarantee or
      otherwise unless the Parties mutually agree otherwise. Creditors of the
      Company shall have recourse only to the assets of the Company and shall
      not seek repayment from any of the Parties. The Company shall indemnify
      the Parties against any and all losses, damages, or liabilities suffered
      by the Parties in respect of any Third Party claims arising out of the
      operation of the Company. Subject to the above, the profits, risks and
      losses of the Company shall be shared by the Parties in proportion to
      their respective contributions to the Company's registered capital.


                                       5                  JOINT VENTURE CONTRACT

3.03  Laws and Decrees

      The Company shall be a legal person under the laws of China. The
      activities of the Company shall be governed and protected by the laws,
      decrees and relevant rules and regulations of China.

3.04  Code of Conduct

      The Company and its employees shall comply with a Code of Conduct adopted
      by the Board of Directors. The Code of Conduct shall be substantially
      similar to the Code of Conduct of Party A, Party B or Party C, whichever
      is more strict, and shall be fully consistent with relevant Chinese laws.

               ARTICLE 4 - PURPOSE, SCOPE AND SCALE OF PRODUCTION

4.01  Purpose

      The Parties have agreed that the purposes of the Company will be
      manufacturing low cost and high efficiency semi-conductor components and
      products that meet world-wide quality standards by using advanced and
      suitable technology and scientific management methods, to satisfy the
      increasing global market demand and achieve a satisfactory return on
      investment.

4.02  Scope of Business

      The Company will engage in the development, design, manufacture, assembly
      and testing of Integrated Circuit ("IC") and Discrete semiconductor
      products and related products, the sale of products produced by the
      Company and the provision of after-sales service with respect to such
      products.

4.03  Scale of Production

      It is anticipated by the Parties that the annual production capacity of
      the Company at the completion of all investment phases will reach 28.5
      billion units of miniature surface mount IC packages and 728,000 6-inch IC
      and Discrete wafers. The Board of Directors of the Company shall have
      complete autonomy in the formulation and execution of the Company's
      production policies in order to achieve these goals, and may expand or
      reduce the Company's scale of production in accordance with market demands
      and the Company's business situation.

         ARTICLE 5 - TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL

5.01  Total Investment

      The total amount of investment will be Five Hundred Nine Million Three
      Hundred Thousand United States Dollars (US$$509.3 million). This
      investment shall be made in phases, subject to market conditions and the
      business operations of the Company, as the Board shall decide from time to
      time. If the Company is successful, the Parties hope to increase further
      their investment, but any such increase will need to be finalized and
      approved in the future by the Board and the Examination and Approval
      Authority .


                                       6                  JOINT VENTURE CONTRACT

5.02  Registered Capital

      The total amount of registered capital will be One Hundred One Million
      Eight Hundred and Sixty Thousand United States Dollars (US$101.86
      Million).

5.03  Contributions to Capital

      (a)   Party A's contribution to the registered capital of the Company
            shall be Thirty-Nine Million Seven Hundred Twenty-Five Thousand and
            Four Hundred United States Dollars (US$39,725,400), representing a
            thirty-nine percent (39%) share of the registered capital of the
            Company. Party A's contribution to the registered capital shall
            include Thirty-Eight Million Three Hundred Sixty Thousand and Four
            Hundred Seventy-Seven United States Dollars (US$38,360,477) in cash,
            equipment valued at Four Hundred Eighty-Three Thousand Nine Hundred
            and Twenty-Three United States Dollars (US$483,923), the land use
            rights of a parcel of land located at No. 27, West People's Road,
            the total area of which is 26,853.80 square meters and is valued at
            Seven Hundred Twenty-One Thousand United States Dollars
            (US$721,000), and additional land use rights and the building
            thereon located at No. 27, West People's Road and currently used for
            Expatriate Apartments valued at One Hundred Sixty Thousand United
            States Dollars (US$160,000).

      (b)   Party B's contribution to the registered capital of the Company
            shall be Ten Million One Hundred Eighty-Six Thousand United States
            Dollars (US$10,186,000), representing a ten percent (10%) share of
            the registered capital of the Company.

      (c)   Party C's contribution to the registered capital of the Company
            shall be Fifty-One Million Nine Hundred Forty-Eight Thousand and Six
            Hundred United States Dollars (US$51,948,600), representing a
            fifty-one percent (51%) share of the registered capital of the
            Company.

      (d)   The unpaid registered capital amount as of the date hereof will be
            paid by installment contribution in accordance with Appendix B.

5.04  Payment of Registered Capital and Conditions Precedent thereto

      (a)   Subject to Article 5.04(c) below, each Party shall make its
            contribution to the registered capital of the Company in accordance
            with the schedule set forth in Appendix B.

      (b)   In the event that a Party fails to make its capital contribution, in
            whole or in part, in accordance with the provisions of Article
            5.04(a) and Appendix B, such Party shall be liable to pay liquidated
            damages to the Company in the form of simple interest on the unpaid
            amount from the time due until the time paid at the rate of two
            percent (2%) above the six-month London Interbank Offered Rate
            (LIBOR) for United States Dollars up to a maximum of US$200,000.00.
            Notwithstanding the above provisions of this Article 5.04 (a), if
            the failure of a Party to make its capital contribution, in whole or
            in part, is not remedied within thirty (30) days of notice from any
            other Party, said other


                                       7                  JOINT VENTURE CONTRACT

            Party shall have the right to terminate this Contract pursuant to
            Article 18.01(c)(ix) hereof.

      (c)   The Parties shall have no obligation to make capital contributions
            in accordance with Appendix B until the occurrence of the Effective
            Date. The capital contributions to be made by the Parties under this
            Contract shall be reduced by the amount of any distributable profits
            that are not distributed to the Parties as dividends, and such
            profits may be reinvested in the business of the Company as
            determined by the Board.

5.05  Investment Certificate

      After each Party's installment contribution to the registered capital has
      been made, a Chinese registered accountant shall verify the contribution
      and issue a contribution verification report. Thereupon, the Company shall
      issue an investment certificate to each Party signed by the Chairman and
      the Vice Chairman of the Board.

5.06  Assignment of Registered Capital

      (a)   Each Party hereto undertakes to the other Parties and to the Company
            that it shall not assign, sell, transfer or otherwise dispose of all
            or any part of its interest in the registered capital of the Company
            or its rights, obligations and benefits under this Contract unless
            (i) each of the other Parties hereto shall have consented in writing
            to such assignment, sale, transfer or disposition or (ii) such
            assignment, sale, transfer or disposition complies with the terms of
            this Article 5.06.

      (b)   When one Party (the "Disposing Party") wishes to sell, assign or
            otherwise dispose of all or part of its share of the registered
            capital (the "Offered Share"), it shall notify each of the other
            Parties (the "Non-Disposing Parties") in writing (the "Transfer
            Notice") of the identity of the proposed purchaser and provide each
            Non-Disposing Party a copy of the offer including all of the
            proposed terms and conditions of such sale, assignment or disposal.
            The Transfer Notice shall include a statement confirming that there
            is no supplementary consideration not stated in the offer. The
            Non-Disposing Parties shall have a preemptive right to purchase all
            but not part of such Offered Share in proportion to their respective
            equity interests in the Company on terms and conditions no less
            favorable to the Disposing Party than those specified in the
            Transfer Notice.

      (c)   The Non-Disposing Parties may exercise their preemptive right by
            giving notice to the Disposing Party of their intention to purchase
            the Offered Share within 30 days after receipt of the Transfer
            Notice ("Option Exercise Period"). Upon issuance of such notice, the
            Parties shall execute such documents as are required to effect the
            transfer. The purchase shall be made within 30 days after receipt of
            any required government approvals of the transfer.

      (d)   If one Non-Disposing Party does not exercise the option within the
            Option Exercise Period or fails to make payment for its share of the
            Offered Share within the time provided in subsection (c), the other
            Non-Disposing Party shall have the option to purchase such share by
            giving notice to the Disposing Party


                                       8                  JOINT VENTURE CONTRACT

            within 30 days thereafter. If such other Non-Disposing Party does
            not wish to purchase such share or if both of the Non-Disposing
            Parties should fail to exercise their preemptive right, the
            Disposing Party may sell all but not part of the Offered Share to
            the proposed purchaser at a price not less than that provided in the
            Transfer Notice. The Disposing Party shall provide each of the
            Non-Disposing Parties with a copy of any executed written equity
            transfer agreement with the purchaser.

      (e)   It shall be a condition precedent to the right of any Party to
            transfer any of its registered capital that (i) the transfer shall
            be done in accordance with Chinese law, (ii) the transferee agrees
            to be bound by and entitled to the obligations and benefits of this
            Contract as if an original party hereto; and (iii) neither the
            business of the Company nor the performance of its contracts shall
            be interrupted, nor shall its organizational structure be affected
            by any such sale, assignment or other disposal of such registered
            capital. Notwithstanding the foregoing, unless the written consent
            of the Disposing Party is obtained, upon any assignment, sale or
            other disposal of the Disposing Party's entire interest in the
            registered capital of the Company, the Company shall remove from its
            name all references to the name of the Disposing Party and shall
            cease using all packaging, letterhead, stationery, promotional and
            advertising materials and other items which contain any reference to
            the name of the Disposing Party.

      (f)   Subject to the satisfaction of the terms and conditions set forth in
            this Article 5.06, the Parties shall cause their directors appointed
            to the Board to approve any sale, assignment or other disposal of
            registered capital hereunder. Any such sale, assignment or other
            disposal shall, to the extent required by law, be submitted to the
            Examination and Approval Authority for examination and approval.
            Upon receipt of the approval of the Examination and Approval
            Authority, the Company shall register the change in ownership with
            the SAIC.

      (g)   The provisions on assignment set forth in this Article 5.06 shall
            not apply to any sale or assignment of registered capital by any
            Party to any of its Affiliates, and the other Parties shall be
            deemed to have consented to, and the Parties shall cause their
            directors appointed to the Board to approve, any such sale or
            assignment. Any such sale or assignment shall, to the extent
            required by law, be submitted to the Examination and Approval
            Authority for examination and approval. Upon receipt of such
            approval, the Company shall register the change in ownership with
            the SAIC.

      (h)   The share of the registered capital owned by Party B and Party C
            shall not, in the aggregate, be lower than 25% of the registered
            capital of the Company.

5.07  Encumbrance of Investment

      No Party shall mortgage, pledge, charge or otherwise encumber all or any
      part of its contribution to the Company's registered capital without the
      prior written consent of the other Parties.

5.08  Increase of Registered Capital and Additional Financing


                                       9                  JOINT VENTURE CONTRACT

      (a)   Any increase in the registered capital of the Company must be
            approved by a unanimous vote of the members of the Board present in
            person or by proxy at a duly constituted meeting thereof and
            submitted to the Examination and Approval Authority for examination
            and approval. Upon receipt of the approval of the Examination and
            Approval Authority, the Company shall register the increase in
            registered capital with the local branch of the SAIC. Unless
            otherwise agreed by the Parties, any increase in the registered
            capital shall be made by the Parties in the same proportion as their
            respective then-existing interests in the registered capital of the
            Company. The agreement on any capital increase may specify the time
            limits for payment of such capital increase. If any Party fails to
            contribute its share of the capital increase within the time limits
            set out therein, such Party shall pay interest to the Company on the
            amount of the overdue contribution at the rate of two percent (2%)
            above the six-month LIBOR for United States Dollars as in effect on
            the date such contribution is due. Such interest shall be payable
            monthly in arrears from and including the date on which such
            contribution is due and to but excluding the date on which such
            contribution (together with all interest accrued thereon) is paid in
            full.

      (b)   In the event that any Party fails to make its registered capital
            contribution (or any portion thereof) as provided herein or fails to
            provide its share of any increase in the Company's registered
            capital as described in (a) above, then in addition to any other
            rights the Company may have against the defaulting Party, the
            Company may offer such portion to the non-defaulting Parties in
            proportion to the ratio of their respective interests in the
            registered capital of the Company. Such offer to provide a portion
            of any increase in the registered capital as described in this
            paragraph requires approval by the Examination and Approval
            Authority.

      (c)   The Company shall fund the difference between the total amount of
            investment and registered capital through long-term loans obtained
            from financial institutions. If the Company cannot obtain all or a
            portion of the required loans on the strength of its own credit,
            then each of the Parties, either directly or through an Affiliate,
            shall raise loans for the Company in the same proportion as their
            respective contributions to the registered capital. If any Party is
            unable to raise loans in the proportion applicable to such Party,
            the other Parties shall consider helping arrange for such loans. The
            Board shall decide the specific timing and amounts of the Company's
            loans. Loans shall bear interest at the actual loan interest rate,
            following confirmation by the Board. Such loans shall be repaid by
            the Company on a pari passu basis in accordance with the decision of
            the Board based upon the Company's ability to repay without
            endangering the financial stability of the Company. The Company may
            fund the difference between the total amount of investment and
            registered capital through overseas loans obtained from financial
            institutions.

      (d)   In the future, the Company may obtain additional financing by
            utilizing its own internal funds, through loans from sources in
            China or outside China, or through increased investment by the
            Parties.

                                       10                 JOINT VENTURE CONTRACT

                  ARTICLE 6 - RESPONSIBILITIES OF THE PARTIES

6.01  Responsibilities of Party A

      In addition to its other obligations under this Contract, Party A shall
      have the following responsibilities:

      (a)   assist the Company in obtaining all necessary approvals, permits and
            licenses for the operation of the Company;

      (b)   assist the Company in liaising with the relevant authorities to
            effectively procure the external water supply, fuel supply, power
            supply, transportation, communications, and other services required
            for the Plant at the most preferential prices available;

      (c)   assist the Company in obtaining raw materials from sources in China;

      (d)   assist the Company in opening Renminbi and foreign currency bank
            accounts and in obtaining Renminbi loans when necessary;

      (e)   assist the Company in arranging for the transportation of imported
            equipment and materials between ports in China and the Plant;

      (f)   assist with the procedures for applying for and procuring licenses,
            and on carrying out all customs procedures, for the import of
            machinery, equipment, materials, supplies and office equipment;

      (g)   assist the expatriate employees of the Company to obtain all
            necessary entry visas and work permits;

      (h)   assist the Company in recruiting various types of qualified Chinese
            personnel;

      (i)   assist the Company in obtaining the Certificate of Authentication of
            its status as an "Integrated Circuit (IC) Manufacturing Enterprise"
            permitting the Company to be entitled to all the Value-Added Tax
            ("VAT") and other investment incentives as provided for by the
            governments including in State Council Document No. (2000) 18 on
            Policies to Encourage the Development of the Software and Integrated
            Circuit (IC) Industries dated on June 24, 2000 and in policies
            promulgated by the Sichuan Provincial Government;

      (j)   assist the Company in obtaining approval of its status as a
            Technologically Advanced Enterprise and/or Export-oriented
            Enterprise and securing the appropriate confirmation certificates;
            thus permitting the Company to enjoy the preferential tax treatment
            and other benefits available to such enterprises under the current
            and future government sponsored programs including programs
            promulgated under the western region modernization policies;

      (k)   assist the Company to obtain access to sources of foreign exchange;

      (l)   assist the Company to apply for and obtain approval from the Customs
            that the Company's factory and all other facilities will be treated
            as a bonded factory or warehouse in accordance with Chinese legal
            regulations;


                                       11                 JOINT VENTURE CONTRACT

      (m)   assist the Company in applying for and obtaining any other most
            preferential tax treatment and other investment incentives available
            under applicable laws and regulations, in addition to those listed
            in this Article 6.01;

      (n)   assist the Company in getting duty and VAT exemption that may be
            available on all self-used materials and equipment; and

      (o)   handle other matters entrusted by the Company from time to time.

6.02  Responsibilities of Party B and Party C

      In addition to its other obligations under this Contract, each of Party B
      and Party C shall have the following responsibilities, which shall be
      carried out directly or through its Affiliates:

      (a)   when requested by the Company, assist the Company in the purchase of
            equipment, supplies and materials manufactured inside or outside
            China;

      (b)   assist the Company in obtaining loans when necessary;

      (c)   assist the Company in recruiting expatriate and local personnel;

      (d)   assist the Company in arranging training of Company personnel in
            China or abroad as contemplated in the Technology License Contract;

      (e)   assist the Company in generating export opportunities; and

      (f)   handle other matters entrusted by the Company from time to time.


6.03  If, at the time or times of Party B or Party C's performance hereunder, a
      validated U.S. export license is required for Party B, Party C or their
      Affiliates to lawfully export goods or associated technical data, then the
      issuance of such license shall constitute a condition precedent to Party B
      and Party C's obligations hereunder.

6.04  No Compensation

      When the Parties assist the Company with the purchase of equipment,
      supplies and materials, they shall serve the Company without compensation
      and no Party may impose additional charges.

                     ARTICLE 7 - TECHNOLOGY AND TRADEMARKS

7.01  Technology

      The Parties contemplate that from time to time during the term of this
      Contract, Semiconductor Components Industries, LLC may provide the Company
      and/or Party A with additional Technical Information and Know-How to
      produce other products. In such event, the Parties shall cause the Company
      and Party A to execute one or more additional technology license contracts
      with Semiconductor Components


                                       12                 JOINT VENTURE CONTRACT

      Industries, LLC in substantially the form of the Technology License
      Contract. Any additional technology license contracts will become
      effective on the date of approval by or registration with the Examination
      and Approval Authority and will be valid for ten (10) years.

7.02  Trademarks

      (a)   The Company is not authorized to use the name or trademark of any
            Party in its name or otherwise, except as specifically authorized in
            writing by such Party.

      (b)   The Company shall develop and register its own trademark. The use of
            such trademark shall be decided upon by the Board.

                   ARTICLE 8 - SALE OF JOINT VENTURE PRODUCTS

8.01  Distribution and Sales- Non Wafer Fab Products

      (a)   Unless unanimously decided otherwise by the Board, each Party,
            directly or through designated Affiliates, shall purchase the
            Company's products in proportion to its contribution to the
            registered capital, and the pricing of such purchases shall follow
            the principles provided in the Board resolutions dated June 12, 1997
            and any subsequent unanimous Board resolutions.

      (b)   Each Party or its Affiliates may act as agent for the sale of such
            Party's portion of the Company's production. In such case, such
            Party or its Affiliates shall receive a sales commission.

      (c)   The majority of the Company's products will be exported directly or
            indirectly.

      (d)   Party A may request the Company to perform the assembly and test of
            devices by the Company which are not produced by Motorola or ON.
            Such production would use wafers provided by Party A on a
            consignment basis and take place within Party A's pro rata share of
            the Company's manufacturing capacity. However, the quantity and
            specifications of each device requested must meet the Company's
            manufacturability requirements as defined by the General Manager of
            the Company.

      (e)   Party A, Party B and Party C may request the Company to perform the
            assembly and test of devices by the Company using wafers provided by
            Party C or its Affiliates, on a consignment basis and taking place
            within each Party's pro rata share of the Company's manufacturing
            capacity. However, the quantity and specifications of each device
            requested must meet the Company's manufacturability requirements as
            defined by the General Manager of the Company.

      (f)   The New Products for non wafer fab listed in Appendix A will be sold
            exclusively to the Parties or their affiliates. However, the Company
            may sell such New Products to third parties if the Board agrees such
            sales are in the best interests of the Company.


                                       13                 JOINT VENTURE CONTRACT

8.02  Distribution and Sales - Wafer Fab Products

      (a)   The Wafer Fab Products listed in Appendix A will be sold exclusively
            to the parties or their affiliates. However, the Company may sell
            such New Products on the open market if the Board agrees such sales
            are in the best interests of the Company.

      (b)   For the first three years of operation of the Wafer Fab, the pricing
            for wafer fab products will be set at the lower of (1) prices that
            are calculated to generate a return on invested equity equal to the
            weighed average annual interest rate of borrowing of the Company as
            determined by the Board at the end of each fiscal year plus 6% or
            (2) the cost at which such products could be purchased from an
            unrelated third party in an arm's-length transaction. Thereafter,
            pricing will be set at a level that generates a return on invested
            equity equal to the weighed average annual interest rate of
            borrowing of the Company as determined by the Board at the end of
            each fiscal year plus 6%.

      (c)   Each party will have the right to purchase Wafer Fab Products from
            the Company in proportion to their respective equity interests
            therein. In order to exercise such right, each party will commit at
            least one year in advance to purchase specified amounts of Wafer Fab
            Products. If a party fails to purchase any of its committed amount,
            then it shall pay the Company an underutilization charge as defined
            in the Board Resolution dated May 16, 2002. In addition, once a
            party makes a commitment to purchase a given amount of Wafter Fab
            Products, it may not reduce such amount in any subsequent year,
            except if (a) such reduction is caused by the exercise by either of
            the other parties of its right to regain its share of the total
            production capacity as set out in Section 8.02d, or (b) either of
            the other parties agrees to take over the reduced amount.

      (d)   If in any year a party does not commit to purchase all the Wafer Fab
            Products it is entitled to purchase (such party a "Declining
            Party"), each of the other parties will have the right to commit to
            purchase a pro rata portion (based on such party's registered
            capital in the Company, calculated for such purpose not taking into
            account the equity owned by the Declining Party) of such New
            Products. A Declining Party may upon one year's advance notice
            regain its share of production.

      (e)   the Company shall increase its production capacity to satisfy the
            demands of the parties for the Wafer Fab Products. If total demand
            exceeds the production capacity of the Company, the parties agree
            that the Company will raise funds, through additional pro rata
            capital contributions or loans, to expand its production capacity.

      (f)   No party or any of its affiliates may resell to any third party
            wafers produced by the Company utilizing the design of any other
            party. However, a party and any of its affiliates may sell finished
            products utilizing wafers produced by the Company.


                                       14                 JOINT VENTURE CONTRACT

                         ARTICLE 9 - BOARD OF DIRECTORS

9.01  Formation of the Board

      (a)   The Board shall consist of nine (9) directors, three (3) of whom
            shall be appointed by Party A, one (1) of whom shall be appointed by
            Party B and five (5) of whom shall be appointed by Party C. At the
            time this Contract is executed and each time a director is
            appointed, each Party shall notify in writing to the other Parties
            the names of its appointee(s).

      (b)   In the event of any change in the ratio of ownership of the Parties
            of the registered capital of the Company (including as a result of
            an increase in the registered capital), the total number of
            directors and the number of directors appointed by each Party shall
            be changed as necessary to reflect such change. The Board may by its
            decision increase or decrease the number of directors from time to
            time, subject to the requirements of PRC law.

      (c)   Each director shall be appointed for a term of four (4) years and
            may serve consecutive terms if reappointed by the Party originally
            appointing him. A director shall serve and may be removed at the
            pleasure of the Party which appointed him. If a seat on the Board is
            vacated by the retirement, resignation, illness, disability or death
            of a director or by the removal of such director by the Party which
            originally appointed him, the Party which originally appointed such
            director shall appoint a successor to serve out such director's
            term.

      (d)   A director selected by Party C shall serve as the Chairman of the
            Board and a director selected by Party A shall serve as Vice
            Chairman of the Board. The Chairman of the Board shall be the legal
            representative of the Company. Whenever the Chairman of the Board is
            unable to perform his responsibilities for any reason, another
            director as designated by the Chairman may temporarily represent
            him. The Chairman of the Board shall exercise his authority within
            the limits prescribed by the Board and may not under any
            circumstances contractually bind the Company or otherwise take any
            action on behalf of the Company without prior approval of the Board.

      (e)   Subject to a decision by the Board, the Company shall indemnify the
            director against all claims and liabilities incurred by reason of
            acting as a director of the Company, except if incurred as a result
            of willful misconduct, gross negligence or violations of criminal
            laws.

9.02  Powers of the Board

      (a)   The Board shall be the highest authority of the Company.

      (b)   Resolutions involving the following matters may be adopted at a duly
            constituted and convened meeting of the Board only upon the
            unanimous affirmative vote of each and every director of the Board
            voting in person, by telephone, video conference or by proxy at such
            meeting:

            (i)         amendment of the Articles of Association;

            (ii)        merger of the Company with another economic
                        organization;


                                       15                 JOINT VENTURE CONTRACT

            (iii)       suspension or dissolution of the Company; and

            (iv)        increase, decrease or assignment of the registered
                        capital of the Company.

      (c)   All other issues that require a resolution by the Board may be
            adopted at a duly convened meeting of the Board, and such resolution
            may be adopted only by the affirmative vote of only a simple
            majority of the directors present at such meeting in person or by
            telephone, video conference or proxy.

      (d)   Meetings of the Board shall be attended by at least one director
            from each Party or his proxy, and will be scheduled to ensure to the
            maximum extent possible, the convenient participation of the
            directors. If a Party is not represented at a meeting it will be
            rescheduled as soon as possible to ensure the participation of
            directors from all the Parties, within a maximum of sixty (60) days.
            After sixty (60) days, the rescheduled meeting may take place if any
            six (6) directors participate. If a Board Meeting is held in
            accordance with this section, the Parties in attendance shall orally
            notify the non-attending Party about the contents and decisions of
            the meeting on the day of the meeting, then fax a copy of the
            minutes of the meeting to the non-attending Party within seven (7)
            days. The non-attending Party may offer opinions and suggestions.

9.03  Meetings

      (a)   Meetings of the Board shall be held at least once each year.
            Meetings shall be held at the registered address of the Company or
            such other address in China or abroad as is designated by the Board.
            Meetings may be attended by directors in person or by telephone,
            video conference or proxy.

      (b)   The Chairman of the Board shall set the agenda and be responsible
            for convening and presiding over Board meetings.

      (c)   Upon the written request of three (3) or more of the directors of
            the Company specifying the matters to be discussed, the Chairman of
            the Board shall within twenty-one (21) days convene an interim
            meeting of the Board. The Chairman, or in his absence another
            director as designated by the Chairman or Party C, shall decide on
            the timing and location of such interim meetings.

      (d)   In order to convene a meeting of the Board, the Chairman shall send
            written notice to each director at least thirty (30) days prior to
            the meeting. Such notice shall include a detailed agenda of matters
            to be discussed at the meeting and all reports, documents and other
            materials relevant or necessary for adequate and informed
            consideration of each matter on such agenda. All such notices of
            meetings, detailed agendas and relevant or necessary reports,
            documents and other materials shall be written in English and
            Chinese. Notice of any meeting of the Board may be waived by consent
            of all directors attending the meeting in person or by proxy.

      (e)   Subject to Article 9.02(d) above, six (6) of the directors present
            in person or by proxy shall constitute a quorum which shall be
            necessary for the conduct of


                                       16                 JOINT VENTURE CONTRACT

            business at any meeting of the Board. Except as provided in Article
            9.02(d), if at any properly convened meeting, no quorum is
            constituted because less than two-thirds of the directors are
            present in person or by proxy, the Chairman may call another meeting
            with seven (7) days' notice. Any director absent from a meeting
            without giving a reason therefor and without having appointed a
            proxy shall be considered to have abstained from voting and shall be
            considered as present for purposes of determining a quorum.
            Excluding those directors who shall be considered to have abstained
            from voting, resolutions other than those listed in Article 9.02(b)
            hereof shall be valid if passed by more than half of the directors
            present.

      (f)   If a Board member is unable to participate in a Board meeting, he
            may issue a proxy and entrust a representative to participate in the
            meeting on his behalf. Unless otherwise provided in the proxy, the
            representative so entrusted shall have the same rights and powers as
            the Board member. One person may represent more than one director by
            proxy. Each Party shall cause its appointed directors to attend
            Board meetings either in person or by proxy.

      (g)   The Board will cause complete and accurate minutes to be kept of all
            meetings of the Board, together with copies of notices of the
            meetings, in English and Chinese. Minutes of all meetings of the
            Board shall be distributed to all the directors as soon as
            practicable after each meeting but not later than thirty (30) days
            from the date of such meeting. Any director who wishes to propose
            any amendment or addition thereto shall submit the same in writing
            to the Chairman and the Vice Chairman within two (2) weeks after
            receipt of the proposed minutes. The minutes shall be finalized by
            the Chairman and Vice Chairman.

      (h)   Any action requiring the unanimous vote of the directors of the
            Board may be taken without a meeting if all members of the Board
            consent in writing to such action. Any action requiring a majority
            vote of the directors may be taken without a meeting if a majority
            of the members of the Board consent in writing to such action. Such
            written consents shall be filed with the minutes of the Board
            proceedings and shall have the same force and effect as a vote taken
            by members physically present.

      (i)   Members of the Board shall serve in such capacity without any
            remuneration, but all reasonable costs incurred by a director in the
            performance of his duties as a member of the Board shall be borne by
            the Party which appointed the director.

                     ARTICLE 10 - OPERATION AND MANAGEMENT

10.01 Management Organization

      The Company shall adopt a management system under which the General
      Manager shall be responsible to and under the leadership of the Board.

10.02 General Manager


                                       17                 JOINT VENTURE CONTRACT

      (a)   The General Manager shall be an individual of high professional
            qualifications and experience. The General Manager shall be
            nominated by Party C and appointed by the Board of Directors. The
            General Manager shall be employed pursuant to such terms as shall be
            set out in an offering letter issued by the Board of Directors and
            an employment contract with the Company. If the General Manager is
            removed or cannot serve in such capacity due to retirement,
            resignation, illness, disability or death, a successor shall be
            nominated and appointed in the same manner as the original
            appointee.

      (b)   The General Manager shall be in charge of the day-to-day operation
            and management of the Company, shall be responsible to the Board and
            shall carry out all matters entrusted by the Board. In particular,
            but without limiting the generality of the foregoing, the General
            Manager shall have the following responsibilities:

            (i)         perform all pertinent obligations set forth in this
                        Contract and the Articles of Association, as well as
                        resolutions adopted by the Board;

            (ii)        formulate a comprehensive organizational structure and
                        management system for consideration and approval by the
                        Board;

            (iii)       appoint and dismiss managerial staff (both Chinese and
                        expatriate) in charge of various departments, and their
                        subordinates;

            (iv)        formulate, and submit to the Board for adoption, Company
                        policies, rules and regulations, define and designate
                        departmental job responsibilities, and direct and
                        supervise departmental activities;

            (v)         submit to the Board for review and approval business
                        plans, annual and quarterly budgets, forecast plans and
                        reports;

            (vi)        formulate and implement personnel training programs,
                        including apprenticeships and graduate training schemes;

            (vii)       manage external relations and sign economic contracts
                        and other corporate documents as authorized by the
                        Board; and

            (viii)      handle all other major issues as authorized and directed
                        by the Board.

      (c)   The General Manager shall perform his or her duties on a full-time
            basis and shall not hold any operation or management related posts
            concurrently with other enterprises.

      (d)   The General Manager shall not be required to indemnify the Company
            for any acts performed in his or her official capacity (but the
            Company shall indemnify Third Parties for losses suffered as a
            result therefrom if liability exists by the Company), except for
            such acts which constitute willful misconduct, gross negligence or
            violations of criminal laws.

10.03 Deputy General Manager


                                       18                 JOINT VENTURE CONTRACT

      (a)   The Deputy General Manager shall be nominated by Party A and
            appointed by the Board of Directors. The Deputy General Manager
            shall assist the General Manager in the day-to-day operation and
            management of the Company.

      (b)   The Deputy General Manager shall perform his or her duties on a
            full-time basis and shall not hold any operation or management
            related posts concurrently with other enterprises.

      (c)   The Deputy General Manager shall not be required to indemnify the
            Company for any acts performed in his or her official capacity (but
            the Company shall indemnify Third Parties for losses suffered as a
            result therefrom if liability exists by the Company), except for
            such acts which constitute willful misconduct, gross negligence or
            violations of criminal laws.

                               ARTICLE 11 - SITE

11.01 Land Use Rights

      (a)   The Company has acquired the land use rights for the Site pursuant
            to the Land Use Rights Grant Contract and other relevant legal
            documents. The Company's land use rights of the Site and its
            ownership of the buildings and structures on the Site are evidenced
            by several Land Use Rights Certificates and Real Estate Certificates
            or equivalent documents issued by the relevant Chinese government
            authorities in the name of the Company.

11.02 Environmental Matters

      (a)   The Company shall strictly comply with all applicable environmental
            laws and regulations of the PRC in its operation activities.

      (b)   Each of the Parties and the Company shall have the right to have the
            Site tested in accordance with ON's "Due Diligence Environmental
            Policy" and the Site must pass such test.

      (c)   The Company will participate in and cooperate with ON's audit
            program, in which facilities are inspected on a periodic basis for
            compliance with environmental, safety, and health laws and
            regulations. Any such audit is subject to prior notice from Party C
            and shall be coordinated and scheduled by the Company and Party C.
            The Company must provide responses to any audit recommendations and
            complete corrective action.

                 ARTICLE 12 - MATERIALS, EQUIPMENT AND SERVICES

12.01 Sources of Supply

      (a)   The Company shall have the right to import materials and equipment
            not available in China in the qualities and quantities deemed
            necessary by the General Manager, except that items requiring import
            licenses shall be handled in accordance with the relevant import
            licensing regulations of China.

      (b)   Unless otherwise required by Chinese legal regulations, the Company
            shall have the right to appoint foreign architects, consultants,
            engineers and


                                       19                 JOINT VENTURE CONTRACT

            contractors to undertake relevant work when, in the opinion of the
            General Manager, there are no Chinese units or individuals qualified
            or available to undertake such work.

12.02 Party A Services

      Party A shall provide to the Company certain services and facilities
      required for the Company's operation, pursuant to the terms and conditions
      of the Services Contract.

12.03 Machinery and Equipment

      The Company may purchase from Party C or its Affiliates machinery and
      equipment. The purchase price will be agreed upon by the Board.

                         ARTICLE 13 - LABOR MANAGEMENT

13.01 Governing Principle

      Matters relating to the recruitment, employment, dismissal, resignation,
      wages and welfare of the staff and workers of the Company shall be handled
      in accordance with the Labor Law of the People's Republic of China (the
      "Labor Law") and related legislation. The Company shall have autonomy in
      determining its employment policies and related matters in accordance with
      Chinese legal regulations applicable to foreign invested enterprises. The
      Company shall seek to deal directly with its employees, without any
      external intermediary parties, and will cause the adoption of such
      personnel policies and practices as appropriate in order to reasonably
      achieve such results. The Company shall establish personnel practices that
      fairly reward employees for services rendered in a manner consistent with
      common business practices in their location of employment.

13.02 Working Personnel

      Working Personnel shall be employed by the Company in accordance with the
      terms of individual employment contracts entered into between the Company
      and individual Working Personnel or relevant agreements entered into
      between the Company and Party A. The standard individual employment
      contract shall be filed with the local labor department.

13.03 Management Personnel

      Management Personnel shall be employed by the Company in accordance with
      the terms of individual employment contracts or the terms of relevant
      agreements between the Company and Party A. Expatriate personnel
      (including those from the regions of Hong Kong, Macau and Taiwan) shall
      receive a salary and benefits commensurate with those provided to
      expatriate personnel employed by other foreign investment enterprises of a
      similar nature in China.

13.04 Conformity with Labor Protection


                                       20                 JOINT VENTURE CONTRACT

      The Company shall conform to rules and regulations of the Chinese
      government concerning labor protection and ensure safe and civilized
      production. Labor insurance for the Working Personnel of the Company shall
      be handled in accordance with individual employment contracts and the
      relevant regulations of the Chinese government.

13.05 Number of Employees

      The qualifications and number of employees shall be determined in
      accordance with the operating needs of the Company. The Company shall
      refer to the guidelines provided by Party C as to staffing experience in
      similar types of facilities in other countries.

13.06 Employee Examination and Recruitment

      (a)   The Company shall observe the Labor Law, labor regulations and other
            relevant regulations and the Company shall have autonomy in
            determining its employment policies and relevant matters.

      (b)   Employees will be selected from candidates for employment according
            to their professional qualifications and work experience. Each
            Working Personnel may be examined and interviewed by the General
            Manager or his designated representative prior to commencement of
            employment by the Company. The General Manager shall have the
            absolute right to decide, on behalf of the Company, whether to
            employ any such person. All candidates hired by the Company must
            complete satisfactorily a probationary period of employment before
            they will be officially considered permanent employees of the
            Company.

                 ARTICLE 14 - FINANCIAL AFFAIRS AND ACCOUNTING

14.01 Accounting System

      (a)   The Financial Controller of the Company, under the leadership of the
            General Manager, shall be responsible for the financial management
            of the Company.

      (b)   The General Manager and the Financial Controller shall prepare the
            accounting system and procedures in accordance with the relevant
            regulations. The accounting system and procedures to be adopted by
            the Company shall be submitted to the Board for approval. Once
            approved by the Board, the accounting system and procedures shall be
            filed with the department in charge of the Company and with the
            relevant local department of finance and the tax authorities for the
            record. The accounting system and procedures approved by the Board
            shall to the maximum extent possible comport with the accounting
            requirements of Party C.

      (c)   The Company shall adopt Renminbi as its bookkeeping base currency,
            but may also adopt the United States Dollar as a supplementary
            bookkeeping currency.


                                       21                 JOINT VENTURE CONTRACT

      (d)   All accounting records, vouchers, books and statements of the
            Company shall be made and kept in Chinese. All accounting statements
            of the Company shall also be made and kept in English.

      (e)   For the purposes of preparing the Company's accounts and statements,
            calculating declared dividends to be distributed to the Parties, and
            for any other purposes where it may be necessary to effect a
            currency conversion, such conversion shall be in accordance with the
            median rate for buying and selling announced by the People's Bank of
            China, or other rate recognized by the Chinese government, on the
            date of actual receipt or payment.

14.02 Financial Reports

      (a)   The Company shall furnish to the Parties financial reports (in
            Chinese and English) on at least a monthly basis so that they may
            continuously be informed about the Company's performance.

      (b)   The Company shall submit to the Parties an annual financial report
            (which shall include an audited profit and loss statement and
            balance sheet for the fiscal year) within one (1) month after the
            end of the fiscal year, together with an audit report from the
            Company's auditor.

14.03 Audits

      (a)   An independent accountant registered in China shall be engaged as
            the Company's auditor to examine and verify the annual financial
            report, investment certificates to be issued to the Parties,
            financial reports on the liquidation of the Company and other
            financial documents as required by the Board.

      (b)   Each of the parties shall have the right to inspect, audit, and
            copy, from time to time, the books and other financial records and
            documents of the Company at its own expense. The Party wishing to
            exercise its right to audit shall be free to use its own internal
            auditors to perform said audit, if it so chooses. Said internal
            auditors shall also have the right to audit the Company's system of
            internal control and the Company's compliance with the Code of
            Conduct approved by the Company. The audit of these systems may
            result in recommendations to management. Management shall be
            required to provide responses to the recommendations and complete
            corrective action. Audit reports, consisting of an introduction,
            conclusion, recommendations, and responses will be issued to the
            Company and the Parties.

      (c)   Each Party may, at its own expense, appoint an accountant (which may
            be either an accountant registered abroad or registered in China) to
            audit the accounts of the Company on behalf of such Party.
            Reasonable access to the Company's financial records shall be given
            to such auditor and such auditor shall keep confidential all
            documents examined while conducting audits.

14.04 Bank Accounts and Foreign Exchange Control


                                       22                 JOINT VENTURE CONTRACT

      (a)   The Company shall open foreign exchange and Renminbi bank accounts
            at authorized banks in China and may also open foreign exchange
            account(s) outside China with the approval of SAFE for the
            furtherance of its business purposes.

      (b)   The Company's foreign exchange transactions shall be handled in
            accordance with relevant Chinese regulations relating to foreign
            exchange control.

14.05 Foreign Exchange Balance

      (a)   The Company shall be responsible to maintain a balance in its
            foreign exchange receipts and expenditures through the sale of its
            products and services and through other methods permitted under the
            laws of China.

      (b)   If there is a foreign exchange deficiency, the Board will consider
            various plans and alternatives to balance foreign exchange receipts
            and expenditures, which, subject to obtaining the relevant
            government approvals, may include all means permitted under the
            relevant regulations, including but not limited to export of
            domestically produced products and, when permitted by law, borrowing
            from foreign exchange banks.

      (c)   All costs incurred in converting Renminbi to foreign exchange
            required for the Company's operations shall be treated as operating
            expenses of the Company.

      (d)   Liquid funds in the Company's foreign exchange account shall be used
            in the following order of priority:

            (i)         payments of principal and interest on foreign exchange
                        loans taken out by the Company from Third Parties;

            (ii)        payment for imported materials and equipment;

            (iii)       payment for imported services;

            (iv)        payments due under the Technology License Contract;

            (v)         payment of the Company's expatriate staff salaries;

            (vi)        payment of principal and interest on foreign exchange
                        loans and advances provided by the Parties or
                        Affiliates;

            (vii)       maintenance of foreign currency reserves determined by
                        the Board of Directors;

            (viii)      remittance of profits to Party B and Party C; and

            (ix)        payment of profits to Party A.

      (e)   Upon government approval, the Company may source components and
            equipment from local suppliers for the Parties' Affiliates inside
            and outside China.


                                       23                 JOINT VENTURE CONTRACT

14.06 Fiscal Year

      The Company shall adopt the calendar year as its fiscal year, which shall
      begin on January 1 and end on December 31 of the same year, except that
      the first fiscal year of the Company shall commence on the date that the
      Company is granted its Business License and shall end on the immediately
      succeeding December 31.

14.07 Profits Distribution

      (a)   After the payment of income tax by the Company, the Board will
            determine the annual allocations from after-tax net profits to the
            reserve fund and expansion fund of the Company and the bonus and
            welfare fund for the workers and staff members. The sum of the
            annual allocations to the three funds shall be determined by the
            Board.

      (b)   The Board shall once every year by a formally adopted resolution
            decide the amount of after-tax net profit of the Company (after the
            deduction of the allocations to the three funds mentioned in
            paragraph (a) above) to be retained in the Company for expanding the
            production and operation of the Company and the amount to be
            distributed to the Parties in proportion to their respective shares
            in the registered capital.

      (c)   If the Company carries losses from previous years, the after-tax net
            profits of the current year shall first be used to cover the losses
            after deductions for the three funds mentioned in 14.07(a). No
            profit shall be distributed unless the deficit from the previous
            years is made up. Profits retained by the Company and carried over
            from the previous years may be distributed together with the
            distributable profits of the current year, or after the deficit of
            the current year is made up therefrom.

      (d)   When the Company has foreign currency available for profit
            distribution, Party B and Party C will have a priority right to
            receive their respective shares of the distributable profit in
            foreign exchange.

                      ARTICLE 15 - TAXATION AND INSURANCE

15.01 Income Tax, Customs Duties and Other Taxes

      (a)   The Company shall pay tax under the relevant tax laws of China,
            subject to any further tax holidays, waivers, exemptions, or
            exclusions granted to the Company from time to time by any local,
            regional or national tax authorities.

      (b)   No later than six (6) months before the expiration of the
            preferential income tax treatment currently enjoyed by the Company,
            the Company may submit an application for confirmation of the
            Company's status as a Technologically Advanced Enterprise and
            Export-oriented Enterprise in accordance with the Implementing
            Measures of the Ministry of Foreign Trade and Economic Cooperation
            on the Confirmation and Examination of Export-Oriented and
            Technologically Advanced Enterprises with Foreign Investment and
            other relevant regulations. Upon receiving such confirmation, the
            Company shall be


                                       24                 JOINT VENTURE CONTRACT

            entitled to all preferential tax treatment granted to such
            enterprise under PRC law.

      (c)   The Chinese and expatriate employees of the Company shall pay tax on
            their individual incomes in accordance with the relevant provisions
            of the tax laws of China.

15.02 Insurance

      (a)   The Company shall, at its own cost and expense, at all times take
            out and maintain full and adequate insurance for the Company against
            loss or damage by fire and such other risks as are customarily
            insured against.

      (b)   The property, transportation and other items of insurance of the
            Company will be denominated in Chinese and foreign currencies, as
            appropriate. The types and amounts of insurance coverage shall be
            determined by the General Manager.

      (c)   The Company shall take out the required insurance from the People's
            Insurance Company of China or any other insurance company authorized
            to do business in China.

                          ARTICLE 16 - CONFIDENTIALITY

16.01 Confidentiality

      (a)   Prior to and during the term of this Contract, each Party has
            disclosed or may disclose confidential and proprietary information
            to the other Parties. In addition, the Parties may, during the term
            of this Contract, obtain confidential and proprietary information of
            the Company in connection with the operation of the Company. Each of
            the Parties receiving such information shall, during the term of
            this Contract and for three (3) years thereafter:

            (i)         maintain the confidentiality of such information; and

            (ii)        not disclose it to any person or entity, except to their
                        employees who need to know such information to perform
                        their responsibilities.

      (b)   The provisions of paragraph (a) above shall not apply to information
            that:

            (i)         can be shown to be known by the receiving Party by
                        written records made prior to disclosure by the
                        disclosing Party;

            (ii)        is or becomes public knowledge otherwise than through
                        the receiving Party's breach of this Contract; or

            (iii)       was obtained by the receiving Party from a Third Party
                        having no obligation of confidentiality with respect to
                        such information.

      (c)   If required by Party B or Party C, the Company shall execute a
            separate confidentiality agreement with provisions similar to those
            in paragraphs (a), (b) and (c) above with respect to confidential
            and proprietary information


                                       25                 JOINT VENTURE CONTRACT

            obtained by the Company from Party B or Party C, as the case may be,
            or their respective Affiliates.

      (d)   Each of the Parties and the Company shall formulate rules and
            regulations to cause its directors, senior staff, and other
            employees, and those of their Affiliates also to comply with the
            confidentiality obligation set forth in this Article 16.

      (e)   The technology and any other technical information licensed or
            provided in any way by Party B, Party C or their Affiliates to the
            Company or otherwise acquired or developed by the Company shall be
            used by the Company only in the Plant for the production of Joint
            Venture Products.

      (f)   The Company shall be liable for damages accrued to any Party as a
            result of a breach of any provision of this Article 16 by the
            Company, which damages shall be determined in accordance with the
            relevant provisions of the contract law of China. The payment of
            damages by the Company to any Party shall be without prejudice to
            any right or rights of action or other remedies accrued to such
            Party at the date of such breach.

      (g)   This Article 16 and the obligations and benefits hereunder shall
            survive for three (3) years after the expiration or termination of
            this Contract, notwithstanding the termination, dissolution or
            liquidation of the Company.

      (h)   Notwithstanding the foregoing provisions of this Article 16, each of
            the Parties shall be permitted to make any disclosure required by
            applicable law.

                        ARTICLE 17 - JOINT VENTURE TERM

17.01 Joint Venture Term

      The Joint Venture Term established under this Contract shall be fifty (50)
      years, commencing on March 28, 1995.

17.02 Extension of the Joint Venture Term

      If the Board unanimously approves the extension of the Joint Venture Term,
      the Company shall apply to the Examination and Approval Authority for
      approval no less than six (6) months prior to the expiration of the Joint
      Venture Term. The Joint Venture Term may be extended only upon approval by
      the Examination and Approval Authority.

                    ARTICLE 18 - TERMINATION AND LIQUIDATION

18.01 Termination

      (a)   This Contract shall terminate upon the expiration of the Joint
            Venture Term set forth in Article 17.01 hereof unless extended
            pursuant to Article 17.02 hereof.


                                       26                 JOINT VENTURE CONTRACT

      (b)   This Contract may be terminated at any time by the written agreement
            of the Parties and after obtaining approval from the relevant
            Chinese government authorities.

      (c)   This Contract may be terminated by the written notice of a Party to
            the other Parties of an intention to terminate this Contract,
            followed by a vote of the Board to terminate this Contract pursuant
            to the procedure set forth in paragraph (d) below and after
            obtaining approval from the relevant Chinese government authorities,
            if:

            (i)         any other Party materially breaches this Contract
                        (except for a breach involving capital contributions per
                        5.04(b)) or violates the Articles of Association causing
                        the Company's inability to continue operating or
                        otherwise undermining the desired objectives of the
                        Parties, and such breach or violation is not cured
                        within three (3) months of written notice to the
                        breaching Party;

            (ii)        the Technology License Contract or any other technology
                        contract or the Land Use Rights Contract is materially
                        breached by the Company;

            (iii)       the Services Contract is materially breached by Party A
                        causing the Company's inability to continue operating or
                        otherwise undermining the desired objectives of the
                        Parties, (in these cases only Party B and Party C may
                        terminate this Contract) or the Services Contract is
                        materially breached by the Company causing the Company's
                        inability to continue operating or otherwise undermining
                        the desired objectives of the Parties, (in these cases
                        only Party A may terminate this Contract);

            (iv)        the Technology License Contract is materially breached
                        by the licensor thereunder (in this case only the
                        Parties which are not the licensor or Affiliates of such
                        licensor may terminate this Contract);

            (v)         the Company or any Party becomes bankrupt, is the
                        subject of proceedings for liquidation or dissolution,
                        ceases to carry on business or becomes unable to pay its
                        debts as they become due;

            (vi)        the Company qualifies but is unable to secure or retain
                        the appropriate certificate from the Examination and
                        Approval Authorities granting the Company status as a
                        Technologically Advanced Enterprise in an economic
                        development area or as a Technologically Intensive or
                        Knowledge Intensive Manufacturing Foreign Investment
                        Enterprise and qualifying the Company for the 15%
                        regular tax rate;

            (vii)       the Company is not allowed to import raw materials and
                        equipment which it deems necessary to carry out its
                        operations.

            (viii)      under the requirements specified in the relevant Chinese
                        legal regulations, the Company is qualified but unable
                        to obtain or retain duty and tax exemption on imported
                        production equipment, spare parts, production tools,
                        construction and production materials, and other


                                       27                 JOINT VENTURE CONTRACT

                        necessary goods and "bonded" treatment on the imported
                        raw materials for the Company's normal production use or
                        is unable to obtain or retain approval of bonded
                        factory, bonded manufacturing area, or bonded warehouse
                        status when the import/export volume of the Company
                        meets the requirements specified in the relevant Chinese
                        regulations.

            (ix)        any other Party has failed to provide its contribution
                        to the registered capital of the Company on or before
                        the expiration of the time period stipulated in Article
                        5.04(b) or 5.08 hereof;

            (x)         any other Party transfers its share of the registered
                        capital in the Company in violation of the provisions of
                        this Contract;

            (xi)        the conditions or consequences of Force Majeure (as
                        hereinafter defined in Article 20) significantly
                        interfere with the normal functioning of the Company for
                        a period in excess of six (6) months causing the
                        Company's inability to continue operating or otherwise
                        undermines the desired objectives of the Parties, and
                        the Parties have been unable to find an equitable
                        solution pursuant to Article 21 hereof;

            (xii)       if the Board determines that the Company is unable
                        obtain its desired objectives such as quantity, quality,
                        cost, rate of production, supply of regional market
                        preferences or requirements, delivery needs or any other
                        objective;

            (xiii)      if market conditions change such that the Board
                        determines that the Company may no longer sell Joint
                        Venture Products on a competitive basis;

            (xiv)       the Parties cannot implement the economic adjustment set
                        forth in Article 22.02.

      (d)   In the event that any Party gives notice pursuant to Article
            18.01(c) hereof of a desire to terminate this Contract, the Parties
            shall within a two (2)-month period after such notice is given
            conduct negotiations and endeavor to resolve the situation which
            resulted in the giving of such notice. In the event matters are not
            resolved to the satisfaction of all the Parties within two (2)
            months of such notice or any non-notifying Party definitely refuses
            to commence negotiations within the period stated above, each Party
            shall cause its appointed directors to vote to terminate this
            Contract, and the Board shall submit a termination application to
            the Examination and Approval Authority for approval.

      (e)   For purposes of this Article 18, the "date of termination" shall be
            (i) the date of expiration of the Joint Venture Term, if the
            termination is effected pursuant to paragraph (a) above; (ii) the
            date of the written agreement of the Parties, if the termination is
            effected pursuant to paragraph (b) above; or (iii) the date that the
            Board votes to terminate this Contract, if the termination is
            effected pursuant to paragraph (c) above.


                                       28                 JOINT VENTURE CONTRACT

18.02 Buy-out Options

      (a)   In the event that any Party gives notice pursuant to Article
            18.01(c) hereof of a desire to terminate this Contract, the other
            Parties (except for the Party in breach or is bankrupt or insolvent)
            shall have the right to purchase the equity interest of such Party
            in proportion to their respective interests in the registered
            capital. A Party that wishes to exercise such buy-out option shall
            notify the other Parties in writing of its decision no later than
            thirty (30) days after the end of the two-month negotiation period
            referred to in Article 18.01(d).

      (b)   In the event that this Contract is terminated pursuant to Article
            18.01(a) or 18.01(b) hereof, any Party shall have the option to
            purchase the equity interest of the other Parties. A Party that
            wishes to exercise such buy-out option shall notify the other
            Parties in writing of its decision no later than thirty (30) days
            after the date of termination.

      (c)   Absent any buy-out notice, the Parties shall liquidate the Company
            in accordance with applicable law and Article 18.03 hereof.

      (d)   In the event a buy-out option is exercised, the Parties shall within
            two (2) weeks of receipt of the buy-out notice jointly appoint one
            Sino-foreign joint venture accounting or appraisal firm qualified in
            China to value the Company. All costs and expenses of such
            accounting or appraisal firm shall be borne equally by Party A,
            Party B and Party C.

      (e)   The valuation of the Company as provided in paragraph (d) above
            shall be completed within four (4) weeks and shall be based on the
            assumption that (i) the Company shall continue as a going concern
            and (ii) subject to the terms and conditions of and to the extent
            permitted by the relevant agreements, the Company shall enjoy the
            right to use the Site and the Plant and the right to use the
            technology and know-how provided to the Company by each of the
            Parties.

      (f)   The purchase price shall be equal to an amount determined by
            multiplying the value of the Company by the percentage of registered
            capital then held by the selling Party.

      (g)   The purchase price shall be paid to the selling Party within sixty
            (60) days after the later to occur of (i) the determination of such
            purchase price and (ii) the receipt of any governmental approvals in
            respect of the relevant purchase then required under applicable law.
            If Party B or Party C is the selling Party, the purchase price shall
            be paid in United States Dollars.

      (h)   Upon a buy-out pursuant to this Article 18.02, each Party agrees to
            take (and to cause the Company and the Board to take) whatever
            action may be necessary to consummate such buy-out, including but
            not limited to (i) obtaining the approval of the Examination and
            Approval Authority and all other necessary approvals, (ii) in the
            case of a buy-out of Party A, taking all actions required to convert
            the Company into a wholly foreign-owned enterprise, and (iii)
            causing the Business License and registration records of the Company
            to be changed or canceled with SAIC.


                                       29                 JOINT VENTURE CONTRACT

18.03 Liquidation

      (a)   If the Parties are required to liquidate the Company pursuant to
            Article 18.02(c) hereof, or if the Parties otherwise agree that the
            Company shall no longer operate as a going concern, then the Board
            shall, within a period of thirty (30) days, appoint a liquidation
            committee which shall have the power to represent the Company in all
            legal matters. The liquidation committee shall value and liquidate
            the Company's assets in accordance with the Foreign Investment
            Enterprises Liquidation Procedures and other applicable Chinese law
            and regulations and the principles set out herein.

      (b)   The liquidation committee shall consist of seven (7) members, of
            which two (2) members shall be nominated by Party A, one (1) member
            shall be nominated by Party B, and four (4) members including the
            chairman of the liquidation committee shall be nominated by Party C.
            Members of the liquidation committee may, but need not be, Board
            directors or senior employees of the Company. When permitted by
            Chinese law or regulations, each Party may also appoint professional
            advisors to be members of or to assist the liquidation committee.
            The Board shall report the formation of the liquidation committee to
            the department in charge of the Company. In principle, the
            liquidation committee shall resolve all issues by consensus. In the
            event that consensus cannot be reached, matters shall be decided by
            a majority vote of all members of the liquidation committee.

      (c)   The liquidation committee shall conduct a thorough examination of
            the Company's assets and liabilities, on the basis of which it
            shall, in accordance with the relevant provisions of this Contract,
            develop a liquidation plan which, if approved by the Board, shall be
            executed under the liquidation committee's supervision. The
            liquidation plan shall provide that the Parties will have the right
            to purchase any of the machinery and equipment and other facilities
            on a priority basis. In the event that two or more Parties offer the
            same terms and conditions for such purchases, competitive bidding
            shall take place. If the Company is liquidated, ON shall have the
            right to terminate the Technology License Contract and Party A shall
            have the right to terminate the Services Contract so that these
            contracts shall not be deemed to be assets of the Company.

      (d)   In developing and executing the liquidation plan, the liquidation
            committee shall use every effort to obtain the highest possible
            price in United States Dollars for the Company's assets.

      (e)   The liquidation expenses, including remuneration to members and
            advisors to the liquidation committee, shall be paid out of the
            Company's assets in priority to the claims of other creditors.

      (f)   After the liquidation of the Company's assets and the settlement of
            all of its outstanding debts, the balance shall be divided and paid
            over to Party A, Party B and Party C in proportion to their
            respective shares of the registered capital of the Company.


                                       30                 JOINT VENTURE CONTRACT

      (g)   On completion of all liquidation procedures, the liquidation
            committee shall submit a final report approved by an independent
            accountant registered abroad or in China to the Examination and
            Approval Authority, hand in the Business License to the original
            registration authority and complete all other formalities for
            canceling the Company's registration. Each of Party B and Party C
            shall have the right to obtain copies of all of the Company's
            accounting books and other documents at its own expense, but the
            originals thereof shall be left in the care of Party A.

      (h)   Party A hereby agrees Party B and Party C shall have priority in
            obtaining the foreign currency portion of the balance to be
            distributed under paragraph (f) above.

18.04 Continuing Obligations

      The obligations and benefits stipulated in the confidentiality provisions
      of Article 16, in the provisions on settlement of disputes of Article 21
      and in the provisions on termination and liquidation of this Article 18
      shall survive the termination of this Contract with approval from the
      relevant authorities of the PRC government and the termination,
      dissolution or liquidation of the Company.

                        ARTICLE 19 - BREACH OF CONTRACT

19.01 Liability for Breach of Contract

      In the event that a breach of contract committed by a Party to this
      Contract results in the non-performance of or inability to fully perform
      this Contract or its Appendices, the liabilities arising from the breach
      of contract shall be borne by the Party in breach as provided in this
      Contract and its Appendices. In the event that a breach of contract is
      committed by more than one Party, each such Party shall bear its
      individual share of the liabilities arising from the breach of contract.

19.02 Limitations on Liability

      Notwithstanding the foregoing, and except for any liability arising under
      Article 11 hereof, the aggregate liability of each Party under this
      Contract shall not exceed such Party's investment in the registered
      capital of the Company.

                           ARTICLE 20 - FORCE MAJEURE

20.01 Definition of Force Majeure

      "Force Majeure" shall mean any event which is beyond the control of the
      affected Party, and which is unforeseen, unavoidable or insurmountable,
      and which arises after the Effective Date and which prevent total or
      partial performance by such Party. Such events shall include earthquakes,
      typhoons, flood, fire, war, failures of international or domestic
      transportation, acts of government or public agencies, epidemics, civil
      disturbances, strikes or any other events which cannot be foreseen,
      prevented or controlled, including events which are accepted as Force
      Majeure in general international commercial practice.

20.02 Consequences of Force Majeure


                                       31                 JOINT VENTURE CONTRACT

      (a)   If an event of Force Majeure occurs, a Party's contractual
            obligations affected by such an event under this Contract shall be
            suspended during the period of delay caused by the Force Majeure.

      (b)   The Party claiming Force Majeure shall promptly inform the other
            Parties in writing and shall furnish the other Parties within
            fifteen (15) days thereafter sufficient proof of the occurrence and
            duration of such Force Majeure. The Party claiming Force Majeure
            shall also use all reasonable endeavors to eliminate or mitigate the
            effects of such Force Majeure.

      (c)   In the event of Force Majeure, the Parties shall immediately consult
            with each other in order to find an equitable solution and shall use
            all reasonable endeavours to minimize the consequences of such Force
            Majeure.

                      ARTICLE 21 - SETTLEMENT OF DISPUTES

21.01 Friendly Consultations

      In the event any dispute arises between the Parties out of or in relation
      to this Contract, including any dispute regarding its breach, termination
      or validity, the Parties shall attempt in the first instance to resolve
      such dispute through friendly consultations.

21.02 Joint Conciliation

      If the dispute has not been resolved by friendly consultations within
      sixty (60) days after one Party has served written notice on the other
      Party or Parties requesting the commencement of such consultations, then
      the Parties shall attempt to reach a settlement through conciliation
      conducted in Beijing in accordance with the Conciliation Rules of the
      Beijing Conciliation Center of the China International Economic and Trade
      Arbitration Commission. If the dispute is resolved through conciliation,
      the Parties agree to enter into a written settlement contract.

21.03 Arbitration

      If the dispute is not resolved pursuant to Article 21.02 within sixty (60)
      days after conciliation proceedings have commenced, or if a Party fails to
      comply with any settlement reached by conciliation conducted pursuant to
      Article 21.02 within sixty (60) days after a settlement is reached, then

      (a)   any Party involved may submit the dispute for arbitration in
            Stockholm at the Arbitration Institute of the Stockholm Chamber of
            Commerce in accordance with the Arbitration Rules of that Institute
            with instructions that the arbitration be conducted in English and
            that the arbitrators may refer to both the English and Chinese texts
            of this Joint Venture Contract;

      (b)   there shall be three (3) arbitrators all of whom shall be fluent in
            English and Mandarin. Party A shall select one (1) arbitrator, and
            Party B and Party C shall select one (1) arbitrator. The third
            arbitrator shall be appointed by agreement between the arbitrators
            selected by Party A, Party B and Party C, and such third arbitrator
            shall serve as chairman of the panel;


                                       32                 JOINT VENTURE CONTRACT

      (c)   the arbitration award shall be final and binding on the Parties and
            shall be enforced in accordance with its terms;

      (d)   the arbitration fee shall be borne by the losing party.

      (e)   each Party may require the other Parties to enter into a written
            contract which sets forth the terms of the arbitration award.

21.04 Continuous Performance of Joint Venture Contract

      In the course of the arbitration, this Contract shall be continuously
      performed in accordance with its terms and the Articles of Association
      except for the part which is under, or which is directly and substantially
      affected by, the arbitration.

21.05 Enforceability of Award

      Any award of the arbitrators shall be enforceable by any court having
      jurisdiction over the Party against which the award has been rendered, or
      wherever assets of the Party against which the award has been rendered can
      be located, and such award shall be enforceable in accordance with the
      "United Nations Convention on the Recognition and Enforcement of Foreign
      Arbitral Awards (1958)" (except where reservations are made by the
      People's Republic of China).

21.06 Jurisdiction of Chinese Courts

      Any dispute arising under this Contract shall be settled in accordance
      with this Article 21, except that either party may apply to the courts of
      China to enforce an arbitration award rendered or contract executed in
      accordance with this Article.

                          ARTICLE 22 - APPLICABLE LAW

22.01 Applicable Law

      The formation, validity, interpretation and implementation of this
      Contract shall be governed by the laws of the People's Republic of China
      which are published and publicly available, but in the event that there is
      no published and publicly available law in China governing a particular
      matter relating to this Contract, reference shall be made to general
      international commercial practices.

22.02 Economic Adjustment

      If any Party's or the Company's economic benefits are adversely and
      materially affected by the promulgation of any new laws, rules or
      regulations of China or the amendment or interpretation of any existing
      laws, rules or regulations of China after the signature date of this
      Contract, or if the Company subsequently fails to continue to qualify for
      preferential treatment, the Parties shall promptly consult with each other
      and use their best endeavors to implement any adjustments necessary to
      maintain each Party's and the Company's economic benefits derived from
      this Contract on a basis no less favorable than the economic benefits it
      would have derived if such laws, rules or regulations had not been
      promulgated, amended or so interpreted. If the economic benefits approved
      by the Parties following consultations cannot be obtained after such
      adjustments are implemented, a Party may terminate this Contract under
      Article 18.


                                       33                 JOINT VENTURE CONTRACT

22.03 Preferential Treatment

      The Company and the Parties shall be entitled according to the law to any
      tax, investment or other benefits or preferences that become available or
      publicly known after the signing of this Contract and which are more
      favorable than those set forth in this Contract.

22.04 Continuity of Contract

      The Parties agree that in the event of the promulgation of any new laws,
      rules or regulations of China, this Contract shall continue to be
      performed in accordance with its terms to the largest extent permitted
      under PRC law.

                     ARTICLE 23 - MISCELLANEOUS PROVISIONS

23.01 Non-Competition

      Because the Company will be manufacturing components with commodity
      characteristics, the Parties agree that Party A or Party C shall not,
      directly or indirectly, through any other joint venture, manufacture in
      China the Joint Venture Products including the New Products listed in
      Appendix A that are being manufactured and to be manufactured by the
      Company, unless the Company cannot meet demand for such products (whether
      due to demands of quantity, quality, cost, rate of production, regional
      market preferences or requirements, delivery needs or any other reason).

      In order to strengthen their relationship with Party A, Party C and their
      Affiliates have no present intention of producing the products in Appendix
      A in China other than through the Company unless the Company cannot meet
      demand for such products.

      In order to strengthen its relationship with Party C, Party A is willing
      to give Party C first right of refusal for Party A's future semi-conductor
      projects. Party A shall give written notice to Party C describing such
      project. Party C shall have sixty (60) days to either agree to participate
      therein or to decline to participate and Party C shall be deemed to have
      declined if it fails to respond in such time. If Party C declines to
      participate, Party A may conduct such activities on its own or with other
      parties on the terms described to Party C.

23.02 Waiver

      To the extent permitted by Chinese law or regulations, failure or delay on
      the part of any Party hereto to exercise a right, power or privilege under
      this Contract and the Appendices hereto shall not operate as a waiver
      thereof; nor shall any single or partial exercise of a right, power or
      privilege preclude any other future exercise thereof.

23.03 Assignability

      This Contract may not be assigned in whole or in part by any Party without
      the prior written consent of each of the other Parties hereto and the
      approval of the Examination and Approval Authority.

23.04 Binding Effect


                                       34                 JOINT VENTURE CONTRACT

      This Contract is made for the benefit of each of the Parties and their
      respective lawful successors and assignees and is legally binding on them.
      This Contract may not be changed orally, but only by a written instrument
      signed by each of the Parties and approved by the Examination and Approval
      Authority.

23.05 Severability

      Subject to the provisions of Article 22.02 hereof, the invalidity of any
      provision of this Contract shall not affect the validity of any other
      provision of this Contract.

23.06 Language

      This Contract is executed in the Chinese language in five (5) originals
      and in the English language in five (5) originals. Both language versions
      shall be equally authentic.

23.07 Entire Agreement

      This Contract and the Appendices hereto constitute the entire agreement
      among Party A, Party B and Party C with respect to the subject matter of
      this Contract and supersede all prior discussions, negotiations and
      agreements among them. In the event of any conflict between the terms and
      provisions of this Contract, the Articles of Association and the
      Feasibility Study, the terms and provisions of this Contract shall
      prevail.

23.08 Notices

      Any notice or written communication provided for in this Contract by one
      Party to the other Parties, including but not limited to any and all
      offers, writings, or notices to be given hereunder, shall be made in
      English or Chinese by facsimile, or by courier service delivered letter,
      promptly transmitted or addressed to the appropriate Party. The date of
      receipt of a notice or communication hereunder shall be deemed to be
      fifteen (15) days after the letter is given to the courier service in the
      case of a courier service delivered letter and one (1) working day after
      dispatch of a facsimile if evidenced by a transmission report. All notices
      and communications shall be sent to the appropriate address set forth
      below, until the same is changed by notice given in writing to the other
      Parties.

      PARTY A:
      Leshan Radio Company, Ltd.
      27 West People's Road
      Leshan, Sichuan Province 614000
      People's Republic of China
      Attention:  Chairman
      Facsimile No:  86-833-213-2060

      PARTY B:
      Motorola (China) Investment Limited
      No. 108 Jian Guo Road
      Chao Yang District


                                       35                 JOINT VENTURE CONTRACT

      Beijing 100022
      People's Republic of China
      Attention:  Corporate Law Department
      Facsimile No:  86-10-6566-8449

      PARTY C:
      SCG (China) Holding Corporation
      5005 East McDowell Road
      Phoenix, Arizona 85008
      U.S.A.
      Attention: General Counsel
      Facsimile No:  1-602-244-5500


      The sending Party shall send confirmation to the other Parties by
      telephone or facsimile at an appropriate time.

23.09 Appendices

      The Appendices hereto listed below are made an integral part of this
      Contract and are equally binding with these Articles 1 through 23.

      List of Joint Venture Products                                (Appendix A)
      Schedule of Capital Contributions                             (Appendix B)

23.10 Effectiveness

      This Contract shall become effective on the Effective Date.


                                       36                 JOINT VENTURE CONTRACT

IN WITNESS WHEREOF, each of the Parties hereto have caused this Contract to be
executed by their duly authorized representatives on the date first set forth
above.


LESHAN RADIO COMPANY, LTD.


By:    /s/ Pan Min-zhi
      --------------------------
Name:  Pan Min-Zhi
Title: Chairman of the Board


MOTOROLA (CHINA) INVESTMENT LIMITED


By:    /s/ Larry Cheng
      --------------------------
Name:  Larry Cheng
Title: Authorized Representative


SCG (CHINA) HOLDING CORPORATION


By:    /s/ Steve Hanson
      --------------------------
Name:  Steve Hanson
Title: President



                                       37                 JOINT VENTURE CONTRACT

                                   APPENDIX A

                         LIST OF JOINT VENTURE PRODUCTS


Assembly Test Products

SOT23, SC59, SC88, SC75, SC89, SC70, SOD323, SOIC, SOD523, SOD723 and other
miniature surface mount semiconductor packages.


Wafer Fab Products
IC and Discrete wafers


                                       A

                                   APPENDIX B

                       SCHEDULE OF CAPITAL CONTRIBUTIONS


The total amount of the registered capital of the Company is US$101.86 million.
As of the date hereof, the Parties have paid in US$52,039,207. The specific
timing and amounts for each future installment payment by each Party shall be
determined by the decision of the Board of the Company.


                                       B


                                                                      EXHIBIT 99

                                  CERTIFICATION


            PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
        (SUBSECTIONS (a) AND (b) OF SECTION 1350, CHAPTER 63 OF TITLE 18,
                               UNITED STATES CODE)

      Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a)
and (b) of section 1350, chapter 63 of title 18, United States Code), each of
the undersigned officers of ON Semiconductor Corporation, a Delaware corporation
(the "Company"), does hereby certify, to such officer's knowledge, that:

      The Quarterly Report on Form 10-Q for the quarter ended June 28, 2002 (the
"Form 10-Q") of the Company fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained
in the Form 10-Q fairly presents, in all material respects, the financial
condition and results of operations of the Company.



Dated: August 9, 2002                      /S/ STEVEN P. HANSON
                                           --------------------
                                           Steven P. Hanson
                                           President and Chief Executive Officer



Dated: August 9, 2002                      /S/ JOHN T. KURTZWEIL
                                           ---------------------
                                           John T. Kurtzweil
                                           Senior Vice President and
                                           Chief Financial Officer