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SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2000

OR

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

For the transition period from                to                

000-30419

ON SEMICONDUCTOR CORPORATION

Delaware

36-3840979

5005 E. McDowell Road

Securities Registered Pursuant to Section 12(b) of the Act:  None

Securities Registered Pursuant to Section 12(g) of the Act:  Common stock, par value $0.01 per share

      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 

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained therein, and will not be contained to the best of registrant’s knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  

      The aggregate market value of voting stock held by non-affiliates of the Registrant as of February 28, 2001 is $214,575,570. Shares held by executive officers, directors and persons owning more than 10% of the outstanding Common Stock have been excluded because such persons may be deemed to be affiliates of the Company.

      The number of shares of the registrant’s Common Stock outstanding at February 28, 2001 was 172,782,789.

Documents Incorporated by Reference

      Portions of the Annual Report to Stockholders for the year ended December 31, 2000 are incorporated by reference into Parts I, II, and IV.

      Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held on May 23, 2001 are incorporated by reference into Part III hereof.

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PART I

Item 1.  Business

Business Overview

      ON Semiconductor Corporation (“ON Semiconductor” or “the Company”) is a global supplier of high-performance broadband and power management integrated circuits and standard semiconductors used in numerous advanced devices ranging from high-speed fiber optic networking equipment to the precise power management functions found in today’s advanced portable electronics. Our technology portfolio is lead by high-speed digital and mixed signal silicon critical to today’s technology solutions requiring speed, capacity and throughput. Our analog technology product portfolio is critical in serving power management needs for portable electronics and access to today’s pervasively connected world.

      Our products provide high-performance clock management and data flow management for precision computing and communications systems, and power management for distributing and monitoring the supply of power to the different elements within virtually every electronic device. The principal end-user markets for our products are networking and computing, wireless communications, consumer electronics, automotive electronics and industrial electronics. Applications for our products in these markets include routers and other advanced networking equipment, cellular telephones and portable electronic, industrial automation and control systems.

      We have three principal product lines: broadband and advanced logic (application specific standard products, communication integrated circuits, clocks, translators and drivers) power management and standard analog (amplifiers, voltage, interfaces, references and comparators); and standard semiconductors.

      We sell our products to customers around the world, including original equipment manufacturers such as Advantest, Agilent, Alcatel, Cisco Systems, Huawei, Lucent, Nortel Networks, Nokia, Sony and Sun Microsystems, electronic manufacturing service providers such as Celestica, Flextronics, SCI and Solectron, and distributors such as Arrow and Avnet. We have design operations in Phoenix and Chandler, Arizona; East Greenwich, Rhode Island; Irvine, California; Grenoble and Toulouse France; Rozov, Czech Republic; Tokyo and Aizu, Japan; and Hong Kong, China. We operate manufacturing facilities in Arizona and Rhode Island in the United States, China, the Czech Republic, Japan, Malaysia, Mexico, the Philippines and Slovakia, directly or through joint ventures.

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

      On April 3, 2000, we acquired all of the outstanding capital stock of Cherry Semiconductor Corporation (“Cherry”) for approximately $253.2 million in cash (including acquisition related costs), which we financed with cash on hand and borrowings of $220.0 million under our senior secured bank facilities. Cherry, which we

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      On May 3, 2000, we completed the initial public offering (“IPO”) of our common stock, selling 34.5 million shares with an issue price of $16 per share. Net proceeds from the IPO (after deducting issuance costs) were approximately $514.8 million. The net proceeds were used to redeem all outstanding preferred stock (including accrued dividends), redeem a portion of the senior subordinated notes and prepay a portion of the loans outstanding under the senior bank facilities. In connection with this debt prepayment, we incurred prepayment penalties and redemption premiums of $17.3 million and wrote off $11.9 million of debt issuance costs. These amounts, totaling $29.2 million ($17.5 million or $0.11 per share, net of income taxes), have been classified as an extraordinary loss in the accompanying consolidated statement of operations and comprehensive income for 2000.

Products and Technology

      The following table provides information regarding our primary product lines:

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      Broadband Products. ON Semiconductor is a global leader in creating high-performance integrated circuit solutions critical to today’s broadband applications. We design and deliver application-specific integrated circuits using advanced technologies that address the high-performance needs of wireless, networking and data management. Our extensive broadband portfolio, led by our ECLinPS family, are designed into state-of-the-art systems such as communication and networking switches, high-end servers, high-performance work stations, highly dense memory modules, storage networks and precision measurement test systems. We enable application specific designs for today’s advanced networks, including Asynchronous Transfer Mode (ATM), Enterprise Networks, Storage Area Networks (SAN) and Internet Protocol (IP) applications.

      Power Management Products and Standard Analog. One of the fastest growing segments within the analog market is power management. ON Semiconductor is one of the largest suppliers of power management analog products. We have a complete power management portfolio in the six major product categories, which include DC/ DC regulators, AC/ DC off-line regulators, linear regulators, PWM/ PFM controllers, PFC pre-regulators and battery charging/management integrated circuits. Our products are engineered and manufactured to meet the power management needs of high-performance applications to customers in the wireless, automotive and computing markets.

      Standard Semiconductor Products. ON Semiconductor offers an extensive line of standard semiconductors, including standard logic integrated circuits and nearly all discrete semiconductors other than sensors, optoelectronics, RF and microwave power transistors. These products are found in nearly every electronic product, including computers, cellular phones, mass storage devices, televisions, radios, VCRs, DVD players and pagers.

Customers

      Our customer base includes original equipment manufacturers, electronic manufacturing service providers and preferred distributors. Our products are ultimately purchased by end users for use in a variety of markets, including networking and computing, wireless communications, consumer electronics, automotive electronics and industrial. Sales to Arrow, Avnet and Motorola accounted for approximately 12%, 11% and 10%, respectively, of our total revenue during 2000, compared to 9%, 10% and 16%, respectively, of our total revenue for the period from August 4, 1999 to December 31, 1999.

      Original Equipment Manufacturers. Direct sales to original equipment manufacturers accounted for approximately 43% of our net product revenues in 2000 and approximately 48% of our net product revenues in 1999. These customers include a variety of companies in the electronics industry, such as Agilent, Alcatel, Cisco Systems, Hewlett-Packard, Lucent Technologies, Motorola, Nortel Networks, Philips, Siemens and Sony, and automotive manufacturers, such as DaimlerChrysler, Delphi and Visteon. We intend to focus on three types of original equipment manufacturers: multi-nationals, selected regional accounts and target market customers. We expect large multi-nationals and selected regional accounts, which are significant in specific markets, to be our core original equipment manufacturer customers. The target market customers in the communications, power management and broadband markets are original equipment manufacturers that are on the leading edge of specific technologies and provide direction for technology and new product development. We expect overall sales to original equipment manufacturers to continue to decline as a percentage of sales as these customers increasingly purchase component products through distributors or outsource their manufacturing to electronic manufacturing service providers. Distributors and electronic manufacturing service providers are representing a larger share of the market in general, and we expect these customers to represent a larger percentage of our total addressable market in the future. We do not anticipate any significant effect on our overall sales from this shift in the customer base.

      Distributors. Sales to distributors accounted for approximately 45% of our net product revenues in 2000 and approximately 44% of our net product revenues in 1999. Our distributors, which include Arrow, Avnet and All American, resell to mid-sized and smaller original equipment manufacturers and to electronic manufacturing service providers and other companies. They expect larger original equipment manufacturers to become an increasingly important category of distributors’ direct customers.

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      Electronic Manufacturing Service Providers. Direct sales to electronic manufacturing service providers accounted for approximately 12% of our net product revenues in 2000 and approximately 8% of our net product revenues in 1999. Our largest electronic manufacturing service customers are Celestica, Delta Electronics, Flextronics, Solectron and SCI. These customers are manufacturers who typically provide contract manufacturing services for original equipment manufacturers. Originally, these companies were involved primarily in the assembly of printed circuit boards, but they now typically provide design, supply management and manufacturing solutions. Many original equipment manufacturers now outsource a large part of their manufacturing to electronic manufacturing service providers in order to focus on their core competencies. We are pursuing a number of strategies to service this increasingly important marketplace, including the use of the Internet not only for order and payment processing but also to promote more immediate communication among our sales and support staff and these customers.

Manufacturing Operations

      We operate our manufacturing facilities either directly or through joint ventures. Four of these are front-end wafer facilities located in Japan, Slovakia and the United States; four are back-end assembly and test facilities located in China, Malaysia and the Philippines; and three are integrated front-end and back-end facilities located in the Czech Republic, Malaysia and Mexico. In addition to these manufacturing and assembly operations, our Terosil facility in Roznov, Czech Republic, manufactures raw wafers that are used by a number of our facilities. We also use third-party contract manufacturers other than our joint ventures. Our agreements with these contract manufacturers typically require them to forecast product needs and commit to purchase services consistent with these forecasts, and in some cases require longer-term commitments in the early stages of the relationship.

      The table below sets forth information with respect to the manufacturing facilities we operate either directly or through our joint ventures, and the products produced at these facilities.

      We have entered into an agreement with Motorola to continue to provide manufacturing services to each other for limited periods of time following our Recapitalization. We negotiated fixed prices with Motorola for the services covered by these agreements to approximate each party’s cost of providing the services. Subject to

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      A portion of our manufacturing activity is conducted through our joint ventures in the Czech Republic, China and Malaysia. In 2000, purchases from the joint ventures represented approximately $193 million of our cost of sales.

      In the Czech Republic, we operate two joint ventures, Tesla and Terosil. These joint ventures are publicly traded Czech companies in which we currently directly own a 78.8% and 75.2% equity interest, respectively. The Tesla joint venture operates an integrated front-end manufacturing and back-end assembly facility. The Terosil joint venture manufactures raw wafers that are used by a number of our facilities. We have committed to purchase all of the output of the Tesla joint venture or, to the extent we do not do so, pay for its fixed and semi-fixed costs of production. We also have fixed minimum commitments for the Terosil joint venture. In 2000, we purchased the total output of Tesla and 77% of the sales of Terosil, which exceeded our minimum commitment. These commitments expire in February 2004.

      In Leshan, China, we operate one joint venture, Leshan-Phoenix Semiconductor Company Ltd. We beneficially own a majority of the outstanding equity interests of the Leshan joint venture, and the remainder is owned by Leshan Radio Company Ltd. Due to certain rights held by the minority shareholder, we do not exercise control over this entity and therefore, account for it using the equity method of accounting for investments. The Leshan joint venture operates a back-end manufacturing facility. We have committed to purchase a percentage of the total output commensurate with our ownership stake, and in 2000 actually purchased 75% of the total sales of Leshan. The Leshan joint venture expires in 2045.

      In Seremban, Malaysia, we have a 50% investment in Semiconductor Miniatures Products Malaysia Sdn. Bhd., (“SMP”) a joint venture with Philips Semiconductors International B.V. SMP operates a back-end assembly facility. The terms of the joint venture agreement provide 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. We do not expect the acquisition by Philips to have a material impact on our financial condition or results of operations.

      Our manufacturing processes use many raw materials, including silicon wafers, copper lead frames, mold compound, ceramic packages and various chemicals and gases. We have no agreements with any of our suppliers that impose minimum or continuing supply obligations and we obtain our raw materials and supplies from a large number of sources on a just-in-time basis. From time to time, suppliers may extend lead times, limit supplies or increase prices due to capacity constraints or other factors. Although we believe that supplies of the raw materials used by us are currently available, shortages could occur in various essential materials due to interruption of supply or increased demand in the industry.

Sales, Marketing and Distribution

      Our global sales and marketing organization serves customers in 37 countries. We operate regional headquarters Aylesbury, U.K., Phoenix, Arizona, and Hong Kong, China. We support our customers through logistics organizations, and just-in-time warehouses. Global and regional distribution partners further support our customer’s needs for quick response and service. We offer efficient, cost-effective Internet-based applications support from our laboratories in the Czech Republic, China and the United States. Through on-line connectivity, applications developed in one region of the world are now instantaneously available to all other regions.

      Motorola agreed to continue to provide us with worldwide shipping and freight services for a period of up to three years following our Recapitalization. The cost allocated to us by Motorola for these services is based our sales as a percentage of total Motorola Semiconductor Products Sector plus ON Semiconductor sales. Because our products are sold in higher volumes than other Motorola products for comparable sales, this allocation may result in better prices than we could obtain from third parties. However, we believe we will be able to replace these services on comparable terms at the expiration of this agreement because of increased

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Patents, Trademarks, Copyrights and Other Intellectual Property Rights

      We own rights to a number of patents, trademarks, copyrights, trade secrets, and other intellectual property directly related to and important to our business. In connection with our Recapitalization, Motorola also granted rights and licenses to certain patents, trademarks, copyrights, trade secrets, and other intellectual property necessary for us to manufacture, market and sell our existing products and those contemplated in its long range plans. Presently, we own more than 740 U.S. and foreign patents, 57 trademarks and intellectual property rights in as many as 39 semiconductor fabrication processes. Our policy is to protect our products and processes by asserting our intellectual property rights where appropriate and prudent and by obtaining patents, copyrights and other intellectual property rights used in connection with our business when practicable and appropriate.

      Under an intellectual property agreement that we entered into with Motorola as part of our Recapitalization, Motorola assigned approximately 280 U.S. patents and patent applications, approximately 280 foreign patents and patent applications, rights to over 50 trademarks (not including the Motorola name) previously used in connection with our products, rights in know-how relating to at least 39 semiconductor fabrication processes and rights in specified copyrightable materials. In addition, Motorola licensed on a non-exclusive, royalty-free basis other patent, trademark, copyright and know-how rights used in connection with our existing products and products contemplated in our long-range plans. We have perpetual, royalty-free, worldwide rights under Motorola’s patent portfolio and other intellectual property, existing as of the date of our Recapitalization or created in the ensuing five years (the five-year period existing only with respect to patents), as necessary to manufacture, market, and sell our existing and long range plan product lines. Additionally, Motorola provided us with a limited indemnity umbrella to protect us from some infringement claims by third parties who have granted Motorola licenses as of the date of our Recapitalization, which will assist us in developing our own patent position and licensing program. We believe that we have the right to use all Motorola-owned technology used in connection with the products we currently offer.

      We market our products under the ON Semiconductor™ name. For one year after our Recapitalization, we retained the limited ability to use the Motorola trade name in connection with the sale, distribution and advertisement of some products we offer. If, however, the removal of the Motorola trade name from any of these products would require the product to be requalified by any of our customers, then we may continue to use the Motorola trade name, for up to two years after our Recapitalization, to allow us to continue selling the product pending its requalification. In addition, for two years after our Recapitalization, we have the ability to utilize the transition statement “formerly a division of Motorola” in connection with the sale, distribution and advertisement of some products we offer.

Seasonality

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

Backlog

      Our trade sales are made primarily pursuant to standard purchase orders that are generally booked up to 26 weeks in advance of delivery. Generally, prices and quantities are fixed at the time of booking. Backlog as of a given date consists of existing orders and estimated orders based on customer forecasts, in each case scheduled to be shipped over the 13-week period following such date. Backlog is influenced by several factors

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      In the semiconductor industry, backlog quantities and shipment schedules under outstanding purchase orders are frequently revised to reflect changes in customer needs. Agreements calling for the sale of specific quantities at specific prices are, typically, contractually subject to price or quantity revisions and are, as a matter of industry practice, often not enforced. Therefore, we believe that a significant portion of our order backlog may be cancelable. For these reasons, the amount of backlog as of any particular date may not be an accurate indicator of future results.

      We sell products to key customers pursuant to contracts that are typically annual fixed-price agreements subject, in some cases, to quarterly negotiations. These contracts allow us to schedule production capacity in advance and allow the customers to manage their inventory levels consistent with just-in-time principles while shortening the cycle times required to produce ordered product. However, these contracts are typically amended to reflect changes in prices and customer demands.

Competition

      The semiconductor industry, particularly the market for general purpose semiconductor products like ours, is highly competitive. Although only a few companies compete with us in all of our product lines, we face significant competition within each of our product lines from major international semiconductor companies, as well as smaller companies focused on specific market niches. Many of these competitors have substantially greater financial and other resources than us with which to pursue development, engineering, manufacturing, marketing and distribution of their products and are better able to withstand adverse economic or market conditions. In addition, companies not currently in direct competition with us may introduce competing products in the future. Significant competitors in the broadband and advanced logic market include AMCC, Micrel and Vitesse. Significant competitors in the power management and standard analog market include Analog Devices, Fairchild, Linear Technology, Maxim Integrated Products, National Semiconductor, ST Microelectronics and Texas Instruments. Significant competitors in the standard semiconductor product market include Fairchild, International Rectifier, Philips, Rohm, ST Microelectronics, Texas Instruments and Toshiba. The semiconductor components industry has also been undergoing significant restructuring and consolidations that could adversely affect our competitiveness.

Government Regulation

      Our manufacturing operations are subject to environmental and worker health and safety laws and regulations. These laws and regulations include those relating to the emissions and discharges into the air and water; the management and disposal of hazardous substances; the release of hazardous substances into the environment at or from our facilities and at other sites; and the investigation and remediation of resulting contamination.

      Our manufacturing facility in Phoenix, Arizona is located on property that is a “Superfund” site, a property listed on the National Priorities List and subject to clean-up activities under the Comprehensive Environmental Response, Compensation, and Liability Act. Motorola is actively involved in the cleanup of on-site solvent contaminated soil and groundwater and off-site contaminated groundwater pursuant to consent decrees with the State of Arizona. Motorola has retained responsibility for this contamination, and has agreed to indemnify us with respect to remediation costs and other costs or liabilities related to this matter.

      The manufacturing facilities in Slovakia and those of the joint ventures in the Czech Republic have ongoing remediation projects to respond to releases of hazardous substances that occurred during the years that these facilities were operated by government-owned entities. In each case, these remediation projects consist primarily of monitoring groundwater wells located on-site and off-site with additional action plans developed to respond in the event activity levels are exceeded at each of the respective locations. The governments of the Czech Republic and Slovakia have agreed to indemnify us and the joint ventures, subject

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      We believe that our operations are in material compliance with applicable environmental and health and safety laws and regulations. We do not expect the cost of compliance with existing environmental and health and safety laws and regulations, and liability for currently known environmental conditions, to have a material adverse effect on our business or prospects. It is possible, however, that future developments, including changes in laws and regulations, government policies, customer specification, personnel and physical property conditions, including currently undiscovered contamination, could lead to material costs.

Employees

      We employ approximately 14,900 people worldwide, consisting of approximately 10,700 people employed directly and approximately 4,200 people employed through our joint ventures, most of whom are engaged in manufacturing services. We do not currently have any collective bargaining arrangements with our employees, except for those arrangements, such as works councils, that are obligatory for all employees or all employers in a particular industry under applicable foreign law.

Executive Officers of the Registrant

      See Part III, Item 10 of this report for information concerning executive officers.

Geographical Information

      For certain geographic operating information, see Note 17, “Segment Information” of the Notes to Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Exhibit 13 on this Form 10K.

      In addition to the above for this Item 1. Business, see pages 4 to 8 of the 2000 Annual Report to Stockholders included in Exhibit 13 to this Form 10-K and incorporated by reference herein.

Item 2.  Properties

      In the United States, our corporate headquarters as well as manufacturing, research and development and warehouse operations are located in approximately 1.8 million square feet of space in properties that we own in Phoenix, Arizona and East Greenwich, Rhode Island. We also lease approximately 40,000 square feet in Tempe and Chandler, Arizona that is used for research and development, warehouse and office facilities. We have entered into lease agreements for approximately 115,000 square feet of space used for sales offices and warehouses in locations such as Huntsville, Alabama; Irvine, San Diego, Cupertino, Encino and Santa Clara, California; Littleton, Colorado; Boca Raton and Tampa, Florida; Duluth, Georgia; Schaumburg, Illinois; Indianapolis and Kokomo, Indiana; Woburn, Massachusetts; Columbia, Maryland; Livonia and Troy, Michigan; Plymouth, Minnesota; Raleigh, North Carolina; Rochester and Hauppauge, New York; Portland, Oregon; Hatfield, Pennsylvania; Plano, Texas; Bellevue, Washington; and Brookfield, Wisconsin. Lease terms range between one year and five years. Prices for the leases have been fixed throughout their terms at amounts intended to approximate the actual historical cost of the covered properties.

      As part of our Recapitalization, Motorola conveyed to us the surface rights to a portion of the land located at our Phoenix facility, excluding the subsurface rights, and conveyed buildings located at the Phoenix facility. These buildings do not include any treatment facilities relating to Motorola’s environmental clean-up operations at the Phoenix facility. We executed a declaration of covenants, easements and restrictions with Motorola providing access easements for the parties and granting to us options to purchase or to lease the subsurface rights of the land.

      We own our manufacturing facilities in Japan, Malaysia, Mexico, the Philippines and Slovakia. These facilities are primarily manufacturing operations, but also include office facilities and warehouse space. We own approximately 817,000 square feet of manufacturing, warehouse and office space in Japan, Malaysia, the

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      In connection with our joint ventures, we also own manufacturing, warehouse and office space in Seremban, Malaysia, Leshan, China and Rosnov, Czech Republic.

      We have also entered into lease agreements for approximately 190,000 square feet of space for research and development, warehouses, logistics centers, sales and trading offices in locations including Bermuda, Brazil, Canada, China, Czech Republic, Denmark, Finland, France, Germany, India, Israel, Italy, Japan, Korea, Malaysia, Mexico, Netherlands, Philippines, Singapore, Spain, Sweden, Switzerland, Taiwan, Thailand and the United Kingdom. Lease terms for the sales offices are between one year and five years. We operate distribution centers, which are leased or contracted through a third party, in locations including Canada, China, France, Germany, Japan, Mexico, Singapore and Taiwan, as well as in Alabama, Indiana and Pennsylvania in the United States. Also, Motorola leases approximately 70,000 square feet of space at our Phoenix facility for a period which expires in 2004. In general, prices for these leases have been fixed throughout their term at amounts intended to approximate the actual historical cost of the covered properties.

      We believe that our facilities around the world, whether owned or leased, are well-maintained. Our manufacturing facilities contain sufficient productive capacity to meet our needs for the foreseeable future.

Item 3.  Legal Proceedings

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

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

      None

PART II

Item 5.  Market for Registrant’s Common Equity and Related Stockholder Matters

      Our common stock is traded on the over-the-counter market under the symbol ONNN and is quoted on the Nasdaq National Market. Although our initial public offering was completed on May 3, 2000, our stock began trading on an as-issued basis on April 28, 2000. The following table sets forth the quarterly high and low sale prices for our common stock as reported by the Nasdaq National Market for 2000 from April 28, 2000:

Range of Sales Price

      As of December 31, 2000 there were 98 stockholders of record and 172,746,435 common shares outstanding.

      We have neither declared nor paid any cash dividends on our common stock since our initial public offering, and we do not presently intend to do so. Future dividend policy will depend upon our earnings, capital requirements, financial condition and other factors deemed relevant by our Board of Directors.

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Item 6.  Selected Financial Data

      This item is incorporated by reference from page 8 of the 2000 Annual Report to Stockholders included in Exhibit 13 to this Form 10-K.

      This item is incorporated by reference from pages 9 to 19 of the 2000 Annual Report to Stockholders included in Exhibit 13 to this Form 10-K.

      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 December 31, 2000, our long-term debt (including current maturities) totaled $1,258.3 million. We have no interest rate exposure due to rate changes for our fixed rate interest bearing debt, which totaled $389.0 million. We do have interest rate exposure with respect to the $869.3 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 December 31, 2000, we had four interest rate swaps covering exposures on $255 million of our variable interest rate debt. A 50 basis point increase in interest rates would result in increased annual interest expense of $3.1 million for the next twelve months.

      A majority of our revenue, expense and capital purchasing activities are transacted in U.S. dollars. However, as a multinational business, we also conduct these activities through transactions denominated in a variety of other currencies. We use forward foreign currency contracts to hedge firm commitments and reduce our overall exposure to the effects of currency fluctuations on our results of operations and cash flows. Gains and losses on these foreign currency exposures would generally be offset by corresponding losses and gains on the related hedging instruments. This strategy reduces, but does not eliminate, the short-term impact of foreign currency exchange rate movements. For example, changes in exchange rates may affect the foreign currency sales price of our products and can lead to increases or decreases in sales volume to the extent that the sales price of comparable products of our competitors are less or more than the sales price of our products. Our policy prohibits speculation on financial instruments, trading in currencies for which there are no underlying exposures, or entering into trades for any currency to intentionally increase the underlying exposure.

Item 8.  Financial Statements and Supplementary Data

      The Report of Independent Accountants, the independent auditors report the consolidated financial statements for the year ended December 31, 2000 and the period from August 4, 1999 to December 31, 1999 and the notes to the consolidated financial statements and the combined statements of revenues less directed and allocated expenses before taxes for the period from January 1, 1999 through August 3, 1999 and the year ended December 31, 1998 are incorporated by reference from pages 20 to 52 of the 2000 Annual Report to Stockholders. See Part IV, Item 14 of this report for information concerning financial statements and schedules filed with this report.

      None.

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PART III

Item 10.  Directors and Executive Officers of the Registrant

      Reference is made to the text under the captions, “Management Proposals — Proposal 1 — Election of Directors”, “The Board of Directors”, “Compensation of Executive Officers”, and “Section 16(b) Reporting Compliance” in the Proxy Statement for the May 23, 2001 Annual Meeting of Stockholders of the Registrant for incorporation of information concerning directors and persons nominated to become directors, and executive officers. Certain additional information concerning executive officers and key officers as of December 31, 2000 is set forth below.

      Steven P. Hanson. Mr. Hanson served as the Senior Vice President and General Manager of Motorola’s Semiconductor Components Group from June 1997. He became our President and a member of our Board of Directors in August 1999 and our Chief Executive Officer in January 2000. Mr. Hanson has held several executive and management positions, including Corporate Vice President, since he joined Motorola in 1971.

      James Thorburn. Prior to assuming the position of Senior Vice President and Chief Operating Officer in August 1999, Mr. Thorburn was the Chief Financial Officer of Zilog, Inc., a position he had held since May 1998. Prior to his tenure at Zilog, Mr. Thorburn spent 17 years at National Semiconductor, most recently as Vice President of Operations Finance. Effective March 10, 2001, Mr. Thorburn separated from ON Semiconductor and SCI, LLC, and each of their subsidiaries.

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      William George. For two years prior to assuming the position of Senior Vice President and Chief Manufacturing Officer in August 1999, Mr. George held several executive and management positions, including directing investment and operation strategy for Motorola’s worldwide manufacturing operations, since he joined Motorola in 1968. Mr. George also holds a position as director on the board of Primarion, Inc.

      Dario Sacomani. Mr. Sacomani served as the Vice President and Director of Finance of Motorola’s Semiconductor Components Group from July 1997 until he assumed the position of Senior Vice President and Chief Financial Officer in August 1999. Mr. Sacomani has held several executive and management positions, including Vice President and Financial Controller for the European Semiconductor Group of Motorola, since he joined Motorola in 1980.

      Michael Rohleder. For two years prior to assuming the position of Senior Vice President and Director of Sales and Marketing in September 1999, Mr. Rohleder was President and Chief Executive Officer of Wyle Electronics, a member of the VEBA Electronics Group. Prior to his tenure at Wyle, Mr. Rohleder served as Chief Executive Officer of Insight Electronics, also a member of the VEBA electronics group, for a period of seven years.

      George H. Cave. Mr. Cave has served as General Counsel and Assistant Secretary for the Company since August 1999. He was elected Secretary in March 2000 and Vice President in May 2000. Before his tenure with the Company, he served for two years as the Regulatory Affairs Director for Motorola’s Semiconductor Components Group in Geneva, Switzerland. Prior to that position, Mr. Cave was Senior Counsel in the Corporate Law Department of Motorola in Phoenix, Arizona for a period of five years.

      Samuel Anderson. Prior to assuming the position of Vice President and Director of Strategic Business Development, Mr. Anderson served as Director of Operations for the Mixed Signal Logic Business Unit at Motorola. Mr. Anderson has held various positions during his 13-year tenure at Motorola, including Director of Business Alliances and Technology Acquisitions and Director of New Product Development in the Analog Division.

      Alistair Banham. Prior to assuming the position of Vice President and General Manager, Europe, Middle East and Africa and Service and E-Commerce Strategy in August 1999, Mr. Banham served as General Manager of Motorola’s Semiconductor Components Group for Europe, the Middle East and Africa beginning in April 1999. Mr. Banham has managed various foreign aspects of Motorola’s semiconductor products business, including leadership of the European Motorola Segment Sales and Engineering Applications Team, since he joined Motorola in 1989.

      Collette T. Hunt. Prior to assuming the position of Vice President and General Manager of Discrete Products Business Unit in August 1999, Ms. Hunt served as Vice President of Motorola’s Semiconductor Products Sector beginning in 1994 and as Director of Product Operations of the Semiconductor Components Group beginning in 1998. Ms. Hunt has held various executive and managerial positions, including positions on the board of directors of Motorola’s joint venture operations in Malaysia and China, since she joined Motorola in 1984.

      Henry Leung. Prior to assuming the position of Vice President and General Manager, Asia Pacific in August 1999, Mr. Leung served as the director in the Asia Pacific Region for Motorola’s Semiconductor Components Group beginning in 1994. Mr. Leung has held several positions, including Business Director of Motorola’s Semiconductor Component Group (Discrete Products) for the Asia Pacific Region, since he joined Motorola in 1976.

      Ralph Quinsey. From 1997 until he assumed the position of Vice President and General Manager of Analog Products Business Unit in August 1999, Mr. Quinsey served as Vice President and General Manager of Motorola’s Semiconductor Products Sector Wireless Subscriber Systems Group. Prior to that time, Mr. Quinsey served as General Manager for the Logic and Analog Integrated Circuits Mixed Signal Communications Products Division of Motorola. Mr. Quinsey has held several management positions since he joined Motorola in 1979.

      William Schromm. Prior to assuming his position as Vice President and General Manager of Logic Products Business Unit in November 2000, Mr. Schromm held the position of Director of Standard Logic Operations from September of 1999. Before his tenure with the Company, Mr. Schromm served in director

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      James Stoeckmann. Prior to assuming the position of Vice President and Director of Human Resources in August 1999, Mr. Stoeckmann served as the Director of Human Resources for Motorola’s Semiconductor Components Group beginning in January 1997. Mr. Stoeckmann has held several positions, including Human Resources Director for SCG Worldwide Manufacturing, since he joined Motorola in 1984.

      Chandramohan Subramaniam. Prior to assuming the position of Vice President and Director of Internal Manufacturing in August 1999, Mr. Subramaniam held several director and management positions, including Director of Asia Manufacturing, General Manager Seremban and Director of Quality and Continuous Improvement, after joining Motorola in 1984.

      Frans van Wijk. Prior to assuming the position of Vice President and General Manager of Broadband Business Unit, Mr. van Wijk served as Senior Vice President and General Manager of Philips Semiconductor from April 1996 to September 2000. Mr. van Wijk also served as General Manager, Marketing Consumer Integrated Circuits for Philips Semiconductor, Nijmegen, The Netherlands from February 1993 to April 1996; along with numerous other management positions with Philips Semiconductor since 1982.

      Peter Zdebel. Prior to assuming the position of Vice President and Chief Technology Officer, Mr. Zdebel held several director and management positions, including Vice President and Director of System-on-Chip Technology Strategy, after joining Motorola in 1984.

      The present term of office for the officers named above will generally expire on their earlier retirement, resignation or removal. There is no family relationship among any such officers.

      Information concerning executive compensation is incorporated by reference from the text under the captions, “The Board of Directors — Compensation of Directors”, “Compensation of Executive Officers”, “Compensation Committee Report”, “Performance Graph — Stock Price Performance”, and “Compensation Committee Interlocks and Insider Participation” in the Proxy Statement for the May 23, 2001 Annual Meeting of Stockholders.

      Information concerning ownership of equity stock of the Registrant by certain beneficial owners and management is incorporated by reference from the text under the captions, “Principal Stockholders” and “Share Ownership of Directors and Officers” in the Proxy Statement for the May 23, 2001 Annual Meeting of Stockholders.

      Information concerning certain relationships and related transactions involving the Registrant and certain others is incorporated by reference from the text under the caption, “Relationships and Related Transactions” in the Proxy Statement for the May 23, 2001 Annual Meeting of Stockholders.

PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

      (a)(1) Consolidated Financial Statements:

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      (2)  Consolidated Financial Statement Schedules:

      All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or related notes.

      (b)  Reports on Form 8-K :

      During the fourth quarter of 2000, ON Semiconductor filed one report on Form 8-K dated December 12, 2000 and filed December 13, 2000. The report, which was filed pursuant to Items 5 and 7, reported revised revenue and earnings per share estimates for the Company’s fourth quarter 2000, first quarter 2001 and fiscal year 2001, and included as an exhibit a press release dated December 12, 2000 titled “ON Semiconductor Updated Fourth Quarter Earnings Estimates.”

      (c) Exhibits

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SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) 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.

March 29, 2001

      Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

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Report of Independent Accountants on

To the Board of Directors of

      Our audits of the consolidated financial statements referred to in our report dated February 1, 2001 incorporated by reference in this Annual Report on Form 10-K of ON Semiconductor Corporation also included an audit of the financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP

Phoenix, Arizona

F-1

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ON SEMICONDUCTOR CORPORATION

VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

F-2

Table of Contents

   1
                                                                   Exhibit 10.37

            2000 ON SEMICONDUCTOR EXECUTIVE COUNCIL BONUS INCENTIVE

     Members of the ON Semiconductor ("Company") Executive Council include the
President and Chief Executive Officer and each of the Senior Vice Presidents
("Executive Council"). This Bonus Program offers members of the Executive
Council and others as identified by the Chief Executive Officer, an opportunity
to earn bonus amounts in addition to the bonus paid to them under the 2000 Key
Contributor Incentive Plan ("KCIP").

     If the Company's revenues (from organic growth) in calendar year 2000 are
less than $2 billion, no amounts are paid under the Bonus Program. The bonus is
triggered for this Plan at amount above $2 billion, with a cap for amounts at or
above $2.2 billion.

     Subject to the target goal set forth above (i) if the Company's revenues in
calendar year 2000 are above $2 billion but less than $2.2 billion, the
Executive Council member or Participant may earn an amount equal to 2.5% of the
final KCIP pay out in additional bonus for each additional 1% growth in revenue
above $2 billion but below $2.2 billion, or (ii) if the Company's revenues for
calendar year 2000 are equal to or above $2.2 billion, the Executive Council
member or Participant may earn an amount under this Bonus Program equal to 25%
of the final KCIP pay out in additional bonus. Thus for amounts at or above $2.2
billion, the maximum additional bonus is 25% of the KCIP pay out.

     Amounts will be paid under this Bonus Program only if the average profit
margin for revenues generate above $2 billion are equal to or greater than the
profit margins generated on business below the $2 billion goal.

   1
                                                                   Exhibit 10.38

                                ON SEMICONDUCTOR

                   2000 KEY CONTRIBUTOR INCENTIVE PLAN (KCIP)

1.       Purpose. The Purpose of the ON Semiconductor 2000 Key Contributor
Incentive Plan ("Plan") is to provide an annual incentive program for the key
contributors who are in management leadership or significant individual
leadership roles with, or other employees who provide significant contribution
to, the Company or any subsidiary. The Plan was effective as of January 1, 2000
and will terminate on December 31, 2000.

2.       Administration. The Plan is administered by the Compensation Committee
of the Company's Board of Directors ("Committee"). The Committee has the
discretion to determine all matters related to the Plan, including but not
limited to, matters related to eligibility, participation, Company and Employee
Goals, award determinations, and any other administrative matter to be
determined under the Plan.

3.       Eligibility and Participation.

         (a) Eligibility. All regular full-time and part time employees of the
Company or any subsidiary working 20 hours or more per week are eligible to
participate in the Plan. Any employee of the Company or a subsidiary who is
designated as an on-call, intern, co-op, part-time working less than 20 hours,
or any individual designated as a contractor, consultant, or hired via a
temporary staffing agency is not eligible to participate in the Plan. Retirees
are eligible to participate and receive a pro-rata award under the Plan.

         (b) Participation. From among the eligible employees of the Company or
any subsidiary, the Company will select those individuals who will participate
in the Plan. The Committee will notify those selected to participate in the Plan
as soon as practicable after they are selected. If an employee is selected to
participate in the Plan, except as provided below, he or she must be actively
employed by the Company or any subsidiary at the time that the amounts are paid
under the Plan to be entitled to receive an award under the Plan. Retirees are
eligible to participate and receive a pro-rata award under the Plan.

4.       Performance Measures.

             An employee's total award under the Plan is computed based on
(i) the employee's base salary, (ii) whether the Company achieves its
"threshold," "target," or "stretch" EBITDA goal, and (iii) the Employee's
Individual Performance Goal ("Employee Goal"). EBITDA means the Company's
Earnings Before Interest, Taxes, Depreciation, and Amortization and is
determined after December 31, 2000.

         (a) Employee's Target Bonus. Under the Plan, an employee's target bonus
amount is determined by the Committee and will generally range from 10% to 75%
of the employee's base salary as of December 31, 2000.


                                                                               1
   2

         (b) Company EBITDA Goals.

                  (i)  For former employees of Cherry Semiconductor, the
Company's EBITDA goals for calendar year 2000, including financial results from
the combined Cherry Semiconductor and the Company, are as follows:



EBITDA GOAL                                                  COMPANY EBITDA
                                                          
Threshold                                                    $425,000,000
Target                                                       $455,000,000
Stretch                                                      $535,000,000


                  (ii) For employees of the Company or any subsidiary, other
than former employees of Cherry Semiconductor, the Company's EBITDA goals for
calendar year 2000, not including financial results from Cherry Semiconductor,
are as follows:



EBITDA GOAL                                                  COMPANY EBITDA
                                                          
Threshold                                                    $400,000,000
Target                                                       $425,000,000
Stretch                                                      $500,000,000



                  The Committee reserves the right to amend the EBITDA goals in
the event of a future acquisition, disposition, or other significant event
affecting the Company or any subsidiary.

         (c)      Employee's Individual Performance Goals. The Employee's
individual performance goals are determined by the employee's supervisor in
consultation with the employee.

5.       Award Determination.

         (a)      EBITDA Goal and Employee Goal Weighted Percentage. The EBITDA
goal will be weighted at 75% of the employee's target bonus and the Employee's
Goal will be weighted at 25% of the employee's target bonus.

         (b)      EBITDA Goals. If the Company does not achieve the Threshold E
BITDA goal, no amounts will be paid under the Plan (either based on Company
performance or the employee's individual performance). If the Company achieves
the Threshold EBITDA goal, the employee's award will be based on 50% of the
target bonus percentage. If the Company achieves the Target EBITDA goal, the
employee's target bonus percentage will remain unchanged. If the Company
achieves the Stretch EBITDA goal, the employee's award will be based on 200% of
the target bonus percentage.

                  The Committee will adjust these percentage on a pro rata basis
if the Company's EBITDA falls in between the Threshold, Target, and Stretch
EBITDA goals.


                                                                               2
   3

         (c) Employee's Goal. The Employee Goal will range from 0% to 150% of
the employee's target bonus percentage. The Committee will have the final
determination regarding whether and to what extent the Employee Goal has been
satisfied.

6.       Transfers, Promotions, New Hires, and Salary Adjustments.



TYPE OF CHANGE                              EFFECT ON AWARDS
                                         
Move into Eligible Position and             Eligible for participation in Plan
New Hires                                   if moved in or hired before December
                                            1, 2000. Award prorated on the basis
                                            of months of service in eligible
                                            position.

Move Into Ineligible Position               Award prorated at end of Plan Year
                                            on the basis of months of service in
                                            eligible position.

Move Into Another Eligible Position         Award prorated on the basis of
                                            months of service in each position
                                            for the varying target bonus
                                            percentages.

Change of Salary                            No impact.  The employee's base
                                            salary on December 31, 2000
                                            determines the employee's target
                                            bonus percentage.




7.       Effect of Termination on Award. If an employee terminates employment
with the Company or a subsidiary for any reason prior to December 31, 2000, the
employee will not be entitled to receive an award under the Plan. In addition,
an employee must be an active employee of the Company or any subsidiary as of
the date of payment to receive an award under the Plan; provided, however, if
the employee is on an a Company-approved leave of absence, becomes disabled, or
dies before the date of the payment (but after December 31, 2000), the employee
will be entitled to receive a payment under the Plan. If an employee retires
during the calendar year 2000, the employee will be entitled to receive payment,
prorated on the basis of the months of services during that calendar year.

8.       Deferral of Bonus Amounts. Certain eligible individuals could elect to
defer all or a percentage of their bonus amounts into the ON Semiconductor
Executive Deferred Compensation Plan. This will delay the income tax but not the
FICA tax obligation on the deferred funds. Participants who elect to defer
payments shall be liable for payment of any applicable taxes due at the time of
deferral; however, such taxes shall not reduce the amount of the deferral but
shall be deducted from the employee's base pay. The executive will have income
equal to the amount paid from the Executive Plan and the Company is entitled to
a tax deduction when paid. All participants in the Executive Plan must qualify
as a "select group of management or highly compensated employees" to participate
in the plan. Generally, those executive earning more than $125,000 per year and
who have significant management responsibility to fall within this category.

9.       Former Cherry Employees. Former Cherry Semiconductor employees may
receive payouts under his plan on a pro-rated basis on the date of the
acquisition or date of hire, which ever is later.


                                                                               3

   1
                                                                   Exhibit 10.39

                                ON SEMICONDUCTOR
                      2000 NON-MANUFACTURING INCENTIVE PLAN

1.       Purpose. The Purpose of the ON Semiconductor 2000 Non-Manufacturing
Incentive Plan ("Plan") is to provide an annual incentive program for the
Non-Manufacturing employees who are normally not affiliated within a
manufacturing facility of the Company or any subsidiary and who are not on the
Company's Key Contributor Incentive Plan (KCIP). The Plan was effective as of
January 1, 2000 and will terminate on December 31, 2000.

2.       Administration. The Plan is administered by the Compensation Committee
of the Company's Board of Directors ("Committee"). The Committee has the
discretion to determine all matters related to the Plan, including but not
limited to, matters related to eligibility, participation, Company and Employee
Goals, award determinations, and any other administrative matter to be
determined under the Plan.

3.       Eligibility and Participation.

         (a) Eligibility. Regular full-time and part-time employees of the
Company or any subsidiary working 20 hours or more per week in a
non-manufacturing role of the Company that is not eligible for the KCIP are
eligible to participate in the Plan. Any employee of the Company or a subsidiary
who is designated as an on-call, intern, co-op, part-time working less than 20
hours, or any individual designated as a contractor, consultant, or hired via a
temporary staffing agency is not eligible to participate in the Plan.

         (b) Participation. From among the eligible employees of the Company or
any subsidiary, the Company will determine those individuals who will
participate in the Plan. The Committee will notify those selected to participate
in the non-manufacturing Plan as soon as practicable after they are determined.
If an employee is determined as eligible, within a non-manufacturing role, to
participate in the Plan, except as provided below, he or she must be actively
employed by the Company or any subsidiary at the time that the amounts are paid
under the Plan to be entitled to receive an award under the Plan.

4.       Performance Measures.

             An employee's total award under the Plan is computed based on
(i) the employee's base salary, and (ii) whether the Company achieves its
"threshold," "target," or "stretch" EBITDA goal. EBITDA means the Company's
Earnings Before Interest, Taxes, Depreciation, and Amortization and is
determined after December 31, 2000.

         (a) Employee's Target Bonus. Under the Plan, an employee's target bonus
amount is determined by the Committee and will generally range from 2% to 10% of
the employee's base salary as of December 31, 2000.


                                                                               1
   2

         (b) Company EBITDA Goals.

                  (i)  For former employees of Cherry Semiconductor, the
Company's EBITDA goals for calendar year 2000, including financial results from
the combined Cherry Semiconductor and the Company, are as follows:



         EBITDA GOAL                                       COMPANY EBITDA
                                                        
         Threshold                                         $425,000,000
         Target                                            $455,000,000
         Stretch                                           $535,000,000


                  (ii) For employees of the Company or any subsidiary, other
than former employees of Cherry Semiconductor, the Company's EBITDA goals for
calendar year 2000, not including financial results from Cherry Semiconductor,
are as follows:



         EBITDA GOAL                                       COMPANY EBITDA
                                                        
         Threshold                                         $400,000,000
         Target                                            $425,000,000
         Stretch                                           $500,000,000


                  The Committee reserves the right to amend the EBITDA goals in
the event of a future acquisition, disposition, or other significant event
affecting the Company or any subsidiary.

         (c)      The Employee's individual performance goals are not a factor
in determining the individual employee's award; the entire award is based on the
Company meeting its EBITDA goals as described above.

5.       Award Determination.

         (a)      Non-Manufacturing goals. Each employee has individual goals in
support of the company's EBITDA goals; these specific goals are not a
determining factor in the award.

         (b)      EBITDA Goals. If the Company does not achieve the Threshold
EBITDA goal, no amounts will be paid under the Plan (either based on Company
performance or the individual's performance). If the Company achieves the
Threshold EBITDA goal, the employee's award will be based on 2% of eligible
earnings. If the Company achieves the Target EBITDA goal, the employee's target
bonus percentage will be 4% of eligible earnings. If the Company achieves the
Stretch EBITDA goal, the employee's award will be based on 10% of eligible
earnings.

                  The Committee will adjust these percentage on a pro rata basis
if the Company's EBITDA falls in between the Threshold, Target, and Stretch
EBITDA goals.


                                                                               2
   3

6.       Transfers, Promotions, New Hires, and Salary Adjustments.



         TYPE OF CHANGE                              EFFECT ON AWARDS
                                         
Move into Eligible Position and New Hires   Eligible for participation in Plan
                                            if moved in or hired before December
                                            1, 2000. Award prorated on the basis
                                            of months of service in eligible
                                            position.

Move Into Ineligible Position               Award prorated at end of Plan Year
                                            on the basis of months of service in
                                            eligible position.

Move Into Another Eligible Position         Award prorated on the basis of
                                            months of service in each position
                                            for the varying target bonus
                                            percentages.

Change of Salary                            No impact.  The employee's base
                                            salary on December 31, 2000
                                            determines the employee's target
                                            bonus percentage.



7.       Effect of Termination on Award. If an employee terminates employment
with the Company or a subsidiary for any reason prior to December 31, 2000, the
employee will not be entitled to receive an award under the Plan. In addition,
an employee must be an active employee of the Company or any subsidiary as of
the date of payment to receive an award under the Plan; provided, however, if
the employee is on an a Company-approved leave of absence, becomes disabled, or
dies before the date of the payment (but after December 31, 2000), the employee
will be entitled to receive a payment under the Plan. If an employee retires
during the calendar year 2000, the employee will be entitled to receive payment,
prorated on the basis of the months of services during that calendar year.

8.       Former Cherry Employees. Former Cherry Semiconductor employees may
receive payouts under his plan on a pro-rated basis on the date of the
acquisition or date of hire, which ever is later.


                                                                               3

   1
                                                                   Exhibit 10.40

                                ON SEMICONDUCTOR
                        2000 MANUFACTURING INCENTIVE PLAN

1.       Purpose. The Purpose of the ON Semiconductor 2000 Manufacturing
Incentive Plan ("Plan") is to provide an annual incentive program for the
Manufacturing employees who are normally affiliated with a manufacturing
facility of the Company or any subsidiary. The Plan was effective as of January
1, 2000 and will terminate on December 31, 2000.

2.       Administration. The Plan is administered by the Compensation Committee
of the Company's Board of Directors ("Committee"). The Committee has the
discretion to determine all matters related to the Plan, including but not
limited to, matters related to eligibility, participation, Company and Employee
Goals, award determinations, and any other administrative matter to be
determined under the Plan.

3.       Eligibility and Participation.

         (a) Eligibility. Regular full-time and part-time employees of the
Company or any subsidiary working 20 hours or more per week with a manufacturing
facility of the Company are eligible to participate in the Plan. Any employee of
the Company or a subsidiary who is designated as an on-call, intern, co-op,
part-time working less than 20 hours, or any individual designated as a
contractor, consultant, or hired via a temporary staffing agency is not eligible
to participate in the Plan.

         (b) Participation. From among the eligible employees of the Company or
any subsidiary, the Company will determine those individuals who will
participate in the Plan. The Committee will notify those selected to participate
in the manufacturing Plan as soon as practicable after they are determined. If
an employee is determined as eligible, within a manufacturing facility, to
participate in the Plan, except as provided below, he or she must be actively
employed by the Company or any subsidiary at the time that the amounts are paid
under the Plan to be entitled to receive an award under the Plan.

4.       Performance Measures.

         An employee's total award under the Plan is computed based on (i) the
employee's base salary, (ii) whether the Company achieves its "threshold" EBITDA
goal, and (iii) whether the manufacturing plant meets its manufacturing goals.
EBITDA means the Company's Earnings Before Interest, Taxes, Depreciation, and
Amortization and is determined after December 31, 2000.

         (a) Employee's Target Bonus. Under the Plan, an employee's target bonus
amount is determined by the Committee and will generally range from 2% to 10% of
the employee's base salary as of December 31, 2000.


                                                                               1
   2

         (b) Company Threshold EBITDA Goals.

                  (i) For former employees of Cherry Semiconductor, the
Company's EBITDA goals for calendar year 2000, including financial results from
the combined Cherry Semiconductor and the Company, are as follows:



                        EBITDA GOAL              COMPANY EBITDA
                                              
                         Threshold                $425,000,000


                  (ii) For employees of the Company or any subsidiary, other
than former employees of Cherry Semiconductor, the Company's EBITDA goals for
calendar year 2000, not including financial results from Cherry Semiconductor,
are as follows:



                        EBITDA GOAL              COMPANY EBITDA
                                              
                         Threshold                $400,000,000



                  The Committee reserves the right to amend the Threshold EBITDA
goals in the event of a future acquisition, disposition, or other significant
event affecting the Company or any subsidiary.

         (c)      The Employee's individual performance goals are not a factor
in determining the individual employee's award; the entire award is based on the
Company meeting its EBITDA goals as described above.

5.       Award Determination.

         (a)      Manufacturing goals. Each plant determines the weight of each
measurement category by placing a certain percentage on each of the three
measures: Cycle time; Shipments; and Costs.

         (b)      EBITDA Goals. If the Company does not achieve the Threshold
EBITDA goal, no amounts will be paid under the Plan (either based on Company
performance or the individual plant's performance).

         The Committee will adjust these percentage on a pro rata basis if the
Company's EBITDA falls in between the Threshold, Target, and Stretch EBITDA
goals.

6.       Transfers, Promotions, New Hires, and Salary Adjustments.



              TYPE OF CHANGE                        EFFECT ON AWARDS
                                         
Move into Eligible Position and New Hires   Eligible for participation in Plan
                                            if moved in or hired before December
                                            1, 2000. Award prorated on the basis
                                            of months of service in eligible
                                            position.

Move Into Ineligible Position               Award prorated at end of Plan Year
                                            on the basis of months of service in
                                            eligible position.

Move Into Another Eligible Position         Award prorated on the basis of
                                            months of service in each position
                                            for the varying target bonus
                                            percentages.

Change of Salary                            No impact. The employee's base
                                            salary on December 31, 2000
                                            determines the employee's target
                                            bonus percentage.



                                                                               2
   3

7.       Effect of Termination on Award. If an employee terminates employment
with the Company or a subsidiary for any reason prior to December 31, 2000, the
employee will not be entitled to receive an award under the Plan. In addition,
an employee must be an active employee of the Company or any subsidiary as of
the date of payment to receive an award under the Plan; provided, however, if
the employee is on an a Company-approved leave of absence, becomes disabled, or
dies before the date of the payment (but after December 31, 2000), the employee
will be entitled to receive a payment under the Plan. If an employee retires
during the calendar year 2000, the employee will be entitled to receive payment,
prorated on the basis of the months of services during that calendar year.

8.       Former Cherry Employees. Former Cherry Semiconductor employees may
receive payouts under this plan on a pro-rated basis on the date of the
acquisition or date of hire, which ever is later.


                                                                               3

   1
                                                                   Exhibit 10.41


                             SCG HOLDING CORPORATION
                            2000 STOCK INCENTIVE PLAN
                      NON-QUALIFIED STOCK OPTION AGREEMENT
                                  FOR DIRECTORS


      This Option Agreement is made and entered into by and between SCG HOLDING
CORPORATION ("Company") and CURTIS J. CRAWFORD ("Optionee"), as of the 12th day
of May, 2000 ("Date of Grant").

                                    RECITALS


      A. The Board of Directors of the Company has adopted the SCG Holding
Corporation 2000 Stock Incentive Plan ("Plan") as an incentive to retain members
of the Board of Directors, key employees, officers, and consultants of the
Company and to enhance the ability of the Company to attract such individuals
whose services are considered unusually valuable by providing an opportunity for
them to have a proprietary interest in the success of the Company.

      B. The Board has approved the granting of options to the Optionee pursuant
to the Plan to provide an incentive to the Optionee to focus on the long-term
growth of the Company.

      In consideration of the mutual covenants and conditions hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and the Optionee agree as follows:

            1. GRANT OF OPTION. The Company hereby grants to the Optionee the
right and option (hereinafter referred to as the "Option") to purchase an
aggregate of 7,017 shares (such number being subject to adjustment as provided
in paragraph 11 hereof and Section 14 of the Plan) of the Common Stock of the
Company (the "Stock") on the terms and conditions herein set forth. This Option
may be exercised in whole or in part and from time to time as hereinafter
provided. The Option granted under this Agreement is NOT intended to be an
"incentive stock option" as set forth in Section 422 of the Internal Revenue
Code of 1986, as amended.

            2. VESTING OF OPTION. The Option shall vest and become exercisable
in accordance with the schedule below:

      -     33 1/3% of the Option grant shall become exercisable on May 12,
            2001;

      -     an additional 33 1/3% of the Option grant shall become exercisable
            on May 12, 2002; and

      -     the final 33 1/3% of the Option grant shall become exercisable on
            May 12, 2003.

            3. PURCHASE PRICE. The price at which the Optionee shall be entitled
to purchase the Stock covered by the Option shall be $21.375 per share.
   2
            4. TERM OF OPTION. The Option granted under this Agreement shall
expire, unless otherwise exercised, ten years from the Date of Grant, through
and including the normal close of business of the Company on May 12, 2010
("Expiration Date"), subject to earlier termination as provided in paragraph 8
hereof.

            5. EXERCISE OF OPTION. The Option may be exercised by the Optionee
as to all or any part of the Stock then vested by delivery to the Company of
written notice of exercise and payment of the purchase price as provided in
paragraphs 6 and 7 hereof.

            6. METHOD OF EXERCISING OPTION. Subject to the terms and conditions
of this Option Agreement, the Option may be exercised by timely delivery to the
Company of written notice, which notice shall be effective on the date received
by the Company ("Effective Date"). The notice shall state the Optionee's
election to exercise the Option, the number of shares in respect of which an
election to exercise has been made, the method of payment elected (see paragraph
7 hereof), the exact name or names in which the shares will be registered and
the Social Security number of the Optionee. Such notice shall be signed by the
Optionee and shall be accompanied by payment of the purchase price of such
shares. In the event the Option shall be exercised by a person or persons other
than Optionee pursuant to paragraph 8 hereof, such notice shall be signed by
such other person or persons and shall be accompanied by proof acceptable to the
Company of the legal right of such person or persons to exercise the Option. All
shares delivered by the Company upon exercise of the Option shall be fully paid
and nonassessable upon delivery.

            7. METHOD OF PAYMENT FOR OPTIONS. Payment for shares purchased upon
the exercise of the Option shall be made by the Optionee in cash,
previously-acquired Stock held for more than six months (through actual tender
or by attestation), broker-assisted cashless exercise arrangement, or such other
method permitted by the Board and communicated to the Optionee in writing prior
to the date the Optionee exercises all or any portion of the Option.

            8. TERMINATION OF SERVICES.

               8.1 GENERAL. If the Optionee ceases to perform services as a
member of the Board of Directors of the Company for any reason other than death
or Disability, then the Optionee may at any time within ninety (90) days after
the effective date of termination of services exercise the Option to the extent
that the Optionee was entitled to exercise the Option at the date of
termination, provided that the Option shall lapse immediately upon a termination
for Cause. In no event shall the Option be exercisable after the Expiration
Date. Any portion of the Option that is not vested on the date the Optionee
ceases to perform services as a Company Director, shall be forfeited on such
date.

               8.2       DEATH OR DISABILITY OF OPTIONEE. In the event of the
death or Disabili (as that term is defined in the Plan) of the Optionee within
a period during which the Option, or any part thereof, could have been
exercised by the Optionee, including ninety (90) days after termination of
services (the "Option Period"), the Option shall lapse unless it is exercised
within the Option Period and in no event later than twelve (12) months after
the date of the Optionee's death or Disability by the Optionee or the
Optionee's legal representative or representatives in the case of a Disability
or, in the case of death, by the person or persons


                                       2
   3
entitled to do so under the Optionee's last will and testament or if the
Optionee fails to make a testamentary disposition of such Option or shall die
intestate, by the person or persons entitled to receive such Option under the
applicable laws of descent and distribution. An Option may be exercised
following the death or Disability of the Optionee only if the Option was
exercisable by the Optionee immediately prior to his death or Disability. In no
event shall the Option be exercisable after the Expiration Date. The Board shall
have the right to require evidence satisfactory to it of the rights of any
person or persons seeking to exercise the Option under this paragraph 8 to
exercise the Option.

            9.  NONTRANSFERABILITY. The Option granted by this Option Agreement
shall be exercisable only during the term of the Option provided in paragraph 4
hereof and, except as provided in paragraph 8 above, only by the Optionee during
his lifetime and while a Director of the Company. Except as otherwise permitted
by the Committee, this Option shall not be transferable by the Optionee or any
other person claiming through the Optionee, either voluntarily or involuntarily,
except by will or the laws of descent and distribution.

            10. MARKET STAND-OFF AGREEMENT. The Optionee, if requested by the
Company and an underwriter of Stock (or other securities) of the Company, agrees
not to sell or otherwise transfer or dispose of any Stock (or other securities)
of the Company held by the Optionee during the period not to exceed 180 days as
requested by the managing underwriter following the effective date of a
registration statement of the Company filed under the Securities Act. Such
agreement shall be in writing in a form satisfactory to the Company and such
underwriter. The Company may impose stop transfer instructions with respect to
the Stock (or other securities) subject to the foregoing restriction until the
end of such project.

            11. ADJUSTMENTS IN NUMBER OF SHARES AND OPTION PRICE. In the event
of a stock dividend or in the event the Stock shall be changed into or exchanged
for a different number or class of shares of stock of the Company or of another
corporation, whether through reorganization, recapitalization, stock split-up,
combination of shares, merger or consolidation, there shall be substituted for
each such remaining share of Stock then subject to this Option the number and
class of shares of stock into which each outstanding share of Stock shall be so
exchanged, all without any change in the aggregate purchase price for the shares
then subject to the Option, all as set forth in Section 14 of the Plan.

            12. DELIVERY OF SHARES. No shares of Stock shall be delivered upon
exercise of the Option until (i) the purchase price shall have been paid in full
in the manner herein provided; (ii) applicable taxes required to be withheld
have been paid or withheld in full; (iii) approval of any governmental authority
required in connection with the Option, or the issuance of shares thereunder,
has been received by the Company; and (iv) if required by the Board, the
Optionee has delivered to the Board an Investment Letter in form and content
satisfactory to the Company as provided in paragraph 13 hereof.

            13. SECURITIES ACT. The Company shall not be required to deliver any
shares of Stock pursuant to the exercise of all or any part of the Option if, in
the opinion of counsel for the Company, such issuance would violate the
Securities Act of 1933 or any other applicable federal or state securities laws
or regulations. The Board may require that the Optionee, prior to the issuance
of any such shares pursuant to exercise of the Option, sign and deliver to the


                                       3
   4
Company a written statement ("Investment Letter") stating (i) that the Optionee
is purchasing the shares for investment and not with a view to the sale or
distribution thereof; (ii) that the Optionee will not sell any shares received
upon exercise of the Option or any other shares of the Company that the Optionee
may then own or thereafter acquire except either (a) through a broker on a
national securities exchange or (b) with the prior written approval of the
Company; and (iii) containing such other terms and conditions as counsel for the
Company may reasonably require to assure compliance with the Securities Act of
1933 or other applicable federal or state securities laws and regulations. Such
Investment Letter shall be in form and content acceptable to the Board in its
sole discretion.

            14. DEFINITIONS; COPY OF PLAN. To the extent not specifically
provided herein, all capitalized terms used in this Option Agreement shall have
the same meanings ascribed to them in the Plan. By the execution of this
Agreement, the Optionee acknowledges receipt of a copy of the Plan.

            15. ADMINISTRATION. This Option Agreement shall at all times be
subject to the terms and conditions of the Plan and the Plan shall in all
respects be administered by the Board in accordance with the terms of and as
provided in the Plan. The Board shall have the sole and complete discretion with
respect to all matters reserved to it by the Plan and decisions of the majority
of the Board with respect thereto and to this Option Agreement shall be final
and binding upon the Optionee and the Company. In the event of any conflict
between the terms and conditions of this Option Agreement and the Plan, the
provisions of the Plan shall control.

            16. CONTINUATION OF SERVICES. This Option Agreement shall not be
construed to confer upon the Optionee any right to continue providing services
as a Company Director and shall not limit the right of the Company, in its sole
discretion, to terminate the services of the Optionee at any time.

            17. OBLIGATION TO EXERCISE. The Optionee shall have no obligation to
exercise any option granted by this Agreement.

            18. GOVERNING LAW. This Option Agreement shall be interpreted and
administered under the laws of the State of Delaware.

            19. AMENDMENTS. This Option Agreement may be amended only by a
written agreement executed by the Company and the Optionee. The Company and the
Optionee acknowledge that changes in federal tax laws enacted subsequent to the
Date of Grant, and applicable to stock options, may provide for tax benefits to
the Company or the Optionee. In any such event, the Company and the Optionee
agree that this Option Agreement may be amended as necessary to secure for the
Company and the Optionee any benefits that may result from such legislation. Any
such amendment shall be made only upon the mutual consent of the parties, which
consent (of either party) may be withheld for any reason.


                                       4
   5
      IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
signed by its duly authorized representative and the Optionee has signed this
Option Agreement as of the date first written above.


SCG HOLDING CORPORATION                 OPTIONEE/CURTIS J. CRAWFORD



By: /s/ George H. Cave                   /s/ Curtis J. Crawford
    ------------------                   ----------------------

Its: Vice President & Secretary
     --------------------------



                                       5

   1
                                                                   Exhibit 10.42


                             SCG HOLDING CORPORATION
                            2000 STOCK INCENTIVE PLAN
                      NON-QUALIFIED STOCK OPTION AGREEMENT
                                  FOR DIRECTORS


      This Option Agreement is made and entered into by and between SCG HOLDING
CORPORATION ("Company") and DAVID BONDERMAN ("Optionee"), as of the 12th day of
May, 2000 ("Date of Grant").

                                    RECITALS


      A. The Board of Directors of the Company has adopted the SCG Holding
Corporation 2000 Stock Incentive Plan ("Plan") as an incentive to retain members
of the Board of Directors, key employees, officers, and consultants of the
Company and to enhance the ability of the Company to attract such individuals
whose services are considered unusually valuable by providing an opportunity for
them to have a proprietary interest in the success of the Company.

      B. The Board has approved the granting of options to the Optionee pursuant
to the Plan to provide an incentive to the Optionee to focus on the long-term
growth of the Company.

      In consideration of the mutual covenants and conditions hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and the Optionee agree as follows:

            1. GRANT OF OPTION. The Company hereby grants to the Optionee the
right and option (hereinafter referred to as the "Option") to purchase an
aggregate of 7,017 shares (such number being subject to adjustment as provided
in paragraph 11 hereof and Section 14 of the Plan) of the Common Stock of the
Company (the "Stock") on the terms and conditions herein set forth. This Option
may be exercised in whole or in part and from time to time as hereinafter
provided. The Option granted under this Agreement is NOT intended to be an
"incentive stock option" as set forth in Section 422 of the Internal Revenue
Code of 1986, as amended.

            2. VESTING OF OPTION. The Option shall vest and become exercisable
in accordance with the schedule below:

      -     33 1/3% of the Option grant shall become exercisable on May 12,
            2001;

      -     an additional 33 1/3% of the Option grant shall become exercisable
            on May 12, 2002; and

      -     the final 33 1/3% of the Option grant shall become exercisable on
            May 12, 2003.

            3. PURCHASE PRICE. The price at which the Optionee shall be entitled
to purchase the Stock covered by the Option shall be $21.375 per share.
   2
            4. TERM OF OPTION. The Option granted under this Agreement shall
expire, unless otherwise exercised, ten years from the Date of Grant, through
and including the normal close of business of the Company on May 12, 2010
("Expiration Date"), subject to earlier termination as provided in paragraph 8
hereof.

            5. EXERCISE OF OPTION. The Option may be exercised by the Optionee
as to all or any part of the Stock then vested by delivery to the Company of
written notice of exercise and payment of the purchase price as provided in
paragraphs 6 and 7 hereof.

            6. METHOD OF EXERCISING OPTION. Subject to the terms and conditions
of this Option Agreement, the Option may be exercised by timely delivery to the
Company of written notice, which notice shall be effective on the date received
by the Company ("Effective Date"). The notice shall state the Optionee's
election to exercise the Option, the number of shares in respect of which an
election to exercise has been made, the method of payment elected (see paragraph
7 hereof), the exact name or names in which the shares will be registered and
the Social Security number of the Optionee. Such notice shall be signed by the
Optionee and shall be accompanied by payment of the purchase price of such
shares. In the event the Option shall be exercised by a person or persons other
than Optionee pursuant to paragraph 8 hereof, such notice shall be signed by
such other person or persons and shall be accompanied by proof acceptable to the
Company of the legal right of such person or persons to exercise the Option. All
shares delivered by the Company upon exercise of the Option shall be fully paid
and nonassessable upon delivery.

            7. METHOD OF PAYMENT FOR OPTIONS. Payment for shares purchased upon
the exercise of the Option shall be made by the Optionee in cash,
previously-acquired Stock held for more than six months (through actual tender
or by attestation), broker-assisted cashless exercise arrangement, or such other
method permitted by the Board and communicated to the Optionee in writing prior
to the date the Optionee exercises all or any portion of the Option.

            8. TERMINATION OF SERVICES.

               8.1       GENERAL. If the Optionee ceases to perform services as
a member of the Board of Directors of the Company for any reason other than
death or Disability, then the Optionee may at any time within ninety (90) days
after the effective date of termination of services exercise the Option to the
extent that the Optionee was entitled to exercise the Option at the date of
termination, provided that the Option shall lapse immediately upon a
termination for Cause. In no event shall the Option be exercisable after the
Expiration Date. Any portion of the Option that is not vested on the date the
Optionee ceases to perform services as a Company Director, shall be forfeited
on such date.

               8.2       DEATH OR DISABILITY OF OPTIONEE. In the event of the
death or Disability (as that term is defined in the Plan) of the Optionee
within a period during which the Option, or any part thereof, could have been
exercised by the Optionee, including ninety (90) days after termination of
services (the "Option Period"), the Option shall lapse unless it is exercised
within the Option Period and in no event later than twelve (12) months after
the date of the Optionee's death or Disability by the Optionee or the
Optionee's legal representative or representatives in the case of a Disability
or, in the case of death, by the person or persons


                                       2
   3
entitled to do so under the Optionee's last will and testament or if the
Optionee fails to make a testamentary disposition of such Option or shall die
intestate, by the person or persons entitled to receive such Option under the
applicable laws of descent and distribution. An Option may be exercised
following the death or Disability of the Optionee only if the Option was
exercisable by the Optionee immediately prior to his death or Disability. In no
event shall the Option be exercisable after the Expiration Date. The Board shall
have the right to require evidence satisfactory to it of the rights of any
person or persons seeking to exercise the Option under this paragraph 8 to
exercise the Option.

            9.  NONTRANSFERABILITY. The Option granted by this Option Agreement
shall be exercisable only during the term of the Option provided in paragraph 4
hereof and, except as provided in paragraph 8 above, only by the Optionee during
his lifetime and while a Director of the Company. Except as otherwise permitted
by the Committee, this Option shall not be transferable by the Optionee or any
other person claiming through the Optionee, either voluntarily or involuntarily,
except by will or the laws of descent and distribution.

            10. MARKET STAND-OFF AGREEMENT. The Optionee, if requested by the
Company and an underwriter of Stock (or other securities) of the Company, agrees
not to sell or otherwise transfer or dispose of any Stock (or other securities)
of the Company held by the Optionee during the period not to exceed 180 days as
requested by the managing underwriter following the effective date of a
registration statement of the Company filed under the Securities Act. Such
agreement shall be in writing in a form satisfactory to the Company and such
underwriter. The Company may impose stop transfer instructions with respect to
the Stock (or other securities) subject to the foregoing restriction until the
end of such project.

            11. ADJUSTMENTS IN NUMBER OF SHARES AND OPTION PRICE. In the event
of a stock dividend or in the event the Stock shall be changed into or exchanged
for a different number or class of shares of stock of the Company or of another
corporation, whether through reorganization, recapitalization, stock split-up,
combination of shares, merger or consolidation, there shall be substituted for
each such remaining share of Stock then subject to this Option the number and
class of shares of stock into which each outstanding share of Stock shall be so
exchanged, all without any change in the aggregate purchase price for the shares
then subject to the Option, all as set forth in Section 14 of the Plan.

            12. DELIVERY OF SHARES. No shares of Stock shall be delivered upon
exercise of the Option until (i) the purchase price shall have been paid in full
in the manner herein provided; (ii) applicable taxes required to be withheld
have been paid or withheld in full; (iii) approval of any governmental authority
required in connection with the Option, or the issuance of shares thereunder,
has been received by the Company; and (iv) if required by the Board, the
Optionee has delivered to the Board an Investment Letter in form and content
satisfactory to the Company as provided in paragraph 13 hereof.

            13. SECURITIES ACT. The Company shall not be required to deliver any
shares of Stock pursuant to the exercise of all or any part of the Option if, in
the opinion of counsel for the Company, such issuance would violate the
Securities Act of 1933 or any other applicable federal or state securities laws
or regulations. The Board may require that the Optionee, prior to the issuance
of any such shares pursuant to exercise of the Option, sign and deliver to the


                                       3
   4
Company a written statement ("Investment Letter") stating (i) that the Optionee
is purchasing the shares for investment and not with a view to the sale or
distribution thereof; (ii) that the Optionee will not sell any shares received
upon exercise of the Option or any other shares of the Company that the Optionee
may then own or thereafter acquire except either (a) through a broker on a
national securities exchange or (b) with the prior written approval of the
Company; and (iii) containing such other terms and conditions as counsel for the
Company may reasonably require to assure compliance with the Securities Act of
1933 or other applicable federal or state securities laws and regulations. Such
Investment Letter shall be in form and content acceptable to the Board in its
sole discretion.

            14. DEFINITIONS; COPY OF PLAN. To the extent not specifically
provided herein, all capitalized terms used in this Option Agreement shall have
the same meanings ascribed to them in the Plan. By the execution of this
Agreement, the Optionee acknowledges receipt of a copy of the Plan.

            15. ADMINISTRATION. This Option Agreement shall at all times be
subject to the terms and conditions of the Plan and the Plan shall in all
respects be administered by the Board in accordance with the terms of and as
provided in the Plan. The Board shall have the sole and complete discretion with
respect to all matters reserved to it by the Plan and decisions of the majority
of the Board with respect thereto and to this Option Agreement shall be final
and binding upon the Optionee and the Company. In the event of any conflict
between the terms and conditions of this Option Agreement and the Plan, the
provisions of the Plan shall control.

            16. CONTINUATION OF SERVICES. This Option Agreement shall not be
construed to confer upon the Optionee any right to continue providing services
as a Company Director and shall not limit the right of the Company, in its sole
discretion, to terminate the services of the Optionee at any time.

            17. OBLIGATION TO EXERCISE. The Optionee shall have no obligation to
exercise any option granted by this Agreement.

            18. GOVERNING LAW. This Option Agreement shall be interpreted and
administered under the laws of the State of Delaware.

            19. AMENDMENTS. This Option Agreement may be amended only by a
written agreement executed by the Company and the Optionee. The Company and the
Optionee acknowledge that changes in federal tax laws enacted subsequent to the
Date of Grant, and applicable to stock options, may provide for tax benefits to
the Company or the Optionee. In any such event, the Company and the Optionee
agree that this Option Agreement may be amended as necessary to secure for the
Company and the Optionee any benefits that may result from such legislation. Any
such amendment shall be made only upon the mutual consent of the parties, which
consent (of either party) may be withheld for any reason.


                                       4
   5
      IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
signed by its duly authorized representative and the Optionee has signed this
Option Agreement as of the date first written above.


SCG HOLDING CORPORATION                 OPTIONEE/DAVID BONDERMAN



By: /s/ George H. Cave                  /s/ David Bonderman
    ------------------                  -------------------

Its: Vice President & Secretary
     --------------------------


                                       5

   1
                                                                   Exhibit 10.43


                             SCG HOLDING CORPORATION
                            2000 STOCK INCENTIVE PLAN
                      NON-QUALIFIED STOCK OPTION AGREEMENT
                                  FOR DIRECTORS


      This Option Agreement is made and entered into by and between SCG HOLDING
CORPORATION ("Company") and RICHARD W. BOYCE ("Optionee"), as of the 12th day of
May, 2000 ("Date of Grant").

                                    RECITALS


      A. The Board of Directors of the Company has adopted the SCG Holding
Corporation 2000 Stock Incentive Plan ("Plan") as an incentive to retain members
of the Board of Directors, key employees, officers, and consultants of the
Company and to enhance the ability of the Company to attract such individuals
whose services are considered unusually valuable by providing an opportunity for
them to have a proprietary interest in the success of the Company.

      B. The Board has approved the granting of options to the Optionee pursuant
to the Plan to provide an incentive to the Optionee to focus on the long-term
growth of the Company.

      In consideration of the mutual covenants and conditions hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and the Optionee agree as follows:

            1. GRANT OF OPTION. The Company hereby grants to the Optionee the
right and option (hereinafter referred to as the "Option") to purchase an
aggregate of 7,017 shares (such number being subject to adjustment as provided
in paragraph 11 hereof and Section 14 of the Plan) of the Common Stock of the
Company (the "Stock") on the terms and conditions herein set forth. This Option
may be exercised in whole or in part and from time to time as hereinafter
provided. The Option granted under this Agreement is NOT intended to be an
"incentive stock option" as set forth in Section 422 of the Internal Revenue
Code of 1986, as amended.

            2. VESTING OF OPTION. The Option shall vest and become exercisable
in accordance with the schedule below:

      -     33 1/3% of the Option grant shall become exercisable on May 12,
            2001;

      -     an additional 33 1/3% of the Option grant shall become exercisable
            on May 12, 2002; and

      -     the final 33 1/3% of the Option grant shall become exercisable on
            May 12, 2003.

            3. PURCHASE PRICE. The price at which the Optionee shall be entitled
to purchase the Stock covered by the Option shall be $21.375 per share.
   2
            4. TERM OF OPTION. The Option granted under this Agreement shall
expire, unless otherwise exercised, ten years from the Date of Grant, through
and including the normal close of business of the Company on May 12, 2010
("Expiration Date"), subject to earlier termination as provided in paragraph 8
hereof.

            5. EXERCISE OF OPTION. The Option may be exercised by the Optionee
as to all or any part of the Stock then vested by delivery to the Company of
written notice of exercise and payment of the purchase price as provided in
paragraphs 6 and 7 hereof.

            6. METHOD OF EXERCISING OPTION. Subject to the terms and conditions
of this Option Agreement, the Option may be exercised by timely delivery to the
Company of written notice, which notice shall be effective on the date received
by the Company ("Effective Date"). The notice shall state the Optionee's
election to exercise the Option, the number of shares in respect of which an
election to exercise has been made, the method of payment elected (see paragraph
7 hereof), the exact name or names in which the shares will be registered and
the Social Security number of the Optionee. Such notice shall be signed by the
Optionee and shall be accompanied by payment of the purchase price of such
shares. In the event the Option shall be exercised by a person or persons other
than Optionee pursuant to paragraph 8 hereof, such notice shall be signed by
such other person or persons and shall be accompanied by proof acceptable to the
Company of the legal right of such person or persons to exercise the Option. All
shares delivered by the Company upon exercise of the Option shall be fully paid
and nonassessable upon delivery.

            7. METHOD OF PAYMENT FOR OPTIONS. Payment for shares purchased upon
the exercise of the Option shall be made by the Optionee in cash,
previously-acquired Stock held for more than six months (through actual tender
or by attestation), broker-assisted cashless exercise arrangement, or such other
method permitted by the Board and communicated to the Optionee in writing prior
to the date the Optionee exercises all or any portion of the Option.

            8. TERMINATION OF SERVICES.

               8.1       GENERAL. If the Optionee ceases to perform services as
a member of the Board of Directors of the Company for any reason other than
death or Disability, then the Optionee may at any time within ninety (90) days
after the effective date of termination of services exercise the Option to the
extent that the Optionee was entitled to exercise the Option at the date of
termination, provided that the Option shall lapse immediately upon a
termination for Cause. In no event shall the Option be exercisable after the
Expiration Date. Any portion of the Option that is not vested on the date the
Optionee ceases to perform services as a Company Director, shall be forfeited
on such date.

               8.2       DEATH OR DISABILITY OF OPTIONEE. In the event of the
death or Disability (as that term is defined in the Plan) of the Optionee
within a period during which the Option, or any part thereof, could have been
exercised by the Optionee, including ninety (90) days after termination of
services (the "Option Period"), the Option shall lapse unless it is exercised
within the Option Period and in no event later than twelve (12) months after
the date of the Optionee's death or Disability by the Optionee or the
Optionee's legal representative or representatives in the case of a Disability
or, in the case of death, by the person or persons


                                       2
   3
entitled to do so under the Optionee's last will and testament or if the
Optionee fails to make a testamentary disposition of such Option or shall die
intestate, by the person or persons entitled to receive such Option under the
applicable laws of descent and distribution. An Option may be exercised
following the death or Disability of the Optionee only if the Option was
exercisable by the Optionee immediately prior to his death or Disability. In no
event shall the Option be exercisable after the Expiration Date. The Board shall
have the right to require evidence satisfactory to it of the rights of any
person or persons seeking to exercise the Option under this paragraph 8 to
exercise the Option.

            9.  NONTRANSFERABILITY. The Option granted by this Option Agreement
shall be exercisable only during the term of the Option provided in paragraph 4
hereof and, except as provided in paragraph 8 above, only by the Optionee during
his lifetime and while a Director of the Company. Except as otherwise permitted
by the Committee, this Option shall not be transferable by the Optionee or any
other person claiming through the Optionee, either voluntarily or involuntarily,
except by will or the laws of descent and distribution.

            10. MARKET STAND-OFF AGREEMENT. The Optionee, if requested by the
Company and an underwriter of Stock (or other securities) of the Company, agrees
not to sell or otherwise transfer or dispose of any Stock (or other securities)
of the Company held by the Optionee during the period not to exceed 180 days as
requested by the managing underwriter following the effective date of a
registration statement of the Company filed under the Securities Act. Such
agreement shall be in writing in a form satisfactory to the Company and such
underwriter. The Company may impose stop transfer instructions with respect to
the Stock (or other securities) subject to the foregoing restriction until the
end of such project.

            11. ADJUSTMENTS IN NUMBER OF SHARES AND OPTION PRICE. In the event
of a stock dividend or in the event the Stock shall be changed into or exchanged
for a different number or class of shares of stock of the Company or of another
corporation, whether through reorganization, recapitalization, stock split-up,
combination of shares, merger or consolidation, there shall be substituted for
each such remaining share of Stock then subject to this Option the number and
class of shares of stock into which each outstanding share of Stock shall be so
exchanged, all without any change in the aggregate purchase price for the shares
then subject to the Option, all as set forth in Section 14 of the Plan.

            12. DELIVERY OF SHARES. No shares of Stock shall be delivered upon
exercise of the Option until (i) the purchase price shall have been paid in full
in the manner herein provided; (ii) applicable taxes required to be withheld
have been paid or withheld in full; (iii) approval of any governmental authority
required in connection with the Option, or the issuance of shares thereunder,
has been received by the Company; and (iv) if required by the Board, the
Optionee has delivered to the Board an Investment Letter in form and content
satisfactory to the Company as provided in paragraph 13 hereof.

            13. SECURITIES ACT. The Company shall not be required to deliver any
shares of Stock pursuant to the exercise of all or any part of the Option if, in
the opinion of counsel for the Company, such issuance would violate the
Securities Act of 1933 or any other applicable federal or state securities laws
or regulations. The Board may require that the Optionee, prior to the issuance
of any such shares pursuant to exercise of the Option, sign and deliver to the


                                       3
   4
Company a written statement ("Investment Letter") stating (i) that the Optionee
is purchasing the shares for investment and not with a view to the sale or
distribution thereof; (ii) that the Optionee will not sell any shares received
upon exercise of the Option or any other shares of the Company that the Optionee
may then own or thereafter acquire except either (a) through a broker on a
national securities exchange or (b) with the prior written approval of the
Company; and (iii) containing such other terms and conditions as counsel for the
Company may reasonably require to assure compliance with the Securities Act of
1933 or other applicable federal or state securities laws and regulations. Such
Investment Letter shall be in form and content acceptable to the Board in its
sole discretion.

            14. DEFINITIONS; COPY OF PLAN. To the extent not specifically
provided herein, all capitalized terms used in this Option Agreement shall have
the same meanings ascribed to them in the Plan. By the execution of this
Agreement, the Optionee acknowledges receipt of a copy of the Plan.

            15. ADMINISTRATION. This Option Agreement shall at all times be
subject to the terms and conditions of the Plan and the Plan shall in all
respects be administered by the Board in accordance with the terms of and as
provided in the Plan. The Board shall have the sole and complete discretion with
respect to all matters reserved to it by the Plan and decisions of the majority
of the Board with respect thereto and to this Option Agreement shall be final
and binding upon the Optionee and the Company. In the event of any conflict
between the terms and conditions of this Option Agreement and the Plan, the
provisions of the Plan shall control.

            16. CONTINUATION OF SERVICES. This Option Agreement shall not be
construed to confer upon the Optionee any right to continue providing services
as a Company Director and shall not limit the right of the Company, in its sole
discretion, to terminate the services of the Optionee at any time.

            17. OBLIGATION TO EXERCISE. The Optionee shall have no obligation to
exercise any option granted by this Agreement.

            18. GOVERNING LAW. This Option Agreement shall be interpreted and
administered under the laws of the State of Delaware.

            19. AMENDMENTS. This Option Agreement may be amended only by a
written agreement executed by the Company and the Optionee. The Company and the
Optionee acknowledge that changes in federal tax laws enacted subsequent to the
Date of Grant, and applicable to stock options, may provide for tax benefits to
the Company or the Optionee. In any such event, the Company and the Optionee
agree that this Option Agreement may be amended as necessary to secure for the
Company and the Optionee any benefits that may result from such legislation. Any
such amendment shall be made only upon the mutual consent of the parties, which
consent (of either party) may be withheld for any reason.


                                       4
   5
      IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
signed by its duly authorized representative and the Optionee has signed this
Option Agreement as of the date first written above.


SCG HOLDING CORPORATION                 OPTIONEE/RICHARD W. BOYCE



By: /s/ George H. Cave                  /s/ Richard W. Boyce
    ------------------                  --------------------

Its: Vice President & Secretary
     --------------------------


                                       5

   1
                                                                   Exhibit 10.44


                             SCG HOLDING CORPORATION
                            2000 STOCK INCENTIVE PLAN
                      NON-QUALIFIED STOCK OPTION AGREEMENT
                                  FOR DIRECTORS


      This Option Agreement is made and entered into by and between SCG HOLDING
CORPORATION ("Company") and JUSTIN T. CHANG ("Optionee"), as of the 12th day of
May, 2000 ("Date of Grant").

                                    RECITALS


      A. The Board of Directors of the Company has adopted the SCG Holding
Corporation 2000 Stock Incentive Plan ("Plan") as an incentive to retain members
of the Board of Directors, key employees, officers, and consultants of the
Company and to enhance the ability of the Company to attract such individuals
whose services are considered unusually valuable by providing an opportunity for
them to have a proprietary interest in the success of the Company.

      B. The Board has approved the granting of options to the Optionee pursuant
to the Plan to provide an incentive to the Optionee to focus on the long-term
growth of the Company.

      In consideration of the mutual covenants and conditions hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and the Optionee agree as follows:

            1. GRANT OF OPTION. The Company hereby grants to the Optionee the
right and option (hereinafter referred to as the "Option") to purchase an
aggregate of 7,017 shares (such number being subject to adjustment as provided
in paragraph 11 hereof and Section 14 of the Plan) of the Common Stock of the
Company (the "Stock") on the terms and conditions herein set forth. This Option
may be exercised in whole or in part and from time to time as hereinafter
provided. The Option granted under this Agreement is NOT intended to be an
"incentive stock option" as set forth in Section 422 of the Internal Revenue
Code of 1986, as amended.

            2. VESTING OF OPTION. The Option shall vest and become exercisable
in accordance with the schedule below:

      -     33 1/3% of the Option grant shall become exercisable on May 12,
            2001;

      -     an additional 33 1/3% of the Option grant shall become exercisable
            on May 12, 2002; and

      -     the final 33 1/3% of the Option grant shall become exercisable on
            May 12, 2003.

            3. PURCHASE PRICE. The price at which the Optionee shall be entitled
to purchase the Stock covered by the Option shall be $21.375 per share.
   2
            4. TERM OF OPTION. The Option granted under this Agreement shall
expire, unless otherwise exercised, ten years from the Date of Grant, through
and including the normal close of business of the Company on May 12, 2010
("Expiration Date"), subject to earlier termination as provided in paragraph 8
hereof.

            5. EXERCISE OF OPTION. The Option may be exercised by the Optionee
as to all or any part of the Stock then vested by delivery to the Company of
written notice of exercise and payment of the purchase price as provided in
paragraphs 6 and 7 hereof.

            6. METHOD OF EXERCISING OPTION. Subject to the terms and conditions
of this Option Agreement, the Option may be exercised by timely delivery to the
Company of written notice, which notice shall be effective on the date received
by the Company ("Effective Date"). The notice shall state the Optionee's
election to exercise the Option, the number of shares in respect of which an
election to exercise has been made, the method of payment elected (see paragraph
7 hereof), the exact name or names in which the shares will be registered and
the Social Security number of the Optionee. Such notice shall be signed by the
Optionee and shall be accompanied by payment of the purchase price of such
shares. In the event the Option shall be exercised by a person or persons other
than Optionee pursuant to paragraph 8 hereof, such notice shall be signed by
such other person or persons and shall be accompanied by proof acceptable to the
Company of the legal right of such person or persons to exercise the Option. All
shares delivered by the Company upon exercise of the Option shall be fully paid
and nonassessable upon delivery.

            7. METHOD OF PAYMENT FOR OPTIONS. Payment for shares purchased upon
the exercise of the Option shall be made by the Optionee in cash,
previously-acquired Stock held for more than six months (through actual tender
or by attestation), broker-assisted cashless exercise arrangement, or such other
method permitted by the Board and communicated to the Optionee in writing prior
to the date the Optionee exercises all or any portion of the Option.

            8. TERMINATION OF SERVICES.

               8.1       GENERAL. If the Optionee ceases to perform services as
a member of the Board of Directors of the Company for any reason other than
death or Disability, then the Optionee may at any time within ninety (90) days
after the effective date of termination of services exercise the Option to the
extent that the Optionee was entitled to exercise the Option at the date of
termination, provided that the Option shall lapse immediately upon a
termination for Cause. In no event shall the Option be exercisable after the
Expiration Date. Any portion of the Option that is not vested on the date the
Optionee ceases to perform services as a Company Director, shall be forfeited
on such date.

               8.2       DEATH OR DISABILITY OF OPTIONEE. In the event of the
death or Disability (as that term is defined in the Plan) of the Optionee
within a period during which the Option, or any part thereof, could have been
exercised by the Optionee, including ninety (90) days after termination of
services (the "Option Period"), the Option shall lapse unless it is exercised
within the Option Period and in no event later than twelve (12) months after
the date of the Optionee's death or Disability by the Optionee or the
Optionee's legal representative or representatives in the case of a Disability
or, in the case of death, by the person or persons


                                       2
   3
entitled to do so under the Optionee's last will and testament or if the
Optionee fails to make a testamentary disposition of such Option or shall die
intestate, by the person or persons entitled to receive such Option under the
applicable laws of descent and distribution. An Option may be exercised
following the death or Disability of the Optionee only if the Option was
exercisable by the Optionee immediately prior to his death or Disability. In no
event shall the Option be exercisable after the Expiration Date. The Board shall
have the right to require evidence satisfactory to it of the rights of any
person or persons seeking to exercise the Option under this paragraph 8 to
exercise the Option.

            9.  NONTRANSFERABILITY. The Option granted by this Option Agreement
shall be exercisable only during the term of the Option provided in paragraph 4
hereof and, except as provided in paragraph 8 above, only by the Optionee during
his lifetime and while a Director of the Company. Except as otherwise permitted
by the Committee, this Option shall not be transferable by the Optionee or any
other person claiming through the Optionee, either voluntarily or involuntarily,
except by will or the laws of descent and distribution.

            10. MARKET STAND-OFF AGREEMENT. The Optionee, if requested by the
Company and an underwriter of Stock (or other securities) of the Company, agrees
not to sell or otherwise transfer or dispose of any Stock (or other securities)
of the Company held by the Optionee during the period not to exceed 180 days as
requested by the managing underwriter following the effective date of a
registration statement of the Company filed under the Securities Act. Such
agreement shall be in writing in a form satisfactory to the Company and such
underwriter. The Company may impose stop transfer instructions with respect to
the Stock (or other securities) subject to the foregoing restriction until the
end of such project.

            11. ADJUSTMENTS IN NUMBER OF SHARES AND OPTION PRICE. In the event
of a stock dividend or in the event the Stock shall be changed into or exchanged
for a different number or class of shares of stock of the Company or of another
corporation, whether through reorganization, recapitalization, stock split-up,
combination of shares, merger or consolidation, there shall be substituted for
each such remaining share of Stock then subject to this Option the number and
class of shares of stock into which each outstanding share of Stock shall be so
exchanged, all without any change in the aggregate purchase price for the shares
then subject to the Option, all as set forth in Section 14 of the Plan.

            12. DELIVERY OF SHARES. No shares of Stock shall be delivered upon
exercise of the Option until (i) the purchase price shall have been paid in full
in the manner herein provided; (ii) applicable taxes required to be withheld
have been paid or withheld in full; (iii) approval of any governmental authority
required in connection with the Option, or the issuance of shares thereunder,
has been received by the Company; and (iv) if required by the Board, the
Optionee has delivered to the Board an Investment Letter in form and content
satisfactory to the Company as provided in paragraph 13 hereof.

            13. SECURITIES ACT. The Company shall not be required to deliver any
shares of Stock pursuant to the exercise of all or any part of the Option if, in
the opinion of counsel for the Company, such issuance would violate the
Securities Act of 1933 or any other applicable federal or state securities laws
or regulations. The Board may require that the Optionee, prior to the issuance
of any such shares pursuant to exercise of the Option, sign and deliver to the


                                       3
   4
Company a written statement ("Investment Letter") stating (i) that the Optionee
is purchasing the shares for investment and not with a view to the sale or
distribution thereof; (ii) that the Optionee will not sell any shares received
upon exercise of the Option or any other shares of the Company that the Optionee
may then own or thereafter acquire except either (a) through a broker on a
national securities exchange or (b) with the prior written approval of the
Company; and (iii) containing such other terms and conditions as counsel for the
Company may reasonably require to assure compliance with the Securities Act of
1933 or other applicable federal or state securities laws and regulations. Such
Investment Letter shall be in form and content acceptable to the Board in its
sole discretion.

            14. DEFINITIONS; COPY OF PLAN. To the extent not specifically
provided herein, all capitalized terms used in this Option Agreement shall have
the same meanings ascribed to them in the Plan. By the execution of this
Agreement, the Optionee acknowledges receipt of a copy of the Plan.

            15. ADMINISTRATION. This Option Agreement shall at all times be
subject to the terms and conditions of the Plan and the Plan shall in all
respects be administered by the Board in accordance with the terms of and as
provided in the Plan. The Board shall have the sole and complete discretion with
respect to all matters reserved to it by the Plan and decisions of the majority
of the Board with respect thereto and to this Option Agreement shall be final
and binding upon the Optionee and the Company. In the event of any conflict
between the terms and conditions of this Option Agreement and the Plan, the
provisions of the Plan shall control.

            16. CONTINUATION OF SERVICES. This Option Agreement shall not be
construed to confer upon the Optionee any right to continue providing services
as a Company Director and shall not limit the right of the Company, in its sole
discretion, to terminate the services of the Optionee at any time.

            17. OBLIGATION TO EXERCISE. The Optionee shall have no obligation to
exercise any option granted by this Agreement.

            18. GOVERNING LAW. This Option Agreement shall be interpreted and
administered under the laws of the State of Delaware.

            19. AMENDMENTS. This Option Agreement may be amended only by a
written agreement executed by the Company and the Optionee. The Company and the
Optionee acknowledge that changes in federal tax laws enacted subsequent to the
Date of Grant, and applicable to stock options, may provide for tax benefits to
the Company or the Optionee. In any such event, the Company and the Optionee
agree that this Option Agreement may be amended as necessary to secure for the
Company and the Optionee any benefits that may result from such legislation. Any
such amendment shall be made only upon the mutual consent of the parties, which
consent (of either party) may be withheld for any reason.


                                       4
   5
      IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
signed by its duly authorized representative and the Optionee has signed this
Option Agreement as of the date first written above.


SCG HOLDING CORPORATION                 OPTIONEE/JUSTIN T. CHANG



By: /s/ George H. Cave                  /s/ Justin T. Chang
    ------------------                  -------------------

Its: Vice President & Secretary
     --------------------------



                                       5

   1
                                                                   Exhibit 10.45


                             SCG HOLDING CORPORATION
                            2000 STOCK INCENTIVE PLAN
                    NON-QUALIFIED STOCK OPTION AGREEMENT
                                  FOR DIRECTORS


      This Option Agreement is made and entered into by and between SCG HOLDING
CORPORATION ("Company") and WILLIAM A. FRANKE ("Optionee"), as of the 12th day
of May, 2000 ("Date of Grant").

                                    RECITALS


      A. The Board of Directors of the Company has adopted the SCG Holding
Corporation 2000 Stock Incentive Plan ("Plan") as an incentive to retain members
of the Board of Directors, key employees, officers, and consultants of the
Company and to enhance the ability of the Company to attract such individuals
whose services are considered unusually valuable by providing an opportunity for
them to have a proprietary interest in the success of the Company.

     B. The Board has approved the granting of options to the Optionee  pursuant
to the Plan to provide an incentive to the Optionee to focus on the long-term
growth of the Company.

      In consideration of the mutual covenants and conditions hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and the Optionee agree as follows:

            1. GRANT OF OPTION. The Company hereby grants to the Optionee the
right and option (hereinafter referred to as the "Option") to purchase an
aggregate of 7,017 shares (such number being subject to adjustment as provided
in paragraph 11 hereof and Section 14 of the Plan) of the Common Stock of the
Company (the "Stock") on the terms and conditions herein set forth. This Option
may be exercised in whole or in part and from time to time as hereinafter
provided. The Option granted under this Agreement is NOT intended to be an
"incentive stock option" as set forth in Section 422 of the Internal Revenue
Code of 1986, as amended.

            2. VESTING OF OPTION. The Option shall vest and become exercisable
in accordance with the schedule below:

      -     33 1/3% of the Option grant shall become exercisable on May 12,
            2001;

      -     an additional 33 1/3% of the Option grant shall become exercisable
            on May 12, 2002; and

      -     the final 33 1/3% of the Option grant shall become exercisable on
            May 12, 2003.

            3. PURCHASE PRICE. The price at which the Optionee shall be entitled
to purchase the Stock covered by the Option shall be $21.375 per share.
   2
            4. TERM OF OPTION. The Option granted under this Agreement shall
expire, unless otherwise exercised, ten years from the Date of Grant, through
and including the normal close of business of the Company on May 12, 2010
("Expiration Date"), subject to earlier termination as provided in paragraph 8
hereof.

            5. EXERCISE OF OPTION. The Option may be exercised by the Optionee
as to all or any part of the Stock then vested by delivery to the Company of
written notice of exercise and payment of the purchase price as provided in
paragraphs 6 and 7 hereof.

            6. METHOD OF EXERCISING OPTION. Subject to the terms and conditions
of this Option Agreement, the Option may be exercised by timely delivery to the
Company of written notice, which notice shall be effective on the date received
by the Company ("Effective Date"). The notice shall state the Optionee's
election to exercise the Option, the number of shares in respect of which an
election to exercise has been made, the method of payment elected (see paragraph
7 hereof), the exact name or names in which the shares will be registered and
the Social Security number of the Optionee. Such notice shall be signed by the
Optionee and shall be accompanied by payment of the purchase price of such
shares. In the event the Option shall be exercised by a person or persons other
than Optionee pursuant to paragraph 8 hereof, such notice shall be signed by
such other person or persons and shall be accompanied by proof acceptable to the
Company of the legal right of such person or persons to exercise the Option. All
shares delivered by the Company upon exercise of the Option shall be fully paid
and nonassessable upon delivery.

            7. METHOD OF PAYMENT FOR OPTIONS. Payment for shares purchased upon
the exercise of the Option shall be made by the Optionee in cash,
previously-acquired Stock held for more than six months (through actual tender
or by attestation), broker-assisted cashless exercise arrangement, or such other
method permitted by the Board and communicated to the Optionee in writing prior
to the date the Optionee exercises all or any portion of the Option.

            8. TERMINATION OF SERVICES.

               8.1       GENERAL. If the Optionee ceases to perform services as
a member of the Board of Directors of the Company for any reason other than
death or Disability, then the Optionee may at any time within ninety (90) days
after the effective date of termination of services exercise the Option to the
extent that the Optionee was entitled to exercise the Option at the date of
termination, provided that the Option shall lapse immediately upon a
termination for Cause. In no event shall the Option be exercisable after the
Expiration Date. Any portion of the Option that is not vested on the date the
Optionee ceases to perform services as a Company Director, shall be forfeited
on such date.

               8.2       DEATH OR DISABILITY OF OPTIONEE. In the event of the
death or Disability (as that term is defined in the Plan) of the Optionee
within a period during which the Option, or any part thereof, could have been
exercised by the Optionee, including ninety (90) days after termination of
services (the "Option Period"), the Option shall lapse unless it is exercised
within the Option Period and in no event later than twelve (12) months after
the date of the Optionee's death or Disability by the Optionee or the
Optionee's legal representative or representatives in the case of a Disability
or, in the case of death, by the person or persons


                                       2
   3
entitled to do so under the Optionee's last will and testament or if the
Optionee fails to make a testamentary disposition of such Option or shall die
intestate, by the person or persons entitled to receive such Option under the
applicable laws of descent and distribution. An Option may be exercised
following the death or Disability of the Optionee only if the Option was
exercisable by the Optionee immediately prior to his death or Disability. In no
event shall the Option be exercisable after the Expiration Date. The Board shall
have the right to require evidence satisfactory to it of the rights of any
person or persons seeking to exercise the Option under this paragraph 8 to
exercise the Option.

            9.  NONTRANSFERABILITY. The Option granted by this Option Agreement
shall be exercisable only during the term of the Option provided in paragraph 4
hereof and, except as provided in paragraph 8 above, only by the Optionee during
his lifetime and while a Director of the Company. Except as otherwise permitted
by the Committee, this Option shall not be transferable by the Optionee or any
other person claiming through the Optionee, either voluntarily or involuntarily,
except by will or the laws of descent and distribution.

            10. MARKET STAND-OFF AGREEMENT. The Optionee, if requested by the
Company and an underwriter of Stock (or other securities) of the Company, agrees
not to sell or otherwise transfer or dispose of any Stock (or other securities)
of the Company held by the Optionee during the period not to exceed 180 days as
requested by the managing underwriter following the effective date of a
registration statement of the Company filed under the Securities Act. Such
agreement shall be in writing in a form satisfactory to the Company and such
underwriter. The Company may impose stop transfer instructions with respect to
the Stock (or other securities) subject to the foregoing restriction until the
end of such project.

            11. ADJUSTMENTS IN NUMBER OF SHARES AND OPTION PRICE. In the event
of a stock dividend or in the event the Stock shall be changed into or exchanged
for a different number or class of shares of stock of the Company or of another
corporation, whether through reorganization, recapitalization, stock split-up,
combination of shares, merger or consolidation, there shall be substituted for
each such remaining share of Stock then subject to this Option the number and
class of shares of stock into which each outstanding share of Stock shall be so
exchanged, all without any change in the aggregate purchase price for the shares
then subject to the Option, all as set forth in Section 14 of the Plan.

            12. DELIVERY OF SHARES. No shares of Stock shall be delivered upon
exercise of the Option until (i) the purchase price shall have been paid in full
in the manner herein provided; (ii) applicable taxes required to be withheld
have been paid or withheld in full; (iii) approval of any governmental authority
required in connection with the Option, or the issuance of shares thereunder,
has been received by the Company; and (iv) if required by the Board, the
Optionee has delivered to the Board an Investment Letter in form and content
satisfactory to the Company as provided in paragraph 13 hereof.

            13. SECURITIES ACT. The Company shall not be required to deliver any
shares of Stock pursuant to the exercise of all or any part of the Option if, in
the opinion of counsel for the Company, such issuance would violate the
Securities Act of 1933 or any other applicable federal or state securities laws
or regulations. The Board may require that the Optionee, prior to the issuance
of any such shares pursuant to exercise of the Option, sign and deliver to the


                                       3
   4
Company a written statement ("Investment Letter") stating (i) that the Optionee
is purchasing the shares for investment and not with a view to the sale or
distribution thereof; (ii) that the Optionee will not sell any shares received
upon exercise of the Option or any other shares of the Company that the Optionee
may then own or thereafter acquire except either (a) through a broker on a
national securities exchange or (b) with the prior written approval of the
Company; and (iii) containing such other terms and conditions as counsel for the
Company may reasonably require to assure compliance with the Securities Act of
1933 or other applicable federal or state securities laws and regulations. Such
Investment Letter shall be in form and content acceptable to the Board in its
sole discretion.

            14. DEFINITIONS; COPY OF PLAN. To the extent not specifically
provided herein, all capitalized terms used in this Option Agreement shall have
the same meanings ascribed to them in the Plan. By the execution of this
Agreement, the Optionee acknowledges receipt of a copy of the Plan.

            15. ADMINISTRATION. This Option Agreement shall at all times be
subject to the terms and conditions of the Plan and the Plan shall in all
respects be administered by the Board in accordance with the terms of and as
provided in the Plan. The Board shall have the sole and complete discretion with
respect to all matters reserved to it by the Plan and decisions of the majority
of the Board with respect thereto and to this Option Agreement shall be final
and binding upon the Optionee and the Company. In the event of any conflict
between the terms and conditions of this Option Agreement and the Plan, the
provisions of the Plan shall control.

            16. CONTINUATION OF SERVICES. This Option Agreement shall not be
construed to confer upon the Optionee any right to continue providing services
as a Company Director and shall not limit the right of the Company, in its sole
discretion, to terminate the services of the Optionee at any time.

            17. OBLIGATION TO EXERCISE. The Optionee shall have no obligation to
exercise any option granted by this Agreement.

            18. GOVERNING LAW. This Option Agreement shall be interpreted and
administered under the laws of the State of Delaware.

            19. AMENDMENTS. This Option Agreement may be amended only by a
written agreement executed by the Company and the Optionee. The Company and the
Optionee acknowledge that changes in federal tax laws enacted subsequent to the
Date of Grant, and applicable to stock options, may provide for tax benefits to
the Company or the Optionee. In any such event, the Company and the Optionee
agree that this Option Agreement may be amended as necessary to secure for the
Company and the Optionee any benefits that may result from such legislation. Any
such amendment shall be made only upon the mutual consent of the parties, which
consent (of either party) may be withheld for any reason.


                                       4
   5
      IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
signed by its duly authorized representative and the Optionee has signed this
Option Agreement as of the date first written above.


SCG HOLDING CORPORATION                 OPTIONEE/WILLIAM A. FRANKE



By: /s/ George H. Cave                  /s/ William A. Franke
    ------------------                  ---------------------

Its: Vice President & Secretary
     --------------------------


                                       5

   1
                                                                   EXHIBIT 10.46


                             SCG HOLDING CORPORATION
                            2000 STOCK INCENTIVE PLAN
                      NON-QUALIFIED STOCK OPTION AGREEMENT
                                  FOR DIRECTORS


         This Option Agreement is made and entered into by and between SCG
HOLDING CORPORATION ("Company") and JEROME GREGOIRE ("Optionee"), as of the 28th
day of April, 2000 ("Date of Grant").

                                    RECITALS


         A. The Board of Directors of the Company has adopted the SCG Holding
Corporation 2000 Stock Incentive Plan ("Plan") as an incentive to retain members
of the Board of Directors, key employees, officers, and consultants of the
Company and to enhance the ability of the Company to attract such individuals
whose services are considered unusually valuable by providing an opportunity for
them to have a proprietary interest in the success of the Company.

         B. The Board has approved the granting of options to the Optionee
pursuant to the Plan to provide an incentive to the Optionee to focus on the
long-term growth of the Company.

         In consideration of the mutual covenants and conditions hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and the Optionee agree as follows:

                  1. GRANT OF OPTION. The Company hereby grants to the Optionee
the right and option (hereinafter referred to as the "Option") to purchase an
aggregate of 3,125 shares (such number being subject to adjustment as provided
in paragraph 11 hereof and Section 14 of the Plan) of the Common Stock of the
Company (the "Stock") on the terms and conditions herein set forth. This Option
may be exercised in whole or in part and from time to time as hereinafter
provided. The Option granted under this Agreement is NOT intended to be an
"incentive stock option" as set forth in Section 422 of the Internal Revenue
Code of 1986, as amended.

                  2. VESTING OF OPTION. The Option is fully vested and
immediately exercisable as of the Date of Grant.

                  3. PURCHASE PRICE. The price at which the Optionee shall be
entitled to purchase the Stock covered by the Option shall be $16.00 per share.

                  4. TERM OF OPTION. The Option granted under this Agreement
shall expire, unless otherwise exercised, ten years from the Date of Grant,
through and including the normal close of business of the Company on April 28,
2010 ("Expiration Date"), subject to earlier termination as provided in
paragraph 8 hereof.

                  5. EXERCISE OF OPTION. The Option may be exercised by the
Optionee as to all or any part of the Stock then vested by delivery to the
Company of written notice of exercise and payment of the purchase price as
provided in paragraphs 6 and 7 hereof.



                                                                               1
   2
                  6. METHOD OF EXERCISING OPTION. Subject to the terms and
conditions of this Option Agreement, the Option may be exercised by timely
delivery to the Company of written notice, which notice shall be effective on
the date received by the Company ("Effective Date"). The notice shall state the
Optionee's election to exercise the Option, the number of shares in respect of
which an election to exercise has been made, the method of payment elected (see
paragraph 7 hereof), the exact name or names in which the shares will be
registered and the Social Security number of the Optionee. Such notice shall be
signed by the Optionee and shall be accompanied by payment of the purchase price
of such shares. In the event the Option shall be exercised by a person or
persons other than Optionee pursuant to paragraph 8 hereof, such notice shall be
signed by such other person or persons and shall be accompanied by proof
acceptable to the Company of the legal right of such person or persons to
exercise the Option. All shares delivered by the Company upon exercise of the
Option shall be fully paid and nonassessable upon delivery.

                  7. METHOD OF PAYMENT FOR OPTIONS. Payment for shares purchased
upon the exercise of the Option shall be made by the Optionee in cash,
previously-acquired Stock held for more than six months (through actual tender
or by attestation), broker-assisted cashless exercise arrangement, or such other
method permitted by the Board and communicated to the Optionee in writing prior
to the date the Optionee exercises all or any portion of the Option.

                  8. TERMINATION OF SERVICES.

                           8.1 GENERAL. If the Optionee ceases to perform
services for the Company for any reason other than death or Disability, then the
Optionee may at any time within 90 days after the effective date of termination
of services exercise the Option to the extent that the Optionee was entitled to
exercise the Option at the date of termination, provided that the Option shall
lapse immediately upon a termination for Cause. In no event shall the Option be
exercisable after the Expiration Date.

                           8.2 DEATH OR DISABILITY OF OPTIONEE. In the event of
the death or Disability (as that term is defined in the Plan) of the Optionee
within a period during which the Option, or any part thereof, could have been
exercised by the Optionee, including 90 days after termination of services (the
"Option Period"), the Option shall lapse unless it is exercised within the
Option Period and in no event later than twelve (12) months after the date of
the Optionee's death or Disability by the Optionee or the Optionee's legal
representative or representatives in the case of a Disability or, in the case of
death, by the person or persons entitled to do so under the Optionee's last will
and testament or if the Optionee fails to make a testamentary disposition of
such Option or shall die intestate, by the person or persons entitled to receive
such Option under the applicable laws of descent and distribution. An Option may
be exercised following the death or Disability of the Optionee only if the
Option was exercisable by the Optionee immediately prior to his death or
Disability. In no event shall the Option be exercisable after the Expiration
Date. The Board shall have the right to require evidence satisfactory to it of
the rights of any person or persons seeking to exercise the Option under this
paragraph 8 to exercise the Option.

                  9. NONTRANSFERABILITY. The Option granted by this Option
Agreement shall be exercisable only during the term of the Option provided in
paragraph 4 hereof and, except as


                                                                               2
   3
provided in paragraph 8 above, only by the Optionee during his lifetime and
while a Director of the Company. Except as otherwise permitted by the Committee,
this Option shall not be transferable by the Optionee or any other person
claiming through the Optionee, either voluntarily or involuntarily, except by
will or the laws of descent and distribution.

                  10. MARKET STAND-OFF AGREEMENT. The Optionee, if requested by
the Company and an underwriter of Stock (or other securities) of the Company,
agrees not to sell or otherwise transfer or dispose of any Stock (or other
securities) of the Company held by the Optionee during the period not to exceed
180 days as requested by the managing underwriter following the effective date
of a registration statement of the Company filed under the Securities Act. Such
agreement shall be in writing in a form satisfactory to the Company and such
underwriter. The Company may impose stop transfer instructions with respect to
the Stock (or other securities) subject to the foregoing restriction until the
end of such project.

                  11. ADJUSTMENTS IN NUMBER OF SHARES AND OPTION PRICE. In the
event of a stock dividend or in the event the Stock shall be changed into or
exchanged for a different number or class of shares of stock of the Company or
of another corporation, whether through reorganization, recapitalization, stock
split-up, combination of shares, merger or consolidation, there shall be
substituted for each such remaining share of Stock then subject to this Option
the number and class of shares of stock into which each outstanding share of
Stock shall be so exchanged, all without any change in the aggregate purchase
price for the shares then subject to the Option, all as set forth in Section 14
of the Plan.

                  12. DELIVERY OF SHARES. No shares of Stock shall be delivered
upon exercise of the Option until (i) the purchase price shall have been paid in
full in the manner herein provided; (ii) applicable taxes required to be
withheld have been paid or withheld in full; (iii) approval of any governmental
authority required in connection with the Option, or the issuance of shares
thereunder, has been received by the Company; and (iv) if required by the Board,
the Optionee has delivered to the Board an Investment Letter in form and content
satisfactory to the Company as provided in paragraph 13 hereof.

                  13. SECURITIES ACT. The Company shall not be required to
deliver any shares of Stock pursuant to the exercise of all or any part of the
Option if, in the opinion of counsel for the Company, such issuance would
violate the Securities Act of 1933 or any other applicable federal or state
securities laws or regulations. The Board may require that the Optionee, prior
to the issuance of any such shares pursuant to exercise of the Option, sign and
deliver to the Company a written statement ("Investment Letter") stating (i)
that the Optionee is purchasing the shares for investment and not with a view to
the sale or distribution thereof; (ii) that the Optionee will not sell any
shares received upon exercise of the Option or any other shares of the Company
that the Optionee may then own or thereafter acquire except either (a) through a
broker on a national securities exchange or (b) with the prior written approval
of the Company; and (iii) containing such other terms and conditions as counsel
for the Company may reasonably require to assure compliance with the Securities
Act of 1933 or other applicable federal or state securities laws and
regulations. Such Investment Letter shall be in form and content acceptable to
the Board in its sole discretion.



                                                                               3
   4
                  14. DEFINITIONS; COPY OF PLAN. To the extent not specifically
provided herein, all capitalized terms used in this Option Agreement shall have
the same meanings ascribed to them in the Plan. By the execution of this
Agreement, the Optionee acknowledges receipt of a copy of the Plan.

                  15. ADMINISTRATION. This Option Agreement shall at all times
be subject to the terms and conditions of the Plan and the Plan shall in all
respects be administered by the Board in accordance with the terms of and as
provided in the Plan. The Board shall have the sole and complete discretion with
respect to all matters reserved to it by the Plan and decisions of the majority
of the Board with respect thereto and to this Option Agreement shall be final
and binding upon the Optionee and the Company. In the event of any conflict
between the terms and conditions of this Option Agreement and the Plan, the
provisions of the Plan shall control.

                  16. CONTINUATION OF SERVICES. This Option Agreement shall not
be construed to confer upon the Optionee any right to continue providing
services to the Company and shall not limit the right of the Company, in its
sole discretion, to terminate the services of the Optionee at any time.

                  17. OBLIGATION TO EXERCISE. The Optionee shall have no
obligation to exercise any option granted by this Agreement.

                  18. GOVERNING LAW. This Option Agreement shall be interpreted
and administered under the laws of the State of Delaware.

                  19. AMENDMENTS. This Option Agreement may be amended only by a
written agreement executed by the Company and the Optionee. The Company and the
Optionee acknowledge that changes in federal tax laws enacted subsequent to the
Date of Grant, and applicable to stock options, may provide for tax benefits to
the Company or the Optionee. In any such event, the Company and the Optionee
agree that this Option Agreement may be amended as necessary to secure for the
Company and the Optionee any benefits that may result from such legislation. Any
such amendment shall be made only upon the mutual consent of the parties, which
consent (of either party) may be withheld for any reason.

         IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
signed by its duly authorized representative and the Optionee has signed this
Option Agreement as of the date first written above.


SCG HOLDING CORPORATION                  OPTIONEE/JEROME N. GREGOIRE



By: /s/ George H. Cave                   /s/ Jerome N. Gregoire
    ------------------                   ----------------------
Its: Vice President & Secretary
     --------------------------




                                                                               4

   1
                                                                   EXHIBIT 10.47


                             SCG HOLDING CORPORATION
                            2000 STOCK INCENTIVE PLAN
                      NON-QUALIFIED STOCK OPTION AGREEMENT
                                  FOR DIRECTORS


         This Option Agreement is made and entered into by and between SCG
HOLDING CORPORATION ("Company") and JEROME N. GREGOIRE ("Optionee"), as of the
12th day of May, 2000 ("Date of Grant").

                                    RECITALS


         A. The Board of Directors of the Company has adopted the SCG Holding
Corporation 2000 Stock Incentive Plan ("Plan") as an incentive to retain members
of the Board of Directors, key employees, officers, and consultants of the
Company and to enhance the ability of the Company to attract such individuals
whose services are considered unusually valuable by providing an opportunity for
them to have a proprietary interest in the success of the Company.

         B. The Board has approved the granting of options to the Optionee
pursuant to the Plan to provide an incentive to the Optionee to focus on the
long-term growth of the Company.

         In consideration of the mutual covenants and conditions hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and the Optionee agree as follows:

                  1. GRANT OF OPTION. The Company hereby grants to the Optionee
the right and option (hereinafter referred to as the "Option") to purchase an
aggregate of 4,678 shares (such number being subject to adjustment as provided
in paragraph 11 hereof and Section 14 of the Plan) of the Common Stock of the
Company (the "Stock") on the terms and conditions herein set forth. This Option
may be exercised in whole or in part and from time to time as hereinafter
provided. The Option granted under this Agreement is NOT intended to be an
"incentive stock option" as set forth in Section 422 of the Internal Revenue
Code of 1986, as amended.

                  2. VESTING OF OPTION. The Option shall vest and become
exercisable in accordance with the schedule below:

            -        33 1/3% of the Option grant shall become exercisable
                     on May 12, 2001;

            -        an additional 33 1/3% of the Option grant shall
                     become exercisable on May 12, 2002; and

            -        the final 33 1/3% of the Option grant shall become
                     exercisable on May 12, 2003.

                  3. PURCHASE PRICE. The price at which the Optionee shall be
entitled to purchase the Stock covered by the Option shall be $21.375 per share.
   2
                  4. TERM OF OPTION. The Option granted under this Agreement
shall expire, unless otherwise exercised, ten years from the Date of Grant,
through and including the normal close of business of the Company on May 12,
2010 ("Expiration Date"), subject to earlier termination as provided in
paragraph 8 hereof.

                  5. EXERCISE OF OPTION. The Option may be exercised by the
Optionee as to all or any part of the Stock then vested by delivery to the
Company of written notice of exercise and payment of the purchase price as
provided in paragraphs 6 and 7 hereof.

                  6. METHOD OF EXERCISING OPTION. Subject to the terms and
conditions of this Option Agreement, the Option may be exercised by timely
delivery to the Company of written notice, which notice shall be effective on
the date received by the Company ("Effective Date"). The notice shall state the
Optionee's election to exercise the Option, the number of shares in respect of
which an election to exercise has been made, the method of payment elected (see
paragraph 7 hereof), the exact name or names in which the shares will be
registered and the Social Security number of the Optionee. Such notice shall be
signed by the Optionee and shall be accompanied by payment of the purchase price
of such shares. In the event the Option shall be exercised by a person or
persons other than Optionee pursuant to paragraph 8 hereof, such notice shall be
signed by such other person or persons and shall be accompanied by proof
acceptable to the Company of the legal right of such person or persons to
exercise the Option. All shares delivered by the Company upon exercise of the
Option shall be fully paid and nonassessable upon delivery.

                  7. METHOD OF PAYMENT FOR OPTIONS. Payment for shares purchased
upon the exercise of the Option shall be made by the Optionee in cash,
previously-acquired Stock held for more than six months (through actual tender
or by attestation), broker-assisted cashless exercise arrangement, or such other
method permitted by the Board and communicated to the Optionee in writing prior
to the date the Optionee exercises all or any portion of the Option.

                  8. TERMINATION OF SERVICES.

                           8.1 GENERAL. If the Optionee ceases to perform
services as a member of the Board of Directors of the Company for any reason
other than death or Disability, then the Optionee may at any time within ninety
(90) days after the effective date of termination of services exercise the
Option to the extent that the Optionee was entitled to exercise the Option at
the date of termination, provided that the Option shall lapse immediately upon a
termination for Cause. In no event shall the Option be exercisable after the
Expiration Date. Any portion of the Option that is not vested on the date the
Optionee ceases to perform services as a Company Director, shall be forfeited on
such date.

                           8.2 DEATH OR DISABILITY OF OPTIONEE. In the event of
the death or Disability (as that term is defined in the Plan) of the Optionee
within a period during which the Option, or any part thereof, could have been
exercised by the Optionee, including ninety (90) days after termination of
services (the "Option Period"), the Option shall lapse unless it is exercised
within the Option Period and in no event later than twelve (12) months after the
date of the Optionee's death or Disability by the Optionee or the Optionee's
legal representative or representatives in the case of a Disability or, in the
case of death, by the person or persons


                                       2
   3
entitled to do so under the Optionee's last will and testament or if the
Optionee fails to make a testamentary disposition of such Option or shall die
intestate, by the person or persons entitled to receive such Option under the
applicable laws of descent and distribution. An Option may be exercised
following the death or Disability of the Optionee only if the Option was
exercisable by the Optionee immediately prior to his death or Disability. In no
event shall the Option be exercisable after the Expiration Date. The Board shall
have the right to require evidence satisfactory to it of the rights of any
person or persons seeking to exercise the Option under this paragraph 8 to
exercise the Option.

                  9. NONTRANSFERABILITY. The Option granted by this Option
Agreement shall be exercisable only during the term of the Option provided in
paragraph 4 hereof and, except as provided in paragraph 8 above, only by the
Optionee during his lifetime and while a Director of the Company. Except as
otherwise permitted by the Committee, this Option shall not be transferable by
the Optionee or any other person claiming through the Optionee, either
voluntarily or involuntarily, except by will or the laws of descent and
distribution.

                  10. MARKET STAND-OFF AGREEMENT. The Optionee, if requested by
the Company and an underwriter of Stock (or other securities) of the Company,
agrees not to sell or otherwise transfer or dispose of any Stock (or other
securities) of the Company held by the Optionee during the period not to exceed
180 days as requested by the managing underwriter following the effective date
of a registration statement of the Company filed under the Securities Act. Such
agreement shall be in writing in a form satisfactory to the Company and such
underwriter. The Company may impose stop transfer instructions with respect to
the Stock (or other securities) subject to the foregoing restriction until the
end of such project.

                  11. ADJUSTMENTS IN NUMBER OF SHARES AND OPTION PRICE. In the
event of a stock dividend or in the event the Stock shall be changed into or
exchanged for a different number or class of shares of stock of the Company or
of another corporation, whether through reorganization, recapitalization, stock
split-up, combination of shares, merger or consolidation, there shall be
substituted for each such remaining share of Stock then subject to this Option
the number and class of shares of stock into which each outstanding share of
Stock shall be so exchanged, all without any change in the aggregate purchase
price for the shares then subject to the Option, all as set forth in Section 14
of the Plan.

                  12. DELIVERY OF SHARES. No shares of Stock shall be delivered
upon exercise of the Option until (i) the purchase price shall have been paid in
full in the manner herein provided; (ii) applicable taxes required to be
withheld have been paid or withheld in full; (iii) approval of any governmental
authority required in connection with the Option, or the issuance of shares
thereunder, has been received by the Company; and (iv) if required by the Board,
the Optionee has delivered to the Board an Investment Letter in form and content
satisfactory to the Company as provided in paragraph 13 hereof.

                  13. SECURITIES ACT. The Company shall not be required to
deliver any shares of Stock pursuant to the exercise of all or any part of the
Option if, in the opinion of counsel for the Company, such issuance would
violate the Securities Act of 1933 or any other applicable federal or state
securities laws or regulations. The Board may require that the Optionee, prior
to the issuance of any such shares pursuant to exercise of the Option, sign and
deliver to the


                                       3
   4
Company a written statement ("Investment Letter") stating (i) that the Optionee
is purchasing the shares for investment and not with a view to the sale or
distribution thereof; (ii) that the Optionee will not sell any shares received
upon exercise of the Option or any other shares of the Company that the Optionee
may then own or thereafter acquire except either (a) through a broker on a
national securities exchange or (b) with the prior written approval of the
Company; and (iii) containing such other terms and conditions as counsel for the
Company may reasonably require to assure compliance with the Securities Act of
1933 or other applicable federal or state securities laws and regulations. Such
Investment Letter shall be in form and content acceptable to the Board in its
sole discretion.

                  14. DEFINITIONS; COPY OF PLAN. To the extent not specifically
provided herein, all capitalized terms used in this Option Agreement shall have
the same meanings ascribed to them in the Plan. By the execution of this
Agreement, the Optionee acknowledges receipt of a copy of the Plan.

                  15. ADMINISTRATION. This Option Agreement shall at all times
be subject to the terms and conditions of the Plan and the Plan shall in all
respects be administered by the Board in accordance with the terms of and as
provided in the Plan. The Board shall have the sole and complete discretion with
respect to all matters reserved to it by the Plan and decisions of the majority
of the Board with respect thereto and to this Option Agreement shall be final
and binding upon the Optionee and the Company. In the event of any conflict
between the terms and conditions of this Option Agreement and the Plan, the
provisions of the Plan shall control.

                  16. CONTINUATION OF SERVICES. This Option Agreement shall not
be construed to confer upon the Optionee any right to continue providing
services as a Company Director and shall not limit the right of the Company, in
its sole discretion, to terminate the services of the Optionee at any time.

                  17. OBLIGATION TO EXERCISE. The Optionee shall have no
obligation to exercise any option granted by this Agreement.

                  18. GOVERNING LAW. This Option Agreement shall be interpreted
and administered under the laws of the State of Delaware.

                  19. AMENDMENTS. This Option Agreement may be amended only by a
written agreement executed by the Company and the Optionee. The Company and the
Optionee acknowledge that changes in federal tax laws enacted subsequent to the
Date of Grant, and applicable to stock options, may provide for tax benefits to
the Company or the Optionee. In any such event, the Company and the Optionee
agree that this Option Agreement may be amended as necessary to secure for the
Company and the Optionee any benefits that may result from such legislation. Any
such amendment shall be made only upon the mutual consent of the parties, which
consent (of either party) may be withheld for any reason.



                                       4
   5
         IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
signed by its duly authorized representative and the Optionee has signed this
Option Agreement as of the date first written above.


SCG HOLDING CORPORATION                  OPTIONEE/JEROME N. GREGOIRE



By: /s/ George H. Cave                   /s/ Jerome N. Gregoire
    ---------------------------          ----------------------
Its: Vice President & Secretary
     --------------------------






                                       5

   1
                                                                   EXHIBIT 10.48


                             SCG HOLDING CORPORATION
                            2000 STOCK INCENTIVE PLAN
                      NON-QUALIFIED STOCK OPTION AGREEMENT
                                  FOR DIRECTORS


         This Option Agreement is made and entered into by and between SCG
HOLDING CORPORATION ("Company") and ALBERT HUGO-MARTINEZ ("Optionee"), as of the
28th day of April, 2000 ("Date of Grant").

                                    RECITALS


         A. The Board of Directors of the Company has adopted the SCG Holding
Corporation 2000 Stock Incentive Plan ("Plan") as an incentive to retain members
of the Board of Directors, key employees, officers, and consultants of the
Company and to enhance the ability of the Company to attract such individuals
whose services are considered unusually valuable by providing an opportunity for
them to have a proprietary interest in the success of the Company.

         B. The Board has approved the granting of options to the Optionee
pursuant to the Plan to provide an incentive to the Optionee to focus on the
long-term growth of the Company.

         In consideration of the mutual covenants and conditions hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and the Optionee agree as follows:

                  1. GRANT OF OPTION. The Company hereby grants to the Optionee
the right and option (hereinafter referred to as the "Option") to purchase an
aggregate of 3,125 shares (such number being subject to adjustment as provided
in paragraph 11 hereof and Section 14 of the Plan) of the Common Stock of the
Company (the "Stock") on the terms and conditions herein set forth. This Option
may be exercised in whole or in part and from time to time as hereinafter
provided. The Option granted under this Agreement is NOT intended to be an
"incentive stock option" as set forth in Section 422 of the Internal Revenue
Code of 1986, as amended.

                  2. VESTING OF OPTION. The Option is fully vested and
immediately exercisable as of the Date of Grant.

                  3. PURCHASE PRICE. The price at which the Optionee shall be
entitled to purchase the Stock covered by the Option shall be $16.00 per share.

                  4. TERM OF OPTION. The Option granted under this Agreement
shall expire, unless otherwise exercised, ten years from the Date of Grant,
through and including the normal close of business of the Company on April 28,
2010 ("Expiration Date"), subject to earlier termination as provided in
paragraph 8 hereof.

                  5. EXERCISE OF OPTION. The Option may be exercised by the
Optionee as to all or any part of the Stock then vested by delivery to the
Company of written notice of exercise and payment of the purchase price as
provided in paragraphs 6 and 7 hereof.



                                                                               1
   2
                  6. METHOD OF EXERCISING OPTION. Subject to the terms and
conditions of this Option Agreement, the Option may be exercised by timely
delivery to the Company of written notice, which notice shall be effective on
the date received by the Company ("Effective Date"). The notice shall state the
Optionee's election to exercise the Option, the number of shares in respect of
which an election to exercise has been made, the method of payment elected (see
paragraph 7 hereof), the exact name or names in which the shares will be
registered and the Social Security number of the Optionee. Such notice shall be
signed by the Optionee and shall be accompanied by payment of the purchase price
of such shares. In the event the Option shall be exercised by a person or
persons other than Optionee pursuant to paragraph 8 hereof, such notice shall be
signed by such other person or persons and shall be accompanied by proof
acceptable to the Company of the legal right of such person or persons to
exercise the Option. All shares delivered by the Company upon exercise of the
Option shall be fully paid and nonassessable upon delivery.

                  7. METHOD OF PAYMENT FOR OPTIONS. Payment for shares purchased
upon the exercise of the Option shall be made by the Optionee in cash,
previously-acquired Stock held for more than six months (through actual tender
or by attestation), broker-assisted cashless exercise arrangement, or such other
method permitted by the Board and communicated to the Optionee in writing prior
to the date the Optionee exercises all or any portion of the Option.

                  8. TERMINATION OF SERVICES.

                           8.1 GENERAL. If the Optionee ceases to perform
services for the Company for any reason other than death or Disability, then the
Optionee may at any time within 90 days after the effective date of termination
of services exercise the Option to the extent that the Optionee was entitled to
exercise the Option at the date of termination, provided that the Option shall
lapse immediately upon a termination for Cause. In no event shall the Option be
exercisable after the Expiration Date.

                           8.2 DEATH OR DISABILITY OF OPTIONEE. In the event of
the death or Disability (as that term is defined in the Plan) of the Optionee
within a period during which the Option, or any part thereof, could have been
exercised by the Optionee, including 90 days after termination of services (the
"Option Period"), the Option shall lapse unless it is exercised within the
Option Period and in no event later than twelve (12) months after the date of
the Optionee's death or Disability by the Optionee or the Optionee's legal
representative or representatives in the case of a Disability or, in the case of
death, by the person or persons entitled to do so under the Optionee's last will
and testament or if the Optionee fails to make a testamentary disposition of
such Option or shall die intestate, by the person or persons entitled to receive
such Option under the applicable laws of descent and distribution. An Option may
be exercised following the death or Disability of the Optionee only if the
Option was exercisable by the Optionee immediately prior to his death or
Disability. In no event shall the Option be exercisable after the Expiration
Date. The Board shall have the right to require evidence satisfactory to it of
the rights of any person or persons seeking to exercise the Option under this
paragraph 8 to exercise the Option.

                  9. NONTRANSFERABILITY. The Option granted by this Option
Agreement shall be exercisable only during the term of the Option provided in
paragraph 4 hereof and, except as


                                                                               2
   3
provided in paragraph 8 above, only by the Optionee during his lifetime and
while a Director of the Company. Except as otherwise permitted by the Committee,
this Option shall not be transferable by the Optionee or any other person
claiming through the Optionee, either voluntarily or involuntarily, except by
will or the laws of descent and distribution.

                  10. MARKET STAND-OFF AGREEMENT. The Optionee, if requested by
the Company and an underwriter of Stock (or other securities) of the Company,
agrees not to sell or otherwise transfer or dispose of any Stock (or other
securities) of the Company held by the Optionee during the period not to exceed
180 days as requested by the managing underwriter following the effective date
of a registration statement of the Company filed under the Securities Act. Such
agreement shall be in writing in a form satisfactory to the Company and such
underwriter. The Company may impose stop transfer instructions with respect to
the Stock (or other securities) subject to the foregoing restriction until the
end of such project.

                  11. ADJUSTMENTS IN NUMBER OF SHARES AND OPTION PRICE. In the
event of a stock dividend or in the event the Stock shall be changed into or
exchanged for a different number or class of shares of stock of the Company or
of another corporation, whether through reorganization, recapitalization, stock
split-up, combination of shares, merger or consolidation, there shall be
substituted for each such remaining share of Stock then subject to this Option
the number and class of shares of stock into which each outstanding share of
Stock shall be so exchanged, all without any change in the aggregate purchase
price for the shares then subject to the Option, all as set forth in Section 14
of the Plan.

                  12. DELIVERY OF SHARES. No shares of Stock shall be delivered
upon exercise of the Option until (i) the purchase price shall have been paid in
full in the manner herein provided; (ii) applicable taxes required to be
withheld have been paid or withheld in full; (iii) approval of any governmental
authority required in connection with the Option, or the issuance of shares
thereunder, has been received by the Company; and (iv) if required by the Board,
the Optionee has delivered to the Board an Investment Letter in form and content
satisfactory to the Company as provided in paragraph 13 hereof.

                  13. SECURITIES ACT. The Company shall not be required to
deliver any shares of Stock pursuant to the exercise of all or any part of the
Option if, in the opinion of counsel for the Company, such issuance would
violate the Securities Act of 1933 or any other applicable federal or state
securities laws or regulations. The Board may require that the Optionee, prior
to the issuance of any such shares pursuant to exercise of the Option, sign and
deliver to the Company a written statement ("Investment Letter") stating (i)
that the Optionee is purchasing the shares for investment and not with a view to
the sale or distribution thereof; (ii) that the Optionee will not sell any
shares received upon exercise of the Option or any other shares of the Company
that the Optionee may then own or thereafter acquire except either (a) through a
broker on a national securities exchange or (b) with the prior written approval
of the Company; and (iii) containing such other terms and conditions as counsel
for the Company may reasonably require to assure compliance with the Securities
Act of 1933 or other applicable federal or state securities laws and
regulations. Such Investment Letter shall be in form and content acceptable to
the Board in its sole discretion.



                                                                               3
   4
                  14. DEFINITIONS; COPY OF PLAN. To the extent not specifically
provided herein, all capitalized terms used in this Option Agreement shall have
the same meanings ascribed to them in the Plan. By the execution of this
Agreement, the Optionee acknowledges receipt of a copy of the Plan.

                  15. ADMINISTRATION. This Option Agreement shall at all times
be subject to the terms and conditions of the Plan and the Plan shall in all
respects be administered by the Board in accordance with the terms of and as
provided in the Plan. The Board shall have the sole and complete discretion with
respect to all matters reserved to it by the Plan and decisions of the majority
of the Board with respect thereto and to this Option Agreement shall be final
and binding upon the Optionee and the Company. In the event of any conflict
between the terms and conditions of this Option Agreement and the Plan, the
provisions of the Plan shall control.

                  16. CONTINUATION OF SERVICES. This Option Agreement shall not
be construed to confer upon the Optionee any right to continue providing
services to the Company and shall not limit the right of the Company, in its
sole discretion, to terminate the services of the Optionee at any time.

                  17. OBLIGATION TO EXERCISE. The Optionee shall have no
obligation to exercise any option granted by this Agreement.

                  18. GOVERNING LAW. This Option Agreement shall be interpreted
and administered under the laws of the State of Delaware.

                  19. AMENDMENTS. This Option Agreement may be amended only by a
written agreement executed by the Company and the Optionee. The Company and the
Optionee acknowledge that changes in federal tax laws enacted subsequent to the
Date of Grant, and applicable to stock options, may provide for tax benefits to
the Company or the Optionee. In any such event, the Company and the Optionee
agree that this Option Agreement may be amended as necessary to secure for the
Company and the Optionee any benefits that may result from such legislation. Any
such amendment shall be made only upon the mutual consent of the parties, which
consent (of either party) may be withheld for any reason.

         IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
signed by its duly authorized representative and the Optionee has signed this
Option Agreement as of the date first written above.


SCG HOLDING CORPORATION                  OPTIONEE/ALBERT HUGO-MARTINEZ



By: /s/ George H. Cave                   /s/ Albert Hugo-Martinez
    ------------------                   ------------------------
Its: Vice President & Secretary
     --------------------------




                                                                               4

   1
                                                                   EXHIBIT 10.49


                             SCG HOLDING CORPORATION
                            2000 STOCK INCENTIVE PLAN
                      NON-QUALIFIED STOCK OPTION AGREEMENT
                                  FOR DIRECTORS


         This Option Agreement is made and entered into by and between SCG
HOLDING CORPORATION ("Company") and ALBERT HUGO-MARTINEZ ("Optionee"), as of the
12th day of May, 2000 ("Date of Grant").

                                    RECITALS


         A. The Board of Directors of the Company has adopted the SCG Holding
Corporation 2000 Stock Incentive Plan ("Plan") as an incentive to retain members
of the Board of Directors, key employees, officers, and consultants of the
Company and to enhance the ability of the Company to attract such individuals
whose services are considered unusually valuable by providing an opportunity for
them to have a proprietary interest in the success of the Company.

         B. The Board has approved the granting of options to the Optionee
pursuant to the Plan to provide an incentive to the Optionee to focus on the
long-term growth of the Company.

         In consideration of the mutual covenants and conditions hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and the Optionee agree as follows:

                  1. GRANT OF OPTION. The Company hereby grants to the Optionee
the right and option (hereinafter referred to as the "Option") to purchase an
aggregate of 4,678 shares (such number being subject to adjustment as provided
in paragraph 11 hereof and Section 14 of the Plan) of the Common Stock of the
Company (the "Stock") on the terms and conditions herein set forth. This Option
may be exercised in whole or in part and from time to time as hereinafter
provided. The Option granted under this Agreement is NOT intended to be an
"incentive stock option" as set forth in Section 422 of the Internal Revenue
Code of 1986, as amended.

                  2. VESTING OF OPTION. The Option shall vest and become
exercisable in accordance with the schedule below:

       -        33 1/3% of the Option grant shall become exercisable
                on May 12, 2001;

       -        an additional 33 1/3% of the Option grant shall
                become exercisable on May 12, 2002; and

       -        the final 33 1/3% of the Option grant shall become
                exercisable on May 12, 2003.

                  3. PURCHASE PRICE. The price at which the Optionee shall be
entitled to purchase the Stock covered by the Option shall be $21.375 per share.
   2
                  4. TERM OF OPTION. The Option granted under this Agreement
shall expire, unless otherwise exercised, ten years from the Date of Grant,
through and including the normal close of business of the Company on May 12,
2010 ("Expiration Date"), subject to earlier termination as provided in
paragraph 8 hereof.

                  5. EXERCISE OF OPTION. The Option may be exercised by the
Optionee as to all or any part of the Stock then vested by delivery to the
Company of written notice of exercise and payment of the purchase price as
provided in paragraphs 6 and 7 hereof.

                  6. METHOD OF EXERCISING OPTION. Subject to the terms and
conditions of this Option Agreement, the Option may be exercised by timely
delivery to the Company of written notice, which notice shall be effective on
the date received by the Company ("Effective Date"). The notice shall state the
Optionee's election to exercise the Option, the number of shares in respect of
which an election to exercise has been made, the method of payment elected (see
paragraph 7 hereof), the exact name or names in which the shares will be
registered and the Social Security number of the Optionee. Such notice shall be
signed by the Optionee and shall be accompanied by payment of the purchase price
of such shares. In the event the Option shall be exercised by a person or
persons other than Optionee pursuant to paragraph 8 hereof, such notice shall be
signed by such other person or persons and shall be accompanied by proof
acceptable to the Company of the legal right of such person or persons to
exercise the Option. All shares delivered by the Company upon exercise of the
Option shall be fully paid and nonassessable upon delivery.

                  7. METHOD OF PAYMENT FOR OPTIONS. Payment for shares purchased
upon the exercise of the Option shall be made by the Optionee in cash,
previously-acquired Stock held for more than six months (through actual tender
or by attestation), broker-assisted cashless exercise arrangement, or such other
method permitted by the Board and communicated to the Optionee in writing prior
to the date the Optionee exercises all or any portion of the Option.

                  8. TERMINATION OF SERVICES.

                           8.1 GENERAL. If the Optionee ceases to perform
services as a member of the Board of Directors of the Company for any reason
other than death or Disability, then the Optionee may at any time within ninety
(90) days after the effective date of termination of services exercise the
Option to the extent that the Optionee was entitled to exercise the Option at
the date of termination, provided that the Option shall lapse immediately upon a
termination for Cause. In no event shall the Option be exercisable after the
Expiration Date. Any portion of the Option that is not vested on the date the
Optionee ceases to perform services as a Company Director, shall be forfeited on
such date.

                           8.2 DEATH OR DISABILITY OF OPTIONEE. In the event of
the death or Disability (as that term is defined in the Plan) of the Optionee
within a period during which the Option, or any part thereof, could have been
exercised by the Optionee, including ninety (90) days after termination of
services (the "Option Period"), the Option shall lapse unless it is exercised
within the Option Period and in no event later than twelve (12) months after the
date of the Optionee's death or Disability by the Optionee or the Optionee's
legal representative or representatives in the case of a Disability or, in the
case of death, by the person or persons


                                       2
   3
entitled to do so under the Optionee's last will and testament or if the
Optionee fails to make a testamentary disposition of such Option or shall die
intestate, by the person or persons entitled to receive such Option under the
applicable laws of descent and distribution. An Option may be exercised
following the death or Disability of the Optionee only if the Option was
exercisable by the Optionee immediately prior to his death or Disability. In no
event shall the Option be exercisable after the Expiration Date. The Board shall
have the right to require evidence satisfactory to it of the rights of any
person or persons seeking to exercise the Option under this paragraph 8 to
exercise the Option.

                  9. NONTRANSFERABILITY. The Option granted by this Option
Agreement shall be exercisable only during the term of the Option provided in
paragraph 4 hereof and, except as provided in paragraph 8 above, only by the
Optionee during his lifetime and while a Director of the Company. Except as
otherwise permitted by the Committee, this Option shall not be transferable by
the Optionee or any other person claiming through the Optionee, either
voluntarily or involuntarily, except by will or the laws of descent and
distribution.

                  10. MARKET STAND-OFF AGREEMENT. The Optionee, if requested by
the Company and an underwriter of Stock (or other securities) of the Company,
agrees not to sell or otherwise transfer or dispose of any Stock (or other
securities) of the Company held by the Optionee during the period not to exceed
180 days as requested by the managing underwriter following the effective date
of a registration statement of the Company filed under the Securities Act. Such
agreement shall be in writing in a form satisfactory to the Company and such
underwriter. The Company may impose stop transfer instructions with respect to
the Stock (or other securities) subject to the foregoing restriction until the
end of such project.

                  11. ADJUSTMENTS IN NUMBER OF SHARES AND OPTION PRICE. In the
event of a stock dividend or in the event the Stock shall be changed into or
exchanged for a different number or class of shares of stock of the Company or
of another corporation, whether through reorganization, recapitalization, stock
split-up, combination of shares, merger or consolidation, there shall be
substituted for each such remaining share of Stock then subject to this Option
the number and class of shares of stock into which each outstanding share of
Stock shall be so exchanged, all without any change in the aggregate purchase
price for the shares then subject to the Option, all as set forth in Section 14
of the Plan.

                  12. DELIVERY OF SHARES. No shares of Stock shall be delivered
upon exercise of the Option until (i) the purchase price shall have been paid in
full in the manner herein provided; (ii) applicable taxes required to be
withheld have been paid or withheld in full; (iii) approval of any governmental
authority required in connection with the Option, or the issuance of shares
thereunder, has been received by the Company; and (iv) if required by the Board,
the Optionee has delivered to the Board an Investment Letter in form and content
satisfactory to the Company as provided in paragraph 13 hereof.

                  13. SECURITIES ACT. The Company shall not be required to
deliver any shares of Stock pursuant to the exercise of all or any part of the
Option if, in the opinion of counsel for the Company, such issuance would
violate the Securities Act of 1933 or any other applicable federal or state
securities laws or regulations. The Board may require that the Optionee, prior
to the issuance of any such shares pursuant to exercise of the Option, sign and
deliver to the


                                       3
   4
Company a written statement ("Investment Letter") stating (i) that the Optionee
is purchasing the shares for investment and not with a view to the sale or
distribution thereof; (ii) that the Optionee will not sell any shares received
upon exercise of the Option or any other shares of the Company that the Optionee
may then own or thereafter acquire except either (a) through a broker on a
national securities exchange or (b) with the prior written approval of the
Company; and (iii) containing such other terms and conditions as counsel for the
Company may reasonably require to assure compliance with the Securities Act of
1933 or other applicable federal or state securities laws and regulations. Such
Investment Letter shall be in form and content acceptable to the Board in its
sole discretion.

                  14. DEFINITIONS; COPY OF PLAN. To the extent not specifically
provided herein, all capitalized terms used in this Option Agreement shall have
the same meanings ascribed to them in the Plan. By the execution of this
Agreement, the Optionee acknowledges receipt of a copy of the Plan.

                  15. ADMINISTRATION. This Option Agreement shall at all times
be subject to the terms and conditions of the Plan and the Plan shall in all
respects be administered by the Board in accordance with the terms of and as
provided in the Plan. The Board shall have the sole and complete discretion with
respect to all matters reserved to it by the Plan and decisions of the majority
of the Board with respect thereto and to this Option Agreement shall be final
and binding upon the Optionee and the Company. In the event of any conflict
between the terms and conditions of this Option Agreement and the Plan, the
provisions of the Plan shall control.

                  16. CONTINUATION OF SERVICES. This Option Agreement shall not
be construed to confer upon the Optionee any right to continue providing
services as a Company Director and shall not limit the right of the Company, in
its sole discretion, to terminate the services of the Optionee at any time.

                  17. OBLIGATION TO EXERCISE. The Optionee shall have no
obligation to exercise any option granted by this Agreement.

                  18. GOVERNING LAW. This Option Agreement shall be interpreted
and administered under the laws of the State of Delaware.

                  19. AMENDMENTS. This Option Agreement may be amended only by a
written agreement executed by the Company and the Optionee. The Company and the
Optionee acknowledge that changes in federal tax laws enacted subsequent to the
Date of Grant, and applicable to stock options, may provide for tax benefits to
the Company or the Optionee. In any such event, the Company and the Optionee
agree that this Option Agreement may be amended as necessary to secure for the
Company and the Optionee any benefits that may result from such legislation. Any
such amendment shall be made only upon the mutual consent of the parties, which
consent (of either party) may be withheld for any reason.




                                       4
   5
         IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
signed by its duly authorized representative and the Optionee has signed this
Option Agreement as of the date first written above.


SCG HOLDING CORPORATION                  OPTIONEE/ALBERT HUGO-MARTINEZ



By: /s/ George H. Cave                   /s/ Albert Hugo-Martinez
    ------------------                   ------------------------
Its: Vice President & Secretary
     --------------------------






                                       5

   1
                                                                   EXHIBIT 10.50


                             SCG HOLDING CORPORATION
                            2000 STOCK INCENTIVE PLAN
                      NON-QUALIFIED STOCK OPTION AGREEMENT
                                  FOR DIRECTORS


         This Option Agreement is made and entered into by and between SCG
HOLDING CORPORATION ("Company") and JOHN MARREN ("Optionee"), as of the 19th day
of July, 2000 ("Date of Grant").

                                    RECITALS


         A. The Board of Directors of the Company has adopted the SCG Holding
Corporation 2000 Stock Incentive Plan ("Plan") as an incentive to retain members
of the Board of Directors, key employees, officers, and consultants of the
Company and to enhance the ability of the Company to attract such individuals
whose services are considered unusually valuable by providing an opportunity for
them to have a proprietary interest in the success of the Company.

         B. The Board has approved the granting of options to the Optionee
pursuant to the Plan to provide an incentive to the Optionee to focus on the
long-term growth of the Company.

         In consideration of the mutual covenants and conditions hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and the Optionee agree as follows:

                  1. GRANT OF OPTION. The Company hereby grants to the Optionee
the right and option (hereinafter referred to as the "Option") to purchase an
aggregate of 7,407 shares (such number being subject to adjustment as provided
in paragraph 11 hereof and Section 14 of the Plan) of the Common Stock of the
Company (the "Stock") on the terms and conditions herein set forth. This Option
may be exercised in whole or in part and from time to time as hereinafter
provided. The Option granted under this Agreement is NOT intended to be an
"incentive stock option" as set forth in Section 422 of the Internal Revenue
Code of 1986, as amended.

                  2. VESTING OF OPTION. The Option shall vest and become
exercisable in accordance with the schedule below:

       -        33 1/3% of the Option grant shall become exercisable
                on July 19, 2001;

       -        an additional 33 1/3% of the Option grant shall
                become exercisable on July 19, 2002; and

       -        the final 33 1/3% of the Option grant shall become
                exercisable on July 19, 2003.

                  3. PURCHASE PRICE. The price at which the Optionee shall be
entitled to purchase the Stock covered by the Option shall be $20.25 per share.
   2
                  4. TERM OF OPTION. The Option granted under this Agreement
shall expire, unless otherwise exercised, ten years from the Date of Grant,
through and including the normal close of business of the Company on July 19,
2010 ("Expiration Date"), subject to earlier termination as provided in
paragraph 8 hereof.

                  5. EXERCISE OF OPTION. The Option may be exercised by the
Optionee as to all or any part of the Stock then vested by delivery to the
Company of written notice of exercise and payment of the purchase price as
provided in paragraphs 6 and 7 hereof.

                  6. METHOD OF EXERCISING OPTION. Subject to the terms and
conditions of this Option Agreement, the Option may be exercised by timely
delivery to the Company of written notice, which notice shall be effective on
the date received by the Company ("Effective Date"). The notice shall state the
Optionee's election to exercise the Option, the number of shares in respect of
which an election to exercise has been made, the method of payment elected (see
paragraph 7 hereof), the exact name or names in which the shares will be
registered and the Social Security number of the Optionee. Such notice shall be
signed by the Optionee and shall be accompanied by payment of the purchase price
of such shares. In the event the Option shall be exercised by a person or
persons other than Optionee pursuant to paragraph 8 hereof, such notice shall be
signed by such other person or persons and shall be accompanied by proof
acceptable to the Company of the legal right of such person or persons to
exercise the Option. All shares delivered by the Company upon exercise of the
Option shall be fully paid and nonassessable upon delivery.

                  7. METHOD OF PAYMENT FOR OPTIONS. Payment for shares purchased
upon the exercise of the Option shall be made by the Optionee in cash,
previously-acquired Stock held for more than six months (through actual tender
or by attestation), broker-assisted cashless exercise arrangement, or such other
method permitted by the Board and communicated to the Optionee in writing prior
to the date the Optionee exercises all or any portion of the Option.

                  8. TERMINATION OF SERVICES.

                           8.1 GENERAL. If the Optionee ceases to perform
services as a member of the Board of Directors of the Company for any reason
other than death or Disability, then the Optionee may at any time within ninety
(90) days after the effective date of termination of services exercise the
Option to the extent that the Optionee was entitled to exercise the Option at
the date of termination, provided that the Option shall lapse immediately upon a
termination for Cause. In no event shall the Option be exercisable after the
Expiration Date. Any portion of the Option that is not vested on the date the
Optionee ceases to perform services as a Company Director, shall be forfeited on
such date.

                           8.2 DEATH OR DISABILITY OF OPTIONEE. In the event of
the death or Disability (as that term is defined in the Plan) of the Optionee
within a period during which the Option, or any part thereof, could have been
exercised by the Optionee, including ninety (90) days after termination of
services (the "Option Period"), the Option shall lapse unless it is exercised
within the Option Period and in no event later than twelve (12) months after the
date of the Optionee's death or Disability by the Optionee or the Optionee's
legal representative or representatives in the case of a Disability or, in the
case of death, by the person or persons


                                       2
   3
entitled to do so under the Optionee's last will and testament or if the
Optionee fails to make a testamentary disposition of such Option or shall die
intestate, by the person or persons entitled to receive such Option under the
applicable laws of descent and distribution. An Option may be exercised
following the death or Disability of the Optionee only if the Option was
exercisable by the Optionee immediately prior to his death or Disability. In no
event shall the Option be exercisable after the Expiration Date. The Board shall
have the right to require evidence satisfactory to it of the rights of any
person or persons seeking to exercise the Option under this paragraph 8 to
exercise the Option.

                  9. NONTRANSFERABILITY. The Option granted by this Option
Agreement shall be exercisable only during the term of the Option provided in
paragraph 4 hereof and, except as provided in paragraph 8 above, only by the
Optionee during his lifetime and while a Director of the Company. Except as
otherwise permitted by the Committee, this Option shall not be transferable by
the Optionee or any other person claiming through the Optionee, either
voluntarily or involuntarily, except by will or the laws of descent and
distribution.

                  10. MARKET STAND-OFF AGREEMENT. The Optionee, if requested by
the Company and an underwriter of Stock (or other securities) of the Company,
agrees not to sell or otherwise transfer or dispose of any Stock (or other
securities) of the Company held by the Optionee during the period not to exceed
180 days as requested by the managing underwriter following the effective date
of a registration statement of the Company filed under the Securities Act. Such
agreement shall be in writing in a form satisfactory to the Company and such
underwriter. The Company may impose stop transfer instructions with respect to
the Stock (or other securities) subject to the foregoing restriction until the
end of such project.

                  11. ADJUSTMENTS IN NUMBER OF SHARES AND OPTION PRICE. In the
event of a stock dividend or in the event the Stock shall be changed into or
exchanged for a different number or class of shares of stock of the Company or
of another corporation, whether through reorganization, recapitalization, stock
split-up, combination of shares, merger or consolidation, there shall be
substituted for each such remaining share of Stock then subject to this Option
the number and class of shares of stock into which each outstanding share of
Stock shall be so exchanged, all without any change in the aggregate purchase
price for the shares then subject to the Option, all as set forth in Section 14
of the Plan.

                  12. DELIVERY OF SHARES. No shares of Stock shall be delivered
upon exercise of the Option until (i) the purchase price shall have been paid in
full in the manner herein provided; (ii) applicable taxes required to be
withheld have been paid or withheld in full; (iii) approval of any governmental
authority required in connection with the Option, or the issuance of shares
thereunder, has been received by the Company; and (iv) if required by the Board,
the Optionee has delivered to the Board an Investment Letter in form and content
satisfactory to the Company as provided in paragraph 13 hereof.

                  13. SECURITIES ACT. The Company shall not be required to
deliver any shares of Stock pursuant to the exercise of all or any part of the
Option if, in the opinion of counsel for the Company, such issuance would
violate the Securities Act of 1933 or any other applicable federal or state
securities laws or regulations. The Board may require that the Optionee, prior
to the issuance of any such shares pursuant to exercise of the Option, sign and
deliver to the


                                       3
   4
Company a written statement ("Investment Letter") stating (i) that the Optionee
is purchasing the shares for investment and not with a view to the sale or
distribution thereof; (ii) that the Optionee will not sell any shares received
upon exercise of the Option or any other shares of the Company that the Optionee
may then own or thereafter acquire except either (a) through a broker on a
national securities exchange or (b) with the prior written approval of the
Company; and (iii) containing such other terms and conditions as counsel for the
Company may reasonably require to assure compliance with the Securities Act of
1933 or other applicable federal or state securities laws and regulations. Such
Investment Letter shall be in form and content acceptable to the Board in its
sole discretion.

                  14. DEFINITIONS; COPY OF PLAN. To the extent not specifically
provided herein, all capitalized terms used in this Option Agreement shall have
the same meanings ascribed to them in the Plan. By the execution of this
Agreement, the Optionee acknowledges receipt of a copy of the Plan.

                  15. ADMINISTRATION. This Option Agreement shall at all times
be subject to the terms and conditions of the Plan and the Plan shall in all
respects be administered by the Board in accordance with the terms of and as
provided in the Plan. The Board shall have the sole and complete discretion with
respect to all matters reserved to it by the Plan and decisions of the majority
of the Board with respect thereto and to this Option Agreement shall be final
and binding upon the Optionee and the Company. In the event of any conflict
between the terms and conditions of this Option Agreement and the Plan, the
provisions of the Plan shall control.

                  16. CONTINUATION OF SERVICES. This Option Agreement shall not
be construed to confer upon the Optionee any right to continue providing
services as a Company Director and shall not limit the right of the Company, in
its sole discretion, to terminate the services of the Optionee at any time.

                  17. OBLIGATION TO EXERCISE. The Optionee shall have no
obligation to exercise any option granted by this Agreement.

                  18. GOVERNING LAW. This Option Agreement shall be interpreted
and administered under the laws of the State of Delaware.

                  19. AMENDMENTS. This Option Agreement may be amended only by a
written agreement executed by the Company and the Optionee. The Company and the
Optionee acknowledge that changes in federal tax laws enacted subsequent to the
Date of Grant, and applicable to stock options, may provide for tax benefits to
the Company or the Optionee. In any such event, the Company and the Optionee
agree that this Option Agreement may be amended as necessary to secure for the
Company and the Optionee any benefits that may result from such legislation. Any
such amendment shall be made only upon the mutual consent of the parties, which
consent (of either party) may be withheld for any reason.



                                       4
   5
         IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
signed by its duly authorized representative and the Optionee has signed this
Option Agreement as of the date first written above.


SCG HOLDING CORPORATION                  OPTIONEE/JOHN MARREN



By: /s/ George H. Cave                   /s/ John Marren
    ------------------                   ---------------
Its: Vice President & Secretary
     --------------------------






                                       5

   1
                                                                   EXHIBIT 10.51


                             SCG HOLDING CORPORATION
                            2000 STOCK INCENTIVE PLAN
                      NON-QUALIFIED STOCK OPTION AGREEMENT
                                  FOR DIRECTORS


         This Option Agreement is made and entered into by and between SCG
HOLDING CORPORATION ("Company") and DAVID M. STANTON ("Optionee"), as of the
12th day of May, 2000 ("Date of Grant").

                                    RECITALS


         A. The Board of Directors of the Company has adopted the SCG Holding
Corporation 2000 Stock Incentive Plan ("Plan") as an incentive to retain members
of the Board of Directors, key employees, officers, and consultants of the
Company and to enhance the ability of the Company to attract such individuals
whose services are considered unusually valuable by providing an opportunity for
them to have a proprietary interest in the success of the Company.

         B. The Board has approved the granting of options to the Optionee
pursuant to the Plan to provide an incentive to the Optionee to focus on the
long-term growth of the Company.

         In consideration of the mutual covenants and conditions hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and the Optionee agree as follows:

                  1. GRANT OF OPTION. The Company hereby grants to the Optionee
the right and option (hereinafter referred to as the "Option") to purchase an
aggregate of 7,017 shares (such number being subject to adjustment as provided
in paragraph 11 hereof and Section 14 of the Plan) of the Common Stock of the
Company (the "Stock") on the terms and conditions herein set forth. This Option
may be exercised in whole or in part and from time to time as hereinafter
provided. The Option granted under this Agreement is NOT intended to be an
"incentive stock option" as set forth in Section 422 of the Internal Revenue
Code of 1986, as amended.

                  2. VESTING OF OPTION. The Option shall vest and become
exercisable in accordance with the schedule below:

       -        33 1/3% of the Option grant shall become exercisable
                on May 12, 2001;

       -        an additional 33 1/3% of the Option grant shall
                become exercisable on May 12, 2002; and

       -        the final 33 1/3% of the Option grant shall become
                exercisable on May 12, 2003.

                  3. PURCHASE PRICE. The price at which the Optionee shall be
entitled to purchase the Stock covered by the Option shall be $21.375 per share.
   2
                  4. TERM OF OPTION. The Option granted under this Agreement
shall expire, unless otherwise exercised, ten years from the Date of Grant,
through and including the normal close of business of the Company on May 12,
2010 ("Expiration Date"), subject to earlier termination as provided in
paragraph 8 hereof.

                  5. EXERCISE OF OPTION. The Option may be exercised by the
Optionee as to all or any part of the Stock then vested by delivery to the
Company of written notice of exercise and payment of the purchase price as
provided in paragraphs 6 and 7 hereof.

                  6. METHOD OF EXERCISING OPTION. Subject to the terms and
conditions of this Option Agreement, the Option may be exercised by timely
delivery to the Company of written notice, which notice shall be effective on
the date received by the Company ("Effective Date"). The notice shall state the
Optionee's election to exercise the Option, the number of shares in respect of
which an election to exercise has been made, the method of payment elected (see
paragraph 7 hereof), the exact name or names in which the shares will be
registered and the Social Security number of the Optionee. Such notice shall be
signed by the Optionee and shall be accompanied by payment of the purchase price
of such shares. In the event the Option shall be exercised by a person or
persons other than Optionee pursuant to paragraph 8 hereof, such notice shall be
signed by such other person or persons and shall be accompanied by proof
acceptable to the Company of the legal right of such person or persons to
exercise the Option. All shares delivered by the Company upon exercise of the
Option shall be fully paid and nonassessable upon delivery.

                  7. METHOD OF PAYMENT FOR OPTIONS. Payment for shares purchased
upon the exercise of the Option shall be made by the Optionee in cash,
previously-acquired Stock held for more than six months (through actual tender
or by attestation), broker-assisted cashless exercise arrangement, or such other
method permitted by the Board and communicated to the Optionee in writing prior
to the date the Optionee exercises all or any portion of the Option.

                  8. TERMINATION OF SERVICES.

                           8.1 GENERAL. If the Optionee ceases to perform
services as a member of the Board of Directors of the Company for any reason
other than death or Disability, then the Optionee may at any time within ninety
(90) days after the effective date of termination of services exercise the
Option to the extent that the Optionee was entitled to exercise the Option at
the date of termination, provided that the Option shall lapse immediately upon a
termination for Cause. In no event shall the Option be exercisable after the
Expiration Date. Any portion of the Option that is not vested on the date the
Optionee ceases to perform services as a Company Director, shall be forfeited on
such date.

                           8.2 DEATH OR DISABILITY OF OPTIONEE. In the event of
the death or Disability (as that term is defined in the Plan) of the Optionee
within a period during which the Option, or any part thereof, could have been
exercised by the Optionee, including ninety (90) days after termination of
services (the "Option Period"), the Option shall lapse unless it is exercised
within the Option Period and in no event later than twelve (12) months after the
date of the Optionee's death or Disability by the Optionee or the Optionee's
legal representative or representatives in the case of a Disability or, in the
case of death, by the person or persons


                                       2
   3
entitled to do so under the Optionee's last will and testament or if the
Optionee fails to make a testamentary disposition of such Option or shall die
intestate, by the person or persons entitled to receive such Option under the
applicable laws of descent and distribution. An Option may be exercised
following the death or Disability of the Optionee only if the Option was
exercisable by the Optionee immediately prior to his death or Disability. In no
event shall the Option be exercisable after the Expiration Date. The Board shall
have the right to require evidence satisfactory to it of the rights of any
person or persons seeking to exercise the Option under this paragraph 8 to
exercise the Option.

                  9. NONTRANSFERABILITY. The Option granted by this Option
Agreement shall be exercisable only during the term of the Option provided in
paragraph 4 hereof and, except as provided in paragraph 8 above, only by the
Optionee during his lifetime and while a Director of the Company. Except as
otherwise permitted by the Committee, this Option shall not be transferable by
the Optionee or any other person claiming through the Optionee, either
voluntarily or involuntarily, except by will or the laws of descent and
distribution.

                  10. MARKET STAND-OFF AGREEMENT. The Optionee, if requested by
the Company and an underwriter of Stock (or other securities) of the Company,
agrees not to sell or otherwise transfer or dispose of any Stock (or other
securities) of the Company held by the Optionee during the period not to exceed
180 days as requested by the managing underwriter following the effective date
of a registration statement of the Company filed under the Securities Act. Such
agreement shall be in writing in a form satisfactory to the Company and such
underwriter. The Company may impose stop transfer instructions with respect to
the Stock (or other securities) subject to the foregoing restriction until the
end of such project.

                  11. ADJUSTMENTS IN NUMBER OF SHARES AND OPTION PRICE. In the
event of a stock dividend or in the event the Stock shall be changed into or
exchanged for a different number or class of shares of stock of the Company or
of another corporation, whether through reorganization, recapitalization, stock
split-up, combination of shares, merger or consolidation, there shall be
substituted for each such remaining share of Stock then subject to this Option
the number and class of shares of stock into which each outstanding share of
Stock shall be so exchanged, all without any change in the aggregate purchase
price for the shares then subject to the Option, all as set forth in Section 14
of the Plan.

                  12. DELIVERY OF SHARES. No shares of Stock shall be delivered
upon exercise of the Option until (i) the purchase price shall have been paid in
full in the manner herein provided; (ii) applicable taxes required to be
withheld have been paid or withheld in full; (iii) approval of any governmental
authority required in connection with the Option, or the issuance of shares
thereunder, has been received by the Company; and (iv) if required by the Board,
the Optionee has delivered to the Board an Investment Letter in form and content
satisfactory to the Company as provided in paragraph 13 hereof.

                  13. SECURITIES ACT. The Company shall not be required to
deliver any shares of Stock pursuant to the exercise of all or any part of the
Option if, in the opinion of counsel for the Company, such issuance would
violate the Securities Act of 1933 or any other applicable federal or state
securities laws or regulations. The Board may require that the Optionee, prior
to the issuance of any such shares pursuant to exercise of the Option, sign and
deliver to the


                                       3
   4
Company a written statement ("Investment Letter") stating (i) that the Optionee
is purchasing the shares for investment and not with a view to the sale or
distribution thereof; (ii) that the Optionee will not sell any shares received
upon exercise of the Option or any other shares of the Company that the Optionee
may then own or thereafter acquire except either (a) through a broker on a
national securities exchange or (b) with the prior written approval of the
Company; and (iii) containing such other terms and conditions as counsel for the
Company may reasonably require to assure compliance with the Securities Act of
1933 or other applicable federal or state securities laws and regulations. Such
Investment Letter shall be in form and content acceptable to the Board in its
sole discretion.

                  14. DEFINITIONS; COPY OF PLAN. To the extent not specifically
provided herein, all capitalized terms used in this Option Agreement shall have
the same meanings ascribed to them in the Plan. By the execution of this
Agreement, the Optionee acknowledges receipt of a copy of the Plan.

                  15. ADMINISTRATION. This Option Agreement shall at all times
be subject to the terms and conditions of the Plan and the Plan shall in all
respects be administered by the Board in accordance with the terms of and as
provided in the Plan. The Board shall have the sole and complete discretion with
respect to all matters reserved to it by the Plan and decisions of the majority
of the Board with respect thereto and to this Option Agreement shall be final
and binding upon the Optionee and the Company. In the event of any conflict
between the terms and conditions of this Option Agreement and the Plan, the
provisions of the Plan shall control.

                  16. CONTINUATION OF SERVICES. This Option Agreement shall not
be construed to confer upon the Optionee any right to continue providing
services as a Company Director and shall not limit the right of the Company, in
its sole discretion, to terminate the services of the Optionee at any time.

                  17. OBLIGATION TO EXERCISE. The Optionee shall have no
obligation to exercise any option granted by this Agreement.

                  18. GOVERNING LAW. This Option Agreement shall be interpreted
and administered under the laws of the State of Delaware.

                  19. AMENDMENTS. This Option Agreement may be amended only by a
written agreement executed by the Company and the Optionee. The Company and the
Optionee acknowledge that changes in federal tax laws enacted subsequent to the
Date of Grant, and applicable to stock options, may provide for tax benefits to
the Company or the Optionee. In any such event, the Company and the Optionee
agree that this Option Agreement may be amended as necessary to secure for the
Company and the Optionee any benefits that may result from such legislation. Any
such amendment shall be made only upon the mutual consent of the parties, which
consent (of either party) may be withheld for any reason.



                                       4
   5
         IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
signed by its duly authorized representative and the Optionee has signed this
Option Agreement as of the date first written above.


SCG HOLDING CORPORATION                  OPTIONEE/DAVID M. STANTON



By: /s/ George H. Cave                   /s/ David M. Stanton
    -----------------                    --------------------
Its: Vice President & Secretary
     --------------------------







                                       5

   1
                                                                      EXHIBIT 11

                STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS

                  ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

                        COMPUTATION OF PER SHARE EARNINGS

                      (IN MILLIONS, EXCEPT PER SHARE DATA)



                                                                                       AUGUST 4, 1999
                                                                      YEAR ENDED          THROUGH
                                                                     DECEMBER 31,       DECEMBER 31,
                                                                         2000               1999
                                                                     ------------      --------------
                                                                                 
Net income before extraordinary loss                                   $   88.6           $   29.8
Less: Redeemable preferred dividends                                       (8.8)             (10.6)
                                                                       --------           --------
Net income before extraordinary loss available for common stock            79.8               19.2
Extraordinary loss on debt prepayment                                     (17.5)                --
                                                                       --------           --------
Net income available for common stock                                  $   62.3           $   19.2
                                                                       ========           ========

Basic weighted average common shares outstanding                          160.2              136.7
Add: Dilutive effect of stock options                                       5.4                7.9
                                                                       --------           --------
Diluted weighted average common shares outstanding:                       165.6              144.6
                                                                       ========           ========

Earnings per share:

Basic:
Net income before extraordinary loss available for common stock        $   0.50           $   0.14
Extraordinary loss on debt prepayment                                     (0.11)                --
                                                                       --------           --------
Net income available for common stock                                  $   0.39           $   0.14
                                                                       ========           ========

Diluted:
Net income before extraordinary loss available for common stock        $   0.49           $   0.13
Extraordinary loss on debt prepayment                                     (0.11)                --
                                                                       --------           --------
Net income available for common stock                                  $   0.38           $   0.13
                                                                       ========           ========

   1
                                                                EXHIBIT 13

"Take a breath. In the amount of time it took you to do that, ON Semiconductor
produced 1,600 chips; 12,000 in the time it took to tie your shoes this
morning; 2,800,000 in an hour; 25 billion in the year 2000."

ON SEMICONDUCTOR -- EXCELLENCE BY DESIGN

     ON Semiconductor designs and manufactures products critical to the
functioning of today's digital world. Semiconductors, the small silicon-based
devices that enable the digital revolution, control the flow of electricity in
the equipment that makes our world easier to manage and more enjoyable to live
in.

     The principal end-user markets for ON Semiconductor products are
networking and computing, wireless communications, consumer, automotive and
industrial electronics. Our products can be found in routers, switches and
other advanced networking equipment, computers, servers, cellular telephones,
portable electronics, industrial automation and control systems and many other
electronic devices.

     The company boasts three main product lines: broadband (application
specific products, communication integrated circuits, clock and data
distribution, translators and drivers); power management (amplifiers, voltage
regulators, interfaces, controllers and comparators); and standard
semiconductors.

     In little more than a year, ON Semiconductor commenced business as an
independent company, conducted a successful initial public offering and
acquired Cherry Semiconductor. ON Semiconductor is now positioned as one of the
top two suppliers of power management devices and a global leader in broadband
solutions.

     ON Semiconductor continues to prove itself as a fast mover in the industry.
The company generates 51% of its revenue from high-margin, high-profit
Integrated Circuits (ICs), an increase of seven percentage points in 2000 alone.

     The company is committed to tripling its investment in research and
development, or 5% to 6% of annual sales revenue, over the next three years.

[ARTWORK]

NETWORKING & COMPUTING APPLICATIONS:
Routers, networking, cable and other high-speed modems, set-top boxes, laser
printers, scanners, Ethernet cards, disk drives.

[RESEARCH & DEVELOPMENT             [THE INNOVATION ENGINE
  SPENDING BAR CHART]               (number of new products)
                                           BAR CHART]


   2

                                   [ARTWORK]

                      WIRELESS COMMUNICATION APPLICATIONS:
   Portable electronic devices, cellular phones, pagers, satellite receivers.


         ON Semiconductor's International design centers provide the innovation
that has enabled the company to introduce more than 400 new products in the
past year. Many of these devices are solid revenue generators with significant
product life cycles. ON Semiconductor owns more than 740 U.S. and foreign
patents, 57 trademarks and intellectual property rights in as many as 39
semiconductor fabrication processes.

         ON Semiconductor's products are the great enablers of connectivity,
convergence, capacity and portability that characterize our highly mobile,
information dependent society. The freedom of wireless communications and the
instantaneous access to information through the Internet are but two examples
of the capabilities that semiconductors bring to our world.

                      O N   S E M I C O N D U C T O R  --
            A   L E A D E R   I N   P O W E R   M A N A G E M E N T

         The Venture Development Corporation(TM) estimates that the global
power-management market will grow at a compounded annual rate of 27% to $10
billion in 2003. The demand for smaller, more efficient portable electronic
devices such as cell phones, Personal Digital Assistants (PDA), and smart
appliances drive this growth trend.

         ON Semiconductor designs and manufactures voltage-supervisory,
battery-management, Radio-Frequency (RF)amplifier control, Input/Output (I/O)
protection and smart card interface ICs that meet numerous requirements for
portable electronics and cellular communications. Do you have a cell phone? If
you do, it is more than likely you also own several of ON Semiconductor's
industry-leading products that ensure precise distribution of power across the
device. The company is a major supplier of products to most major cellular phone

[ARTWORK]

                                                                             4/5


   3
"As one of the pioneers of the world's fastest logic silicon...we still lead
the market three decades later."


manufacturers. Every time you hit the send button on your phone, ON
Semiconductor products help turn your wireless communications into a reality.

     ON Semiconductor continues to develop and introduce power-management ICs
that enable longer battery life for smaller, more efficient portable electronic
devices. The company produces the devices that extend the life of your phone's
battery, enabling you to carry your phone over increasing periods of time. In
the not-so-distant future, advances in battery composition and power-management
semiconductor design will enable you to use your phone for up to a year before
recharging.

BROADBAND--WORLD'S FASTEST LOGIC SILICON

     It is almost impossible to send an email message or surf the Internet
without using ON Semiconductor's products. You can find the company's devices
in your computer, the high-speed modem, the router at your service
provider's central office and in the advanced switches that are the backbone of
the Internet.

     Venture Development Corporation estimates the broadband IC market will
grow 28% at a compounded annual rate from $1.3 billion in 1999 to $3.5 billion
in 2003. As one of the pioneers of the world's fastest logic silicon, ON
Semiconductor is uniquely positioned to take advantage of this growth.

[ARTWORK]

CONSUMER ELECTRONIC APPLICATIONS:
DVD players, home security systems, small
household appliances, smart cards.
   4
                              [ ] [ ] [ ]
                                  [ ] [ ] [ ]    [ARTWORK]

                      AUTOMOTIVE ELECTRONIC APPLICATIONS:
    GPS and navigational tools, air bag controls, anti-lock braking systems.


     Already positioned as a global leader in this market, ON Semiconductor
designs, develops and supplies clock management, high-performance digital and
communications ICs for the high-growth broadband communications markets.
Applications in these markets include fiber-optic modules, communication and
networking switches, high-end routers, high-performance work stations, highly
dense memory modules, storage-area networks and precision measurement test
systems.

     ON Semiconductor provides broadband semiconductor technology that has
evolved into an essential component of the global networking backbone. The
company pioneered the development of high-performance silicon products under
the broadband umbrella to address increased performance demands of
next-generation networking equipment. ON Semiconductor is creating advanced
semiconductor processes that employ deep sub-micron technology optimized for
performance in OC-192 systems and beyond.

     As demand for bandwidth rapidly accelerates, service providers strive to
be the first to deploy broadband multi-service networks. Network equipment
manufacturers are challenged to meet the requirement for products that can help
break the bandwidth bottleneck. This next generation of networking equipment
must be able to do significantly more in less space and at lower power while
maintaining high-performance specifications.

     ON Semiconductor is creating high-performance semiconductors that are
critical in powering broadband equipment that supports the global networking
infrastructure. As the number of users increase the load on the Internet
infrastructure, ON Semiconductor will be there to provide the silicon solutions
for the next-generation network equipment.

                                   [ARTWORK]
                1992         1995         1999        TODAY

STANDARD SEMICONDUCTORS--DISCRETES AND BEYOND

     ON Semiconductor's discrete and standard logic businesses provide the
company with scale and leverage in its manufacturing capability. These
businesses, growing more than 7% last year, provide ON Semiconductor with a
powerful complement to its growth engines and strategies because of their low
level of reinvestment, product pull through and cash generation. Discretes play
an important role in virtually every device that uses power.



                                                                             6/7
   5
[ARTWORK]

INDUSTRIAL APPLICATIONS: Automation and control systems,
power supplies, motor controls, lighting controls.

     As consumer demand increases for competitively priced portable-electronic
devices with increased functionality, engineers face the difficult task of
fitting an increasing number of faster, smaller and noise-sensitive
micropackages into ever-shrinking design space. ON Semiconductor solves these
design issues by using advanced manufacturing processes to deliver a low-cost
family of discrete-integration devices.

     Micropackaging and discrete-integration capabilities enable the company to
significantly reduce the component count and the required printed-circuit board
space that are not possible with traditional techniques.

CUSTOMERS - THE DRIVING FORCE OF THE COMPANY'S SUCCESS

     ON Semiconductor's focus on service, growth, cost and speed resonate with
its customers. In fact, its customers recognized the company with more than 15
awards as a leading supplier during the past year. ON Semiconductor sells its
products to customers around the world including original equipment
manufacturers, such as Cisco Systems, Lucent, Nortel Networks, Nokia, Motorola,
Visteon, Sony and Sun Microsystems, electronic manufacturing service providers,
such as Celestica, Flextronics, SCI and Solectron, and global distributors,
such as Arrow and Avnet.

ON SEMICONDUCTOR - THE GLOBAL START UP

     From its headquarters in Phoenix, Arizona, the company commands nine
manufacturing facilities, eleven design centers, over 14,000 employees and
numerous sales offices strategically placed worldwide to meet the needs of its
global customers.

     ON Semiconductor has design operations in San Jose and Irvine,
California; Phoenix and Chandler, Arizona; East Greenwich, Rhode Island;
Grenoble and Toulouse, France; Roznov, Czech Republic; Tokyo and Aizu, Japan;
and Hong Kong, China.

     The company operates manufacturing facilities in Arizona and Rhode Island
in the United States, China, the Czech Republic, Japan, Malaysia, Mexico, the
Phillippines and Slovak Republic, directly or through joint ventures.


*Venture Development Corporation, the global market for power supply and power
management integrated circuits, second edition, December 2000.
   6



    The following table sets forth our selected financial data for the periods
indicated. We derived the statement of operations data set forth below for the
year ended December 31, 2000 and the period from August 4, 1999 through December
31, 1999, and the balance sheet data for December 31, 2000 and 1999, from our
audited historical post-Recapitalization consolidated financial statements. We
derived the statement of operations data set forth below for the years ended
December 31, 1998, 1997 and 1996 and the period from January 1, 1999 through
August 3, 1999, and balance sheet data as of December 31, 1998, 1997 and 1996,
from our audited combined financial statements prior to our Recapitalization.
You should read this information in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and our audited
consolidated financial statements and our audited combined financial statements
included in Exhibit 13 in this Form 10-K.



                                                POST-RECAPITALIZATION                        PRE-RECAPITALIZATION
                                                ---------------------                        --------------------

                                                                AUGUST 4,    JANUARY 1,
                                                                  1999          1999
                                            YEAR  ENDED          THROUGH       THROUGH
                                           DECEMBER 31,       DECEMBER 31,    AUGUST 3,             YEAR ENDED DECEMBER 31,
                                           ------------       ------------    ---------             -----------------------
                                                2000              1999          1999             1998        1997      1996
                                           ------------------ -----------   -----------      ----------- -----------  --------

  STATEMENT OF OPERATIONS DATA:                              (IN MILLIONS, EXCEPT PER SHARE     DATA)


                                                                                                      
Total revenues                             $2,073.9            $798.7         $986.4           $1,657.6     $1,992.7     $1,907.5

Write-off acquired in-process research
and development(1)                             26.9               --              --                --           --            --

Restructuring charges                           4.8               3.7             --              189.8          --            --

Extraordinary loss on debt prepayment(2)       17.5               --              --                --           --            --

Net income (loss)(3)                           71.1              29.8           104.8             (136.3)      270.0        289.7

Diluted earnings per common share (4)        $ 0.38           $  0.13





                                                    DECEMBER 31,                                      DECEMBER 31,
                                                    ------------                                     ------------
                                                2000             1999                        1998        1997         1996
                                                ----             ----                        ----        ----         ----
  BALANCE SHEET DATA:

                                                                                                      
  Total assets                                $2,023.0           $1,616.8                   $840.7      $935.3       $768.9

  Long-term debt, less current portion(5)      1,252.7            1,295.3

  Redeemable preferred stock(6)                    --               219.6                      --          --           --

  Stockholders equity(deficit)/business          337.7             (247.7)                   681.0      866.4        746.1
  equity(7)




- -------
(1) Write-off of acquired in-process research and development relates to the
April 2000 acquisition of Cherry Semiconductor Corporation.

(2) Prepayment penalties, redemption premiums and the write-off of deferred debt
issuance costs were incurred in connection with the repayment of debt in 2000
net of tax.

(3) Prior to our Recapitalization, cost of sales, research and development
expenses, selling and marketing expenses, general and administrative expenses
and interest expense included amounts allocated to us by Motorola. In addition,
Motorola did not allocate income tax expense to us.

(4) Diluted earnings per common share for the year ended December 31, 2000 and
the period from August 4, 1999 to December 31, 1999 are calculated by deducting
dividends on our redeemable preferred stock of $8.8 million and $10.6 million,
respectively, from net income for such periods and then dividing the resulting
amounts by the weighted average number of common shares outstanding (including
the incremental shares issuable upon the assumed exercise of stock options)
during such periods.

(5) It is not meaningful to show long-term debt, less the current portion prior
to our Recapitalization because Motorola's cash management system was not
designed to track centralized cash and related financing transactions to the
specific cash requirements of our business.

(6) Repaid with a portion of the proceeds from our initial public offering.

(7) For periods prior to our Recapitalization, business equity represented
Motorola's ownership interest in our net assets. All cash transactions, accounts
receivable, accounts payable in the United States, other allocations and
intercompany transactions were reflected in this amount. For periods subsequent
to our Recapitalization, our stockholders' equity(deficit) consisted of our
common stock, paid-in-capital, accumulated other comprehensive income(loss) and
accumulated deficit.


                                                                             8/9
   7
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
    RESULTS OF OPERATIONS

    You should read the following discussion in conjunction with our audited
historical post-Recapitalization consolidated financial statements and our
audited historical pre-Recapitalization combined financial statements, which are
included elsewhere in this Annual Report to Stockholders. The
post-Recapitalization consolidated financial statements present our consolidated
financial position, results of operations and cash flows on a stand-alone basis.
The pre-Recapitalization combined financial statements present the combined
revenues less direct and allocated expenses before taxes of the business of
Motorola's Semiconductor Components Group prior to our August 4, 1999
Recapitalization and are not intended to be a complete presentation of the
results of operations or cash flows that would have been recorded by us on a
stand-alone basis.

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

    Recent Developments. Entering 2001, we continue to experience slowing demand
for our products as customers have delayed or cancelled bookings in order to
manage their inventories in line with incoming business. With the recent
economic downturn, our customers are unable to provide us with much visibility
to their expected requirements. We project net product revenues for the first
quarter of 2001 to be down approximately 30% from the fourth quarter of 2000,
with an expected loss per share of approximately $0.13-$0.15, excluding
restructuring charges and amortization of goodwill and other intangibles. In the
fourth quarter of 2000 we reported net product revenues of $490.7 million and
net income of $21.2 million, or $0.12 per share, excluding amortization of
goodwill and other intangibles. We are managing our resources prudently, staying
close to our customers for signals of an upturn and continuing our new product
development efforts. We will continue to actively adjust our cost structure to
limit the impact of reduced revenue on profitability. Cost reduction actions
include accelerating our manufacturing moves into lower cost regions,
transitioning higher-cost external supply to internal manufacturing, working
with our materials suppliers to further lower cost, and aggressively
streamlining our overhead. As a result of actions already initiated, we expect
to incur a restructuring charge in the first quarter 2001. We estimate the cash
portion of this restructuring charge will be approximately $30-40 million
(before income taxes), primarily associated with severance costs. We plan to
continue to execute on our long-range growth plan in broadband and power
management solutions while appropriately managing short-term demand
fluctuations.

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

    On May 3, 2000, we completed the initial public offering of our common
stock, selling 34.5 million shares with an issue price of $16 per share. Net
proceeds from the IPO (after deducting issuance costs) were approximately $514.8
million. The net proceeds were used to redeem all outstanding preferred stock
(including accrued dividends), redeem a portion of the senior subordinated notes
and prepay a portion of the loans outstanding under the senior bank facilities.
In connection with this debt prepayment, we incurred prepayment penalties and
redemption premiums of $17.3 million and wrote off $11.9 million of debt
issuance costs. These amounts, totaling $29.2 million ($17.5 million or $0.11
per share, net of income taxes), have been classified as an extraordinary loss
in the consolidated statement of operations and comprehensive income for 2000.

    Acquisition. On April 3, 2000, we acquired all of the outstanding capital
stock of Cherry Semiconductor Corporation for approximately $253.2 million in
cash (including acquisition related costs), which was financed with cash on hand
and borrowings of $220.0 million under our senior bank facilities. Cherry, which
was renamed Semiconductor Components Industries of Rhode Island, Inc., designs
and manufactures analog and mixed signal integrated circuits for the power
management and automotive markets, and had revenues for its fiscal year ended
February 29, 2000 of $129.1 million.
   8

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


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


    Developed technology and assembled workforce are being amortized on a
straight-line basis over estimated useful lives of five years while goodwill is
being amortized over an estimated life of ten years. Accumulated amortization of
these intangible assets totaled $16.8 million at December 31, 2000.

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

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

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

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



                                                                                                   (unaudited)
                                                                                                
    Total revenues                                                                                 $ 2,110.3
    Net income before extraordinary loss                                                                85.4
    Net income                                                                                          67.9
    Diluted earnings per share before extraordinary loss                                           $    0.46
    Diluted earnings per share                                                                     $    0.35


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

    Market. Our products are sold primarily to three different customer bases:
original equipment manufacturers, electronic manufacturing service providers,
and distributors. Since the products we sell are ultimately purchased by end
users for use in a variety of markets, we are less dependent on either specific
customers or specific end-use applications. Direct sales to original equipment
manufacturers, electronic manufacturing service providers, and distributors
accounted for approximately 43%, 12% and 45%, respectively, of our net product
revenues in 2000 and approximately 48%, 8%, and 44%, respectively, of our net
product revenues in 1999. We expect overall sales to original equipment
manufacturers to continue to decline as a percentage of sales as these customers
increasingly purchase component products through distributors or outsource their
manufacturing to electronic manufacturing service providers. Distributors and
electronic manufacturing service providers are representing a larger share of
the market in general, and we expect these


                                                                           10/11
   9
customers to represent a larger percentage of our total addressable market in
the future. We do not anticipate any significant effect on our overall sales
from this shift in customer base.

     Market share. We experienced a decline in our market share from 1994
through 2000. Our market share as a percentage of our total addressable market
was 10.3% in 1994, 9.1% in 1995, 8.6% in 1996, 8.5% in 1997, 7.9% in 1998, 7.3%
in 1999 and 6.6% in 2000. We believe this decline was attributable primarily to
the emphasis of Motorola's Semiconductor Products Sector, prior to our
Recapitalization, on the sale of more complex and higher-priced semiconductors,
including the diversion of research and development, capital expenditures and
manufacturing capacity to these products and incentives provided to their sales
force and third-party distributors linked to the sale of these products.
Although our total addressable market may continue to decline in 2001, we expect
that any such decline will not materially affect our operating results because
we have chosen to focus on products with significant growth potential, such as
analog and emitter-coupled logic ("ECL") products.

     Joint ventures. We have a majority ownership in two joint ventures
located in the Czech Republic. As we have the ability to control these joint
ventures, we have consolidated them in our financial statements. We also have a
majority interest in a Chinese joint venture and, through January 31, 2001, a
50% interest in a joint venture located in Malaysia. As we do not have the
ability to control these joint ventures, we use the equity method to account for
them in our financial statements.

     The other owner of the Malaysia joint venture is Philips Semiconductors
International B.V.("Philips") The terms of the joint venture agreement provide
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. This transaction resulted in proceeds of
approximately $20.4 million and a pretax gain of approximately $3.2 million. We
do not expect the acquisition by Philips to have a material impact on our
financial condition or results of operations. See "Business Overview --
Manufacturing Operations".

RESULTS OF OPERATIONS

    Earnings per common share. Our diluted earnings per share on an actual and
adjusted basis for 2000 and for the period from August 4, 1999 to December 31,
1999 is as follows:


                                                           PERIOD FROM AUGUST 4, 1999          YEAR ENDED
                                                           THROUGH DECEMBER 31, 1999        DECEMBER 31, 2000
                                                           -------------------------       -------------------
                                                       IN MILLIONS         PER SHARE       IN MILLIONS      PER SHARE
                                                       -----------------------------     -----------------------------

                                                                                             
Net income                                              $   29.8                          $    71.1
Less: Redeemable preferred stock dividends                 (10.6)                              (8.8)
                                                           ------                              -----
Net income available for common stock                       19.2           $  0.13             62.3        $   0.38
Plus: (net of tax)
  Amortization of goodwill and other                          --                 --            10.1            0.06
  intangibles
  Write-off of acquired in-process research                   --                 --            16.1            0.10
  and development
  Restructuring charges                                     3.7               0.03              2.9            0.02
  Extraordinary loss                                         --                 --             17.5            0.10
                                                          ------             -------         ------           -----
Adjusted net income available for common stock           $ 22.9            $  0.16         $  108.9        $   0.66
                                                       ========            =========       ========        =========
Weighted average common shares outstanding:               144.6                               165.6
Diluted                                                  ======                               =====



   10
    The following table summarizes certain information relating to our operating
results that has been derived from our audited post-Recapitalization
consolidated financial statements and our audited pre-Recapitalization combined
financial statements (in millions):


                                                          PRE-                    POST-                           POST-
                                                     RECAPITALIZATION         RECAPITALIZATION   PRO FORMA    RECAPITALIZATION
                                                     ----------------         ----------------   ---------    ----------------
                                                                    JANUARY 1    AUGUST 4           YEAR            YEAR
                                                    YEAR ENDED       THROUGH      THROUGH           ENDED           ENDED
                                                    DECEMBER 31,    AUGUST 3,  DECEMBER 31,     DECEMBER 31,    DECEMBER 31,
                                                        1998          1999         1999             1999            2000
                                                    ------------  ------------ ------------     ------------    ------------

                                                                                                 
            Revenues:
              Net product revenues                    $ 1,495.3      $ 895.4      $ 728.8         $ 1,624.2       $ 2,012.2
              Foundry revenues                            162.3         91.0         69.9             160.9            61.7
                                                      ---------      -------      -------         ---------       ---------
                Total revenues                          1,657.6        986.4        798.7           1,785.1         2,073.9
            Cost of sales                               1,222.3        711.3        573.3           1,284.6         1,355.0
                                                      ---------      -------      -------         ---------       ---------
            Gross profit                                  435.3        275.1        225.4             500.5           718.9
                                                      ---------      -------      -------         ---------       ---------
            Operating expenses:
              Research and development                     67.5         34.3         16.3              50.6            69.2
              Selling and marketing                        92.4         39.0         24.6              63.6           100.1
              General and administrative                  205.7         89.4         77.3             166.7           233.4
              Amortization of goodwill and other
            intangibles                                    --            --           --              --               16.8
             Write-off of acquired in-process
            research and development                       --            --           --              --               26.9
             Restructuring charges                        189.8           --          3.7               3.7             4.8
                                                      ---------        -------     -------         ---------       ---------

               Total operating expenses                   555.4        162.7        121.9             284.6           451.2
                                                      ---------      -------      -------         ---------       ---------
            Operating income (loss)                      (120.1)       112.4        103.5             215.9           267.7
                                                      ---------      -------      -------         ---------       ---------
            Other income (expenses), net:
              Interest expense                            (19.8)        (9.1)       (55.9)            (65.0)         (131.2)
              Equity in earnings of joint ventures          5.7          2.4          1.4               3.8             4.4
                                                       ---------      -------      -------         ---------       ---------
                Other income (expenses), net              (14.1)        (6.7)       (54.5)            (61.2)         (126.8)
                                                       ---------      -------      -------         ---------       ---------
            Income before income taxes,  minority
              interests and extraordinary loss           (134.2)       105.7         49.0             154.7           140.9
            Minority interests                             (2.1)        (0.9)        (1.1)             (2.0)           (2.2)
                                                       ---------      -------      -------         ---------       ---------
            Revenues less direct and allocated
              expenses before taxes                   $  (136.3)     $ 104.8         47.9          $  152.7           138.7
                                                      =========      =======                      ===========
            Provision for income taxes                   n/a            n/a         (18.1)            n/a             (50.1)
                                                                                    -----                          --------
            Net income before extraordinary loss         n/a            n/a          29.8            n/a               88.6

            Extraordinary loss on debt prepayment,
              net of tax                                 n/a            n/a           --             n/a              (17.5)
                                                                                 ----------                         --------
            Net income                                   n/a            n/a         $29.8            n/a            $  71.1
                                                                                    =====                          =========


                                                                           12/13
   11

    The following table summarizes certain information related to our operating
results expressed as a percentage of net product revenues:



                                                              PRE-                  POST-                        POST-
                                                        RECAPITALIZATION       RECAPITALIZATION  PRO FORMA    RECAPITALIZATION
                                                       ----------------        ----------------  ---------    ----------------

                                                                    JANUARY 1    AUGUST 4           YEAR          YEAR
                                                    YEAR  ENDED      THROUGH      THROUGH           ENDED         ENDED
                                                    DECEMBER 31,    AUGUST 3,  DECEMBER 31,     DECEMBER 31,  DECEMBER 31,
                                                        1998          1999         1999             1999          2000
                                                    ------------  ------------ ------------     ------------  --------

                                                                                               
            Revenues:
              Net product revenues                       100.0%        100.0%      100.0%          100.0%        100.0%
              Foundry revenues                            10.9          10.2         9.6             9.9           3.1
                                                          ----          ----       -----           -----         -----
                Total revenues                           110.9         110.2       109.6           109.9         103.1
                Cost of sales                             81.8          79.5        78.7            79.1          67.4
                                                         -----         -----       -----           -----         -----
            Gross profit                                  29.1          30.7        30.9            30.8          35.7
                                                        -----          -----       -----           -----         -----
            Operating expenses:
              Research and development                     4.5           3.8         2.2             3.1           3.5
              Selling and marketing                        6.2           4.4         3.4             3.9           5.0
              General and administrative                  13.8          10.0        10.6            10.3          11.6
               Amortization of goodwill and other          --            --           --              --           0.8
             intangibles
               Write-off of acquired in-process            --            --           --              --           1.3
             research and development
              Restructuring charges                       12.7           --           0.5             0.2          0.2
                                                         -----          ----        -----           -----        -----
                Total operating expenses                  37.2          18.2         16.7            17.5         22.4
                                                         -----         -----        -----           -----        -----
            Operating income (loss)                      (8.1)          12.5         14.2            13.3         13.3
                                                         -----         -----        -----           -----        -----
            Other income (expenses), net:
              Interest expense                           (1.3)          (1.0)       (7.7)           (4.0)         (6.5)
              Equity in earnings of joint ventures        0.4            0.3         0.2             0.2           0.2
                                                         -----          -----      -----           -----         -----
                Other income (expenses), net             (0.9)          (0.7)       (7.5)           (3.8)         (6.3)
                                                        -----          -----       -----           -----         -----
            Income before income taxes,  minority
              interests and extraordinary loss           (9.0)          11.8         6.7             9.5           7.0
               Minority interests                        (0.1)          (0.1)       (0.2)           (0.1)         (0.1)
                                                       -------         -------      -----       --------       --------
               Revenues less direct and allocated
               expenses before taxes                     (9.1)%         11.7%        6.5             9.4%          6.9
                                                     ==========      ==========                    =======
               Provision for income taxes               n/a             n/a         (2.4)            n/a          (2.5)
                                                                                    -----                       --------
               Net income before extraordinary loss     n/a             n/a          4.1             n/a           4.4
            Extraordinary loss on debt prepayment       n/a             n/a           -              n/a          (0.9)
                                                                                     ----                          -----
            Net income                                  n/a             n/a          4.1%            n/a           3.5%
                                                                                     ===                           =====


YEAR ENDED DECEMBER 31, 2000 COMPARED TO PRO FORMA YEAR ENDED DECEMBER 31, 1999

    Total revenues. Total revenues increased $288.8 million, or 16.2%, to
$2,073.9 million in 2000 from $1,785.1 million in 1999, due to an increase in
net product revenues, partially offset by a planned decrease in foundry revenues
as described below.

    Net product revenues. Net product revenues increased $388.0 million, or
23.9%, to $2,012.2 million in 2000 from $1,624.2 million in 1999. Unit volume
increased by 32.5% in 2000 compared to 1999, while the average selling price for
our products decreased by 6.5%, primarily as a result of increased micropackaged
business, in higher volume, lower average selling price small signal products.
Net revenues for broadband products, which accounted for 15.5% of net product
revenues in 2000, increased 50.4% compared to 1999 as a result of a strong
increase in demand for ECL products. Net revenues for analog products, which
accounted for 26.5% of net product revenues in 2000, increased 61.6% compared to
1999 as a result of the Cherry acquisition and increased demand in the power
management market. Net revenues for standard semiconductor products, which
accounted for 58.0% of net product revenues for 2000, increased 7.4% compared to
1999, fueled mainly by increased demand in micropackaged products within the
small signal and rectifier product families. Other product families, including
thyristors, TMOS, and standard logic also experienced revenue growth due to
increases in demand. Approximately 46%, 33% and 21% of our net product revenues
were derived from the Americas, Asia/Pacific and Europe (including the Middle
East), respectively, in both 2000 and 1999.
   12

    Foundry revenues. Foundry revenues decreased $99.2 million, or 61.7%, to
$61.7 million in 2000 from $160.9 million in 1999. These foundry revenues are a
result of agreements made with Motorola in connection with our Recapitalization.
We expect that these revenues will continue to decline in the future as the
separation from Motorola progresses. Motorola continues to be one of our largest
original equipment manufacturer customers, and those product revenues are
distinctly different from, and not included with, the aforementioned foundry
revenues.

    Cost of sales. Cost of sales increased $70.4 million, or 5.5%, to $1,355.0
million in 2000 from $1,284.6 million in 1999, primarily as a result of
increased sales volume, partially offset by cost reductions from the
restructuring programs instituted over the past three years. These programs
included the implementation of ongoing cost-saving initiatives to rationalize
our product portfolio, close plants and relocate or outsource related operations
to take advantage of lower-cost labor markets and make our manufacturing
processes more efficient as described below in "Restructuring charges". We
expect these cost reductions will continue to have a positive impact on our
gross margin as a percentage of net product revenues.

    Gross profit. Gross profit (computed as total revenues less cost of sales)
increased $218.4 million, or 43.6%, to $718.9 million in 2000 from $500.5
million in 1999. As a percentage of total revenues, gross margin improved to
34.7% (35.7% for product gross margin) in 2000 from 28.0% in 1999. The
improvement in gross profit resulted mainly from reductions in costs from our
restructuring programs, increased sales volume and a shift in product mix toward
higher margin products, including broadband and analog families.

Operating expenses

    Research and development. Research and development costs increased $18.6
million, or 36.8%, to $69.2 million in 2000 from $50.6 million in 1999,
primarily as a result of the Cherry acquisition and planned increased
investments in research and development, offset by the elimination of corporate
allocations from Motorola incurred in 1999 prior to our Recapitalization, which
totaled $13.3 million. Research and development costs that we incurred directly
(excluding the corporate allocations from Motorola in 1999) increased $31.9
million or 86% from 1999 to 2000. As a percentage of net product revenues,
research and development costs increased to 3.5% in 2000 from 3.1% in 1999.
During 2000, we introduced 422 new products. The main emphasis of our new
product development is in the high-growth market applications of power
management and broadband solutions with 80% of our overall research and
development investment targeted in these areas. Our long-term target for
research and development costs is 5-6% of revenues.

    Selling and marketing. Selling and marketing expenses increased by $36.5
million, or 57.4%, to $100.1 million in 2000 from $63.6 million in 1999. The
increase in selling and marketing expenses was attributable to the Cherry
acquisition and increased branding and marketing costs associated with
establishing the ON Semiconductor trade name. As a percentage of net product
revenues, these costs increased to 5.0% in 2000 from 3.9% in 1999.

    General and administrative. General and administrative expenses increased by
$66.7 million, or 40.0% to $233.4 million in 2000 from $166.7 million in 1999,
as a result of the Cherry acquisition, costs incurred to establish corporate
functions, costs resulting from our separation from Motorola, higher performance
bonuses in 2000 and increases in professional services. As a percentage of net
product revenues, these costs increased to 11.6% in 2000 from 10.3% in 1999.

    Write-off of acquired in-process research and development. In 2000, we
incurred a $26.9 million charge for the write-off of acquired in-process
research and development resulting from the Cherry acquisition. No such charges
were incurred in 1999.

    Amortization of goodwill and other intangibles. Amortization of goodwill and
other intangibles was $16.8 million in 2000 due to the intangible assets that
were acquired with Cherry, including amounts related to developed technology,
assembled workforce and goodwill. No such amortization was charged in 1999.

    Restructuring charges. In March 2000, we recorded a $4.8 million charge to
cover costs associated with a restructuring program at our manufacturing
facility in Guadalajara, Mexico. The charge included $3.2 million to cover
employee separation costs associated with the termination of approximately 500
employees and $1.6 million for equipment write-downs that were charged directly
against the related assets.

    In September 2000, we completed a detailed evaluation of the costs to be
incurred to complete the March 2000 restructuring program. Based on this
evaluation, we released $0.8 million of the remaining restructuring reserve for
employee separation costs to income as a credit to restructuring charges in the
consolidated statement of operations and comprehensive income. Also in
conjunction with this evaluation, we recorded an additional charge of $0.8
million for asset impairments that was charged directly against the related
assets.

    In December 1999, we recorded a restructuring charge of $11.1 million,
including $3.5 million to cover separation costs relating to approximately 150
employees at a manufacturing facility in Mesa, Arizona that was closed in
December 1999, as well as a charge of $7.6 million to cover equipment
write-downs at that facility and other non-cash business exit costs that were
charged directly against the related assets.



                                                                           14/15

   13
    A summary of activity in our restructuring reserves during 2000 is as
follows (in millions):



                                                 BALANCE                                        BALANCE
                                                  AS OF                                          AS OF
                                              DECEMBER 31,                AMOUNTS    RESERVE   DECEMBER 31,
                                                 1999        PROVISION     USED      RELEASED     2000
                                            --------------  -----------  ---------  ---------  ----------

                                                                                
Consolidation of manufacturing operations       $ 6.0       $    -       $ (6.0)    $      -   $      -
Employee separations                              3.5          3.2         (5.2)        (0.8)       0.7
                                                -----       ------       -------     --------  --------
Total                                           $ 9.5       $  3.2       $(11.2)    $   (0.8)  $    0.7
                                                =====       ======       =======     ========  ========


    Operating income. Operating income increased $51.8 million, or 24.0%, to
$267.7 million in 2000 from $215.9 million in 1999. This increase was due to
increased net product revenues, an improved product mix towards higher-margin
products and cost reductions from our prior period restructuring programs,
offset by increased investment in research and development, increased costs
associated with our separation from Motorola and the amortization of goodwill
and other intangibles. Cost reductions resulting from our prior period
restructuring programs relate to the consolidation of manufacturing operations
and the relocation or outsourcing of related operations to take advantage of
lower-cost labor markets and make our manufacturing processes more efficient.

    Interest expense. Interest expense increased $66.2 million, or 101.8% to
$131.2 million in 2000 from $65.0 million in 1999, due to borrowings under our
senior bank facilities and the issuance of our senior subordinated notes and our
junior subordinated note in order to finance our Recapitalization. A portion of
the interest expense for 1999 was an allocation we received from Motorola for
the portion of the year prior to our Recapitalization.

    Equity in earnings of joint ventures. Equity in earnings from joint ventures
increased $0.6 million to $4.4 million in 2000 from $3.8 million in 1999, due
primarily to increased capacity and manufacturing efficiencies in our Chinese
joint venture and improved capacity utilization in both our Chinese and
Malaysian joint ventures.

    Minority interests. Minority interests, which represent the portion of net
income of two Czech joint ventures attributable to the minority owners of each
joint venture, increased to $2.2 million in 2000 from $2.0 million in 1999 due
to increased net income from the joint ventures, offset by our acquisition of a
portion of the minority interests in the fourth quarter of 2000, which reduced
the effective ownership of the minority shareholders.

    Provision for income taxes. Provision for income taxes increased $32.0
million, or 176.8% to $50.1 million in 2000 from $18.1 million in 1999. A
provision for taxes was not made for periods prior to our Recapitalization. Our
effective tax rate decreased to 35.6% in 2000 as compared to 37.0% from our
post-Recapitalization period for 1999 primarily due to increased research and
foreign tax credits.

    Extraordinary loss on debt prepayment. In May 2000, we used a portion of the
proceeds from our IPO to redeem a portion of our senior subordinated notes and
prepay a portion of the loans outstanding under our senior bank facilities. In
connection with this debt prepayment, we incurred an extraordinary loss of $29.2
million ($17.5 million, or $0.11 per share, net of income taxes) related to
prepayment penalties and redemption premiums as well as the write-off of
capitalized debt issuance costs.

PRO FORMA YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

    Total revenues. Total revenues increased $127.5 million, or 7.7%, to
$1,785.1 million in 1999 from $1,657.6 million in 1998, due to an increase in
net product revenues partially offset by a slight decrease in foundry revenues.
Foundry revenues relate to products manufactured for Motorola and are recognized
at the time of shipment to Motorola.

    Net product revenues. Net product revenues increased $128.9 million, or
8.6%, to $1,624.2 million in 1999 from $1,495.3 million in 1998. Unit volume
increased by 27.1% in 1999 compared to 1998, while the average selling price for
our products decreased by 14.6%, primarily as a result of excess semiconductor
manufacturing capacity, product mix and aggressive pricing actions taken to
maintain market share. Net revenues for analog products, which accounted for
20.3% of net product revenues in 1999, increased 17.9% compared to 1998, as a
result of increased demand in the telecommunications industry and our focus on
expanding the sales of this product line. Net revenues for broadband products,
which accounted for 12.8% of net product revenues in 1999, increased 43.8%
compared to 1998, due to increased demand for ECL products. Net revenues for
standard semiconductor products, which accounted for 66.9% of net product
revenues in 1999, remained relatively flat compared to 1998, as increased demand
in the rectifier, thyristor and zener product families was partially offset by
the sale of a product line in August 1998.

    Approximately 46%, 33% and 21% of our net product revenues in 1999 were
derived from sales to end users, directly or through distributors or electronic
manufacturing service providers, in the Americas, Asia/Pacific and Europe
(including the Middle East), respectively, compared to 46%, 30% and 24%,
respectively, in 1998.

    Foundry revenues. Foundry revenues decreased $1.4 million or 0.9% to $160.9
million in 1999 from $162.3 million in 1998. We expect that foundry revenues
will decline in the future as the separation from Motorola progresses.

   14
    Cost of sales. Cost of sales increased $62.3 million, or 5.1%, to $1,284.6
million in 1999 from $1,222.3 million in 1998, primarily as a result of
increased sales volume, partially offset by cost reductions from the
restructuring program commenced in 1998. The restructuring program included the
implementation of ongoing cost-saving initiatives to rationalize our product
portfolio, close plants and relocate or outsource related operations to take
advantage of lower-cost labor markets and make our manufacturing processes more
efficient. In connection with the restructuring program, we have closed wafer
fabrication and assembly and test facilities located in the Philippines and
Arizona and have outsourced or moved related operations to other facilities in
Malaysia, Mexico, the Czech Republic and Japan. We expect these cost reductions
will continue to have a positive impact on our gross margin as a percentage of
net product revenues.

    Gross profit. Gross profit increased 15.0% to $500.5 million in 1999 from
$435.3 million in 1998. As a percentage of net product revenues, gross margin
was 30.8% in 1999 compared to 29.1% in 1998. The improvement in gross profit
resulted mainly from reductions in costs from our restructuring program, which
were offset, in part, by lower average selling prices.

Operating expenses

    Research and development. Research and development costs decreased $16.9
million, or 25.0% to $50.6 million in 1999 from $67.5 million in 1998, primarily
as a result of the discontinuation of related expense allocations from Motorola
following our Recapitalization. As a percentage of net product revenues, these
costs decreased to 3.1% in 1999 from 4.5% in 1998. Research and development
costs that we incurred directly increased to $37.3 million in 1999 from $34.4
million in 1998, while research and development costs allocated from Motorola
decreased to $13.3 million from $33.1 million for the same periods. We expect
our research and development costs to increase as we concentrate on developing
products for our high-growth markets.

    Selling and marketing. Selling and marketing expenses decreased by 31.2% to
$63.6 million in 1999 from $92.4 million in 1998. As a percentage of net product
revenues, these costs decreased to 3.9% in 1999 from 6.2% in 1998. The decrease
in selling and marketing expenses was attributable to workforce reductions
associated with our restructuring programs.

    General and administrative. General and administrative expenses decreased by
19.0% to $166.7 million in 1999 from $205.7 million in 1998, as a result of
worldwide personnel reductions associated with our restructuring programs and as
a result of our Recapitalization and the discontinuation of related expense
allocations from Motorola. As a percentage of net product revenues, these costs
decreased to 10.3% in 1999 from 13.8% in 1998. General and administrative
expenses allocated from Motorola decreased to $50.0 million in 1999 from $115.2
million in 1998.

    Restructuring charges. In June 1998, Motorola recorded a charge to cover
one-time costs related to a restructuring program, including costs related to
the consolidation of manufacturing operations, the exit of non-strategic or
poorly performing businesses by discontinuance of selected product lines and the
rationalization of our product portfolio, and a reduction in the number of our
employees. Asset impairment and other charges were also recorded for the
write-down of assets that had become impaired as a result of business conditions
or business portfolio decisions. Motorola allocated $189.8 million of this
charge to us, of which $53.9 million represented asset impairments charged
directly against machinery and equipment. The remaining charges consisted of
$13.2 million for the consolidation of manufacturing operations, $20.7 million
for business exits and $102.0 million for employment reductions. Through
December 31, 1998, we had spent $67.9 million in connection with this
restructuring program, including $58.5 million for employee separation costs and
$9.4 million for business exits, leaving a reserve of $68.0 million as of that
date.

    A summary of activity in our restructuring reserves during 1999 is as
follows (in millions):



                                                   BALANCE                               AMOUNTS                  BALANCE
                                                    AS OF                               RETAINED                   AS OF
                                                  DECEMBER 31,                AMOUNTS       BY       RESERVE    DECEMBER 31,
                                                     1998        PROVISION     USED      MOTOROLA   RELEASED        1999
                                                  -----------    ---------    -------   ---------   ---------   -------------

                                                                                              
     Consolidation of manufacturing
     operations                                     $13.2          $ --       $(4.6)      $ --       $ (2.6)      $6.0
     Business exits                                  11.3            --        (6.5)        --         (4.8)       --
     Employee separations                            43.5            3.5      (14.7)      (28.8)       --          3.5
                                                    ------          -----    -------      ------      -----       -----
     Total                                          $68.0           $3.5     $(25.8)     $(28.8)     $ (7.4)      $9.5
                                                    =====           ====     ========     ======      ======      =====



                                                                           16/17


f
   15
    At the time of our Recapitalization, it was determined that the remaining
900 employees whose positions were to have been eliminated in connection with
the restructuring described above would only be entitled to termination benefits
if they remained employees of and were terminated by Motorola. Accordingly,
Motorola agreed to retain the employees as well as the remaining employee
separation reserve of $28.8 million as of August 3, 1999. Motorola has advised
us that the remaining employees were released over the balance of 1999 and that
the related costs were charged against the employee separation reserve.

    During the fourth quarter of 1999, we completed a detailed evaluation of the
costs to be incurred to complete the remaining actions under our restructuring
and have, as a result, released $7.4 million of our restructuring reserve to
income as a credit to restructuring charges in our consolidated statement of
operations and comprehensive income.

    In December 1999, we recorded a restructuring charge of $11.1 million,
including $3.5 million to cover separation costs relating to approximately 150
employees at a manufacturing facility in Mesa, Arizona that was closed in
December 1999, as well as a charge of $7.6 million to cover equipment
write-downs at that facility and other non-cash business exit costs that were
charged directly against the related assets.

    Operating income (loss). We generated operating income of $215.9 million in
1999 compared to an operating loss of $120.1 million in 1998. This improvement
is attributable to the restructuring charge in 1998 as well as subsequent cost
reductions resulting from the restructuring and an increase in net product
sales. As described above, cost reductions from the restructuring related to the
consolidation of manufacturing operations, the relocation or outsourcing of
related operations to take advantage of lower-cost labor markets, the exit of
non-strategic or poorly performing businesses by discontinuance of select
product lines and the rationalization of our product portfolio, and a reduction
in the number of employees. Excluding the restructuring charge, we generated
operating income of $69.7 million, or 4.7% of net product revenues during 1998.

    Interest expense. Interest expense increased $45.2 million, or 228%, to
$65.0 million in 1999 from $19.8 million in 1998, due to borrowings under our
senior bank facilities and the issuance of our senior subordinated notes and our
junior subordinated note in order to finance our Recapitalization.

    Equity in earnings of joint ventures. Equity in earnings from joint ventures
decreased $1.9 million, or 33.3%, to $3.8 million in 1999 from $5.7 million in
1998, due primarily to reduced earnings in the Leshan, China joint venture
associated with higher financing costs.

    Minority interests. Minority interests represent the portion of net income
of two Czech joint ventures attributable to the minority owners of each joint
venture. As previously described, we consolidate these joint ventures in our
financial statements. Minority interests were $2.0 million in 1999, compared to
$2.1 million in 1998.

    Revenues less direct and allocated expenses before taxes. Revenues less
direct and allocated expenses before taxes increased $289.0 million, to income
of $152.7 million in 1999, from a deficit of $136.3 million in 1998, due
primarily to the restructuring charge in 1998, an increase in net product
revenues and the cost reductions associated with the restructuring, partially
offset by average sales price declines.

    Provision for income taxes. Provision for income taxes was $18.1 million in
1999. No provision for taxes was made for periods prior to our Recapitalization.

LIQUIDITY AND CAPITAL RESOURCES

    Prior to our Recapitalization, Motorola performed cash management on a
centralized basis, and its Semiconductor Products Sector processed receivables
and payables, payroll and other activities for the Semiconductor Components
Group. Most of these systems were not designed to track receivables,
liabilities, cash receipts and payments on a division-specific basis.
Accordingly, it is not practical to determine assets and liabilities associated
with the Semiconductor Components Group prior to our Recapitalization.

    Net cash provided by operating activities was $301.3 million in 2000
compared to $40.7 million for the period from August 4, 1999 to December 31,
1999. Cash generated by operating activities in 2000 was due primarily to net
income of $71.1 million, adjusted for non-cash charges, including depreciation
and amortization of $158.9 million, the write-off of acquired in-process
research and development of $26.9 million and non-operating charges relating to
the extraordinary loss on debt prepayment of $29.2 million. Cash generated by
operating activities was also affected by changes in assets and liabilities,
including an increase in accounts payable of $47.1 million and an increase in
accrued expenses of $34.8 million, offset by an increase in inventories of $33.1
million and an increase in other assets of $25.2 million as well as a decrease
in income taxes payable of $8.1 million and a decrease in accrued interest of
$12.2 million.

    Net cash used in investing activities was $467.9 million in 2000 compared to
$95.4 million for the period from August 4, 1999 to December 31, 1999. Net cash
used in 2000 included a net cash outflow of $253.2 million resulting from the
Cherry acquisition, capital expenditures of $198.8 million and loans to and
investments in unconsolidated entities totaling $32.5 million, offset by
proceeds from sales of property, plant and equipment of $18.1 million. Capital
expenditures were $119.4 million in 1999 ($103.6 million, net of transfers prior
to our Recapitalization). Capital expenditures in 2001 are expected to be
approximately $140 million and will be used primarily to continue the
development of broadband design and manufacturing capacity, continue IT
infrastructure upgrades and provide general maintenance of manufacturing
facilities.
   16
    Net cash provided by financing activities was $228.8 million for 2000
compared to $181.9 million for the period from August 4, 1999 to December 31,
1999. Cash inflows from financing activities in 2000 consisted of borrowings
from senior credit facilities used to finance the Cherry acquisition, a loan
from a Japanese bank to finance capital expenditures at our Japanese
manufacturing facilities, and proceeds from our initial public offering. In May
2000, we sold 34.5 million shares of our common stock with an issue price of $16
per share. Net proceeds from this offering (after deducting issuance costs) were
approximately $514.8 million. Cash outflows from financing activities included
the redemption of our outstanding preferred stock of $228.4 million (including
accrued dividends), the redemption of a portion of our senior subordinated notes
of $156.8 million (including prepayment penalties) and the prepayment of a
portion of the loans outstanding under our senior bank facilities totaling
$131.5 million (including prepayment penalties) all with the proceeds from our
initial public offering. The cash provided by financing activities for the
period from August 4, 1999 to December 31, 1999 was primarily from the issuance
of common and preferred stock to an affiliate of Texas Pacific Group and the
borrowings incurred in conjunction with our Recapitalization, less amounts paid
to Motorola as part of our Recapitalization.

    As of December 31, 2000, long-term debt (including current maturities)
totaled $1,258.3 million and stockholders' equity was $337.7 million. Long-term
debt included $869.3 million under our senior bank facilities, $260.0 million
senior subordinated notes, $104.5 million junior subordinated notes and a $24.5
million note payable to a Japanese bank. We are required to begin making
principal payments on our senior bank facilities in the third quarter of 2001.

    As of December 31, 2000, $136.5 million of our $150 million revolving
facility was available, reflecting outstanding letters of credit of $13.5
million. In addition, the terms of our credit agreements allow us to incur
further additional indebtedness.

    Our credit agreements currently do, and other debt instruments we enter into
in the future may, impose various restrictions and covenants that could limit
our ability to respond to market conditions, to provide for unanticipated
capital investments or to take advantage of business opportunities. At December
31, 2000, we were in compliance with all debt covenants. Our ability to remain
in compliance with these covenants, to make payments on and to refinance our
indebtedness, and to fund working capital, capital expenditures, research and
development efforts and strategic acquisitions will depend on our ability to
generate cash in the future, which is subject to our future performance, general
economic, financial, competitive, legislative, regulatory and other factors,
some of which may be beyond our control.

    Our primary future cash needs, both in the short term and in the long term,
will continue to be for capital expenditures, debt service, working capital and
potential business acquisitions. We believe that cash flows from operations and
existing credit facilities will be sufficient to enable us to service our
indebtedness and to fund our other liquidity needs (other than potential
business acquisitions) for the next 12 months. As part of our business strategy,
we continuously review acquisition opportunities and proposals. We expect to
finance any future acquisitions with borrowings under our revolving credit
facility and additional equity and debt financing, to the extent available on
attractive terms.

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

RECENT ACCOUNTING PRONOUNCEMENTS AND RELATED INTERPRETATIONS

    In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities,"("SFAS 133") which establishes standards for
the accounting and reporting for derivative instruments, including derivative
instruments embedded in other contracts, and hedging activities. This statement
generally requires recognition of gains and losses on hedging instruments based
on changes in fair value. SFAS 133, as amended by SFAS 137, "Accounting for
Derivative Instruments and Hedging Activities -- Deferral of the Effective Date
of FASB Statement No. 133", and SFAS 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities", is effective for the Company as of
January 1, 2001.

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


                                                                           18/19


   17
    In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 provides guidance on the recognition, presentation, and
disclosure of revenue in financial statements filed with the SEC and, as
amended, became effective for us in the fourth quarter of 2000, with effect from
January 1, 2000. The implementation of SAB 101 did not impact our results of
operations.

    In March 2000, the FASB issued Interpretation No.44, "Accounting for Certain
Transactions Involving Stock Compensation- an interpretation of APB Opinion 25"
("FIN 44"). FIN 44 clarifies among other issues (a) the definition of an
employee of applying APB No. 25, (b) the criteria for determining whether a plan
qualifies as a noncompensatory plan, (c) the accounting consequences of various
modifications to the terms of a previously fixed stock option award, and (d) the
accounting for an exchange of stock compensation awards in a business
combination. The adoption of this interpretation did not impact our results of
operations.

BUSINESS RISK AND FORWARD LOOKING STATEMENTS

    This Annual Report on Form 10-K includes "forward-looking statements" as
that term is defined in Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements are often characterized by the use of words such as
"believes," "estimates," "expects," "projects," "may," "will," "intends,"
"plans," or "anticipates," or by discussions of strategy, plans or intentions.
All forward-looking statements in the Form 10-K are made based on management's
current expectations and estimates, which involve risks, uncertainties and other
factors that could cause results to differ materially from those expressed in
forward-looking statements. Among these factors are changes in overall economic
conditions, the cyclical nature of the semiconductor industry, changes in demand
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, changes in
management, and risks involving environmental or other governmental regulation.
Additional factors that could affect the company's future operating results are
described from time to time in ON Semiconductor's Securities and Exchange
Commission reports, including but not limited to those found at Exhibit 99.1,
entitled "Risk Factors", on Form 10-K, and for the year ended December 31, 2000
subsequently filed reports. Readers are cautioned not to place undue reliance on
forward-looking statements. We assume no obligation to update such information.

   18


                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
of ON Semiconductor Corporation:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations and comprehensive income, of stockholders'
equity (deficit) and of cash flows present fairly, in all material respects, the
financial position of ON Semiconductor Corporation and its subsidiaries at
December 31, 2000 and 1999, and the results of their operations and their cash
flows for the year ended December 31, 2000 and for the period from August 4,
1999 through December 31, 1999, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

/S/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP


Phoenix, Arizona
February 1, 2001



                                                                           20/21



   19


                          ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                          (in millions, except share data)

                                                                         DECEMBER 31,
                                                                         ------------
                                                                      2000          1999
                                                                   ----------     ---------

                                                                              
ASSETS
Cash and cash equivalents                                              $ 188.9    $ 126.8
Receivables, net (including $14.9 and $24.7 due
from Motorola)                                                           271.2      249.7
Inventories                                                              258.1      206.2
Other current assets                                                      39.6       26.0
Deferred income taxes                                                     40.7       28.4
                                                                     ---------  ---------
   Total current assets                                                  798.5      637.1
Property, plant and equipment, net                                       648.2      569.7
Deferred income taxes                                                    286.8      289.0
Investments in joint ventures                                             45.3       40.4
Goodwill and other intangibles, net                                      140.8       -
Other assets                                                             103.4       80.6
                                                                     ---------  ---------
   Total assets                                                      $ 2,023.0  $ 1,616.8
                                                                     =========  =========
LIABILITIES, MINORITY INTERESTS, REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable (including $7.3 and $13.8
   payable to Motorola)                                                $ 175.0    $ 122.5
Accrued expenses (including $8.3 and $8.2
   payable to Motorola)                                                  184.3      142.8
Income taxes payable                                                      22.3       31.9
Accrued interest                                                          17.9       30.1
Current portion of long-term debt                                          5.6        -
                                                                     ---------  ---------
Total current liabilities                                                405.1      327.3
Long-term debt (including $104.5 and $94.8
payable to Motorola)                                                   1,252.7    1,295.3
Other long-term liabilities                                               20.8       12.2
                                                                     ---------  ---------
   Total liabilities                                                   1,678.6    1,634.8
                                                                     ---------  ---------
Commitments and contingencies (see Note 13)                              -          -
                                                                     ---------  ---------
Minority interests in consolidated subsidiaries                            6.7       10.1
                                                                     ---------  ---------
Redeemable preferred stock ($0.01 par value, 100,000 shares
authorized, 2,090 shares issued and outstanding in 1999; 12% annual
dividend rate; liquidation value - $209.0 plus $10.6 of accrued          -          219.6
dividends in 1999)                                                   ---------  ---------
Common stock ($0.01 par value, 300,000,000 shares authorized,
   172,746,435 and 136,666,666 shares issued and outstanding)              1.7        1.4
Additional paid-in capital                                               730.4      204.2
Accumulated other comprehensive income (loss)                             (0.7)      2.7
Accumulated deficit                                                     (393.7)    (456.0)
                                                                      ---------  ---------
Total stockholders' equity (deficit)                                     337.7      (247.7)
                                                                      ---------  ---------
Total liabilities, minority interests, redeemable preferred
   stock and stockholders' equity (deficit)                          $ 2,023.0  $ 1,616.8
                                                                      =========  =========


See accompanying notes to consolidated financial statements.


                                                                           22/23



   20
 ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

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



                                                                           YEAR ENDED          AUGUST 4 THROUGH
                                                                       DECEMBER 31, 2000       DECEMBER 31, 1999
                                                                       -----------------       -----------------

                                                                                        
Revenues:
Net product revenues (including $144.3 and $61.5 from
  Motorola)                                                               $  2,012.2            $    728.8
Foundry revenues from Motorola                                                  61.7                  69.9
                                                                           ---------             ---------
Total revenues                                                               2,073.9                 798.7
Cost of sales                                                                1,355.0                 573.3
                                                                           ---------             ---------
Gross profit                                                                   718.9                 225.4
                                                                           ---------             ---------
Operating expenses:
Research and development                                                        69.2                  16.3
Selling and marketing                                                          100.1                  24.6
General and administrative                                                     233.4                  77.3
Amortization of goodwill and other intangibles                                  16.8                  -
Write-off of acquired in-process research and development                       26.9                  -
Restructuring charges                                                            4.8                   3.7
                                                                            --------             ---------
Total operating expenses                                                       451.2                 121.9
                                                                           ---------             ---------
  Operating income                                                             267.7                 103.5
                                                                           ---------             ---------
Other income (expenses), net:
Interest expense                                                              (131.2)                (55.9)
Equity in earnings of joint ventures                                             4.4                   1.4
                                                                            ---------             ---------
Other income (expenses), net                                                  (126.8)                (54.5)
                                                                            ---------             ---------
Income before income taxes, minority interests and
extraordinary loss                                                             140.9                  49.0
Provision for income taxes                                                     (50.1)                (18.1)
Minority interests                                                              (2.2)                 (1.1)
                                                                            ---------             ---------
Net income before extraordinary loss                                            88.6                  29.8
Extraordinary loss on debt prepayment (net of income
taxes of $11.7)                                                                (17.5)                 -
                                                                            ---------             ---------
Net income                                                                      71.1                  29.8
Less: Redeemable preferred stock dividends                                      (8.8)                (10.6)
                                                                            ---------             ---------
Net income available for common stock                                      $    62.3             $     19.2
                                                                           =========              =========

Comprehensive income (loss):
Net income                                                                 $    71.1             $    29.8
Foreign currency translation adjustments                                        (3.1)                  2.7
Additional minimum pension liability                                            (0.3)                 -
                                                                            ---------             ---------
Comprehensive income (loss)                                                $    67.7             $    32.5
                                                                           =========             =========

Earnings per common share:
Basic:
Net income before extraordinary loss                                       $     0.50            $     0.14
  Extraordinary loss on debt prepayment                                         (0.11)                   -
                                                                            ---------             ---------
Net income                                                                 $     0.39            $     0.14
                                                                            =========             =========
Diluted:
Net income before extraordinary loss                                       $     0.49            $     0.13
Extraordinary loss on debt prepayment                                           (0.11)                -
                                                                           ----------             ---------
Net income                                                                 $     0.38            $     0.13
                                                                           ==========            ==========

Weighted average common shares outstanding:
Basic                                                                          160.2                 136.7
                                                                          ==========             =========
Diluted                                                                        165.6                 144.6
                                                                           ==========            =========




See accompanying notes to consolidated financial statements.
   21
                        ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(DEFICIT)
                        (in millions, except share data)




                                                                               Accumulated
                                                                Additional       Other
                                     Common Stock     Common     Paid-In      Comprehensive     Accumulated
                                      (Shares)        Stock      Capital      Income / (Loss)      Deficit      Total
                                     -----------      ------    ---------    ---------------    ------------   --------

                                                                                          
Shares issued in connection
with Recapitalization (see Note 1)   136,666,666    $  1.4     $   203.6      $   -           $   (474.6)   $  (269.6)
Redeemable preferred stock                -            -            -             -                (10.6)       (10.6)
dividends
Stock options granted in
connection with
the Recapitalization (see
Note 10)                                 -             -             0.6          -                 (0.6)        -
Comprehensive income:
Net income                               -             -              -           -                 29.8        29.8
Foreign currency translation             -             -              -          2.7                 -           2.7
adjustments                                                                    --------                        --------
Comprehensive income                     -             -              -          2.7                 -          32.5
                                     -----------   ------       ---------    --------         ----------       --------
Balances at December 31, 1999        136,666,666      1.4          204.2         2.7              (456.0)     (247.7)

Shares issued in connection
  with initial public offering        34,500,000      0.3          514.4          -                  -          514.7
Stock options exercised                  601,646      -              0.9          -                  -            0.9
Tax benefit of stock option
exercise                                  -           -              3.3          -                  -            3.3
Compensation expense-stock
  options                                 -           -              0.7          -                  -            0.7
Redeemable preferred stock
 dividends                                -           -               -           -                (8.8)         (8.8)
Shares issued under the
employee stock purchase plan            978,123       -              6.9          -                  -            6.9
Comprehensive income (loss):
Net income                                -           -                -          -                71.1          71.1
Foreign currency translation
  adjustments                             -           -                -        (3.1)                -           (3.1)
Additional minimum pension
  liability                               -           -                -        (0.3)                -           (0.3)
                                                                             --------                          --------
Comprehensive income (loss)               -           -                -        (3.4)                -            67.7
                                     -----------   ------       ---------    --------         ----------       --------

Balances at December 31, 2000        172,746,435  $  1.7       $   730.4    $   (0.7)        $   (393.7)      $  337.7
                                     ===========  ======       =========    ========         ==========       ========


See accompanying notes to consolidated financial statements.



                                                                           24/25


   22
                 ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN MILLIONS)



                                                                        YEAR ENDED       AUGUST 4, 1999 THROUGH
                                                                      DECEMBER 31, 2000   DECEMBER 31, 1999
                                                                      -----------------   -----------------


                                                                                   
Cash flows from operating activities:
Net income                                                              $    71.1            $   29.8
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization                                               158.9                61.9
Write-off of acquired in-process research and development                    26.9                 -
Extraordinary loss on debt prepayment                                        29.2                 -
Amortization of debt issuance costs                                           5.9                 2.7
Provision for doubtful accounts                                               1.7                 2.0
Net (gain) loss on disposals of property, plant and equipment                (1.5)                0.7
Non-cash interest on junior subordinated note payable to Motorola             9.6                 3.8
Minority interests in earnings of consolidated subsidiaries                   2.2                 1.1
Undistributed earnings of unconsolidated joint ventures                      (4.4)               (1.4)
Tax benefits of stock option exercises                                        3.3                 -
Deferred income taxes                                                       (11.6)              (17.6)
Non-cash compensation charges                                                 0.7                 -
Changes in assets and liabilities:
Receivables                                                                   0.3              (238.4)
Inventories                                                                 (33.1)               10.5
Other assets                                                                (25.2)               (2.0)
Accounts payable                                                             47.1                84.1
Accrued expenses                                                             34.8                39.9
Income taxes payable                                                         (8.1)               31.8
Accrued interest                                                            (12.2)               30.1
Other long-term liabilities                                                   5.7                 1.7
                                                                          ---------          ---------
Net cash provided by operating activities                                   301.3                40.7
                                                                          ---------          ---------
Cash flows from investing activities:
Purchases of property, plant and equipment                                 (198.8)              (64.0)
Investment in business, net of cash acquired                               (253.2)                 -
Investments in joint ventures and other                                      (2.5)               (4.9)
Acquisition of minority interests in consolidated subsidiaries               (1.5)               -
Loans to unconsolidated joint venture                                       (30.0)              (28.3)
Proceeds from sales of property, plant and equipment                         18.1                 1.8
                                                                          ---------            ---------
Net cash used in investing activities                                      (467.9)              (95.4)
                                                                          ---------            ---------



                                                        (continued on next page)

   23
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

(continued from previous page)



                                                                        YEAR ENDED       AUGUST 4, 1999 THROUGH
                                                                      DECEMBER 31, 2000   DECEMBER 31, 1999
                                                                      -----------------   -----------------

                                                                                    
Cash flows from financing activities:
Proceeds from initial public offering, net of offering expenses             514.8               -
Proceeds from borrowings                                                    226.1               800.5
Payment of debt issuance costs                                               (3.2)              (52.6)
Repayment of senior credit facilities, including prepayment penalty        (131.5)                -
Repayment of senior subordinated notes, including prepayment penalty       (156.8)                -
Redemption of preferred stock, including accrued dividends                 (228.4)                -
Proceeds from issuance of common stock under the employee stock               6.9                 -
purchase plan
Proceeds from exercise of stock options                                       0.9                 -
Proceeds from issuance of common stock to an affiliate of Texas               -                 187.5
Pacific Group
Proceeds from issuance of redeemable preferred stock to an affiliate          -                 150.0
of Texas Pacific Group
Proceeds from issuance of senior subordinated notes                           -                 400.0
Repayment of joint venture debt                                               -                 (44.8)
Net cash payments to Motorola in connection with Recapitalization             -              (1,258.7)
                                                                          ---------          ---------
Net cash provided by financing activities                                   228.8               181.9
                                                                          ---------          ---------
Effect of exchange rate changes on cash and cash equivalents                 (0.1)               (0.4)
                                                                          ---------          ---------
Net increase in cash and cash equivalents                                    62.1               126.8
Cash and cash equivalents, beginning of period                              126.8                 -
                                                                         ---------           ---------
Cash and cash equivalents, end of period                                $   188.9           $   126.8
                                                                        ==========          ==========







                                                                           26/27


   24
                  ON SEMICONDUCTOR CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: BACKGROUND AND BASIS OF PRESENTATION

    ON Semiconductor Corporation, together with its wholly and majority-owned
subsidiaries (the "Company"), is one of the largest independent suppliers of
semiconductor components in the world. Formerly known as the Semiconductor
Components Group of the Semiconductor Products Sector of Motorola, Inc., the
Company was a wholly-owned subsidiary of Motorola Inc. ("Motorola") prior to its
August 4, 1999 recapitalization (the "Recapitalization"). The Company holds and
continues to hold, through direct and indirect subsidiaries, substantially all
the assets and operations of the Semiconductor Components Group of Motorola's
Semiconductor Products Sector.

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

    On May 3, 2000, the Company completed the initial public offering ("IPO") of
its common stock, selling 34.5 million shares with an issue price of $16 per
share. Net proceeds from the IPO (after deducting issuance costs) were
approximately $514.8 million. The net proceeds were used to redeem all
outstanding preferred stock (including accrued dividends), redeem a portion of
the senior subordinated notes and prepay a portion of the loans outstanding
under the senior bank facilities. In connection with this debt prepayment, the
Company incurred prepayment penalties and redemption premiums of $17.3 million
and wrote off $11.9 million of debt issuance costs. These amounts, totaling
$29.2 million ($17.5 million or $0.11 per share, net of income taxes), have been
classified as an extraordinary loss in the accompanying consolidated statement
of operations and comprehensive income for 2000.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

    The accompanying consolidated financial statements include the accounts of
the Company, its wholly-owned subsidiaries and the majority-owned subsidiaries
that it controls. An investment in a majority-owned joint venture that the
Company does not control as well as an investment in a 50%-owned joint venture
are 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 (see
Note 5).

CASH EQUIVALENTS

    The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.

INVENTORIES

    Inventories are stated at the lower of cost, determined on a first-in,
first-out basis, or market.

PROPERTY, PLANT AND EQUIPMENT

    Property, plant and equipment are recorded at cost and are depreciated over
useful lives of 30-40 years for buildings and 3-20 years for machinery and
equipment using accelerated and straight-line methods. Expenditures for
maintenance and repairs are charged to operations in the year in which the
expense is incurred.

IMPAIRMENT OF LONG-LIVED ASSETS

    The Company reviews the carrying value of long-lived assets for impairment
by measuring the carrying amount of the assets against the estimated
undiscounted future cash flows associated with them. In cases where undiscounted
expected future cash flows are less than the carrying value, an impairment loss
is recognized for the amount by which the carrying value exceeds the fair value
of assets. The fair value is determined based on the present value of estimated
expected future cash flows using a discount rate commensurate with the risks
involved.

DEBT ISSUANCE COSTS

    In connection with the Recapitalization, the Company incurred $52.6 million
in costs relating to the establishment of its senior bank facilities and the
issuance of its senior subordinated notes. During 2000, the Company incurred
$3.2 million in costs relating to additional borrowings under its senior bank
facilities (see Note 3). These costs have been capitalized and are being
amortized on a straight-line basis over the terms of the underlying agreements.
Also during 2000, the Company utilized a portion
   25
of the net proceeds from its IPO to redeem a portion of its senior subordinated
notes and prepay a portion of the loans outstanding under its senior bank
facilities. In connection therewith, the Company wrote off $11.9 million of debt
issuance costs (see Note 1). Other assets at December 31, 2000 and 1999 includes
$36.1 and $50.2 million, respectively, of unamortized debt issuance costs.

REVENUE RECOGNITION

     Product revenues are recognized when title has transferred to the buyer
with provisions for anticipated returns and allowance also recorded at that
time. Foundry revenues which relate to services provided to Motorola are
recognized when the services have been complete.

RESEARCH AND DEVELOPMENT COSTS

    Research and development costs are expensed as incurred.

STOCK-BASED COMPENSATION

    The Company measures compensation expense relating to employee stock awards
in accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25"). The Company measures compensation expense
relating to non-employee stock awards in accordance with Statement of Financial
Accounting Standards No. 123 "Accounting for Stock Based Compensation" ("SFAS
123").

INCOME TAXES

    Income taxes are accounted for using the asset and liability method. Under
this method, deferred income tax assets and liabilities are recognized for the
future tax consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred income tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which these temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date. A
valuation allowance is provided for deferred tax assets that are not expected to
be recovered from future operations.

FOREIGN CURRENCIES

    The Company's foreign subsidiaries utilize the U.S. dollar as their
functional currency, except for subsidiaries in Japan and Western Europe where
the local currency is used. For those subsidiaries which use the U.S. dollar as
the functional currency, the net effects of gains and losses from foreign
currency transactions and from the translation of foreign currency financial
statements into U.S. dollars are included in current operations. The net
translation gains and losses for subsidiaries using the local currency as the
functional currency are included as foreign currency translation adjustments in
accumulated other comprehensive income (loss).

EARNINGS PER COMMON SHARE

    Basic earnings per share are computed by dividing net income available for
common stock (net income less dividends accrued on the Company's redeemable
preferred stock) by the weighted average number of common shares outstanding
during the period. Diluted earnings per share incorporates the incremental
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. Earnings per share calculations for 2000 and
the period August 4, 1999 to December 31, 1999 are as follows (in millions,
except per share data):






                                                                                     2000            1999
                                                                                    -------        -------
                                                                                             
                    Net income before extraordinary loss                            $88.6           $29.8
                    Less: Redeemable preferred dividends                            (8.8)           (10.6)
                                                                                    -------        -------
                    Net income before extraordinary loss available for common
                    stock                                                            79.8            19.2
                    Extraordinary loss on debt prepayment                           (17.5)              -
                                                                                    -------        -------

                    Net income available for common stock                           $62.3            $19.2
                                                                                    =======        ========

                    Basic weighted average common shares outstanding                160.2           136.7

                    Add: Dilutive effect of stock options                             5.4             7.9
                                                                                    -------        -------
                    Diluted weighted average common shares outstanding:             165.6           144.6
                                                                                    =======        ========

                    Earnings per share:

                    Basic:
                    Net income before extraordinary loss available for common
                    stock                                                           $0.50           $0.14
                    Extraordinary loss on debt prepayment                           (0.11)              -
                                                                                    -------        -------
                    Net income available for common stock                           $0.39           $0.14
                                                                                    =======        ========

                    Diluted:
                    Net income before extraordinary loss available for common
                    stock                                                           $0.49           $0.13
                    Extraordinary loss on debt prepayment                           (0.11)              -
                                                                                    -------        -------
                    Net income available for common stock                           $0.38           $0.13
                                                                                    =======        ========



STOCK SPLITS

    In connection with the Recapitalization, the Company issued 100,000 shares
of its $.01 par value common stock. The Company's Board of Directors
subsequently approved a 2,049-for-1 stock split effected in the form of a stock
dividend. On February 17, 2000, the Company's Board of Directors approved a
2-for-3 reverse stock split. Historical stockholders' equity (deficit), share
and per share amounts have been retroactively restated to reflect these stock
splits as of August 4, 1999. The par value of common stock has not been changed
as a result of these transactions.



                                                                           28/29




   26
USE OF ESTIMATES

    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.

RECENT ACCOUNTING PRONOUNCEMENTS AND RELATED INTERPRETATIONS

    In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities,"("SFAS 133") which establishes standards for
the accounting and reporting for derivative instruments, including derivative
instruments embedded in other contracts, and hedging activities. This statement
generally requires recognition of gains and losses on hedging instruments based
on changes in fair value. SFAS 133, as amended by SFAS 137, "Accounting for
Derivative Instruments and Hedging Activities -- Deferral of the Effective Date
of FASB Statement No. 133", and SFAS 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities", is effective for the Company as of
January 1, 2001.

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

    In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 provides guidance on the recognition, presentation, and
disclosure of revenue in financial statements filed with the SEC and, as
amended, became effective for the Company in the fourth quarter of 2000 with
effect from January 1, 2000. The implementation of SAB 101 did not impact the
Company's results of operations.

    In March 2000, the FASB issued Interpretation No.44, "Accounting for Certain
Transactions Involving Stock Compensation -- an interpretation of APB Opinion
25" ("FIN 44"). FIN 44 clarifies among other issues (a) the definition of an
employee in applying APB No. 25, (b) the criteria for determining whether a plan
qualifies as a noncompensatory plan, (c) the accounting consequences of various
modifications to the terms of a previously fixed stock option award, and (d) the
accounting for an exchange of stock compensation awards in a business
combination. The adoption of this interpretation did not impact the Company's
results of operations.

NOTE 3: ACQUISITION

    On April 3, 2000, the Company acquired all of the outstanding capital stock
of Cherry Semiconductor Corporation ("Cherry") for approximately $253.2 million
in cash (including acquisition related costs), which was financed with cash on
hand and borrowings of $220.0 million under the Company's senior bank
facilities. Cherry, which was renamed Semiconductor Components Industries of
Rhode Island, Inc., designs and manufactures analog and mixed signal integrated
circuits for the power management and automotive markets, and had revenues for
its fiscal year ended February 29, 2000 of $129.1 million.

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



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


    Developed technology and assembled workforce are being amortized on a
straight-line basis over estimated useful lives of five years while goodwill is
being amortized over an estimated life of ten years. Accumulated amortization of
these intangible assets totaled $16.8 million at December 31, 2000.

    The fair value of the acquired in-process research and development was
determined using the income approach, which discounts expected future cash flows
to present value. Significant assumptions that had to be made in using this
approach included revenue and operating margin projections and determination of
the applicable discount rate. The fair value of the acquired in-process research
and development was based on sales forecasts and cost assumptions projected to
be achievable by Cherry on a standalone basis. Operating margins were based on
cost of goods
   27
sold and selling, general and administrative expenses as a percentage of
revenues. All projected revenue and cost information was based on historical
results and trends and did not include any synergies or cost savings that may
result from the acquisition. The rate used to discount future projected cash
flows resulting from the acquired in-process research and development was 20
percent, which was derived from a weighted average cost of capital analysis
adjusted upward to reflect additional risks inherent in the development life
cycle.

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

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

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



                                                                                                   (unaudited)
                                                                                                   ----------
                                                                                                
    Total revenues                                                                                 $ 2,110.3
    Net income before extraordinary loss                                                                85.4
    Net income                                                                                          67.9
    Diluted earnings per share before extraordinary loss                                           $    0.46
    Diluted earnings per share                                                                     $    0.35


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

NOTE 4: BALANCE SHEET INFORMATION

    Balance sheet information is as follows (in millions):



                                                                                         DECEMBER 31,
                                                                                         ------------
                                                                                   2000                1999
                                                                                ---------            ---------

                                                                                               
                 RECEIVABLES, NET:
                 Accounts receivable                                            $   274.3              $   251.7
                 Less: Allowance for doubtful accounts                               (3.1)                  (2.0)
                                                                                ---------              ---------
                                                                                $   271.2              $   249.7
                                                                                =========              =========
                 INVENTORIES:
                 Raw materials                                                  $    26.6              $    25.6
                 Work in process                                                    123.4                  103.8
                 Finished goods                                                     108.1                   76.8
                                                                                -----------            ---------
                                                                                $   258.1              $   206.2
                                                                                ==========             =========




                                                                                                 
                 PROPERTY, PLANT AND EQUIPMENT, NET:
                 Land                                                           $    13.6              $    12.0
                 Buildings                                                          319.0                  257.9
                 Machinery and equipment                                          1,264.0                1,287.3
                                                                                ---------              ---------
                      Total property, plant and equipment                         1,596.6                1,557.2
                 Less: Accumulated depreciation                                    (948.4)                (987.5)
                                                                                ---------              ---------
                                                                                $   648.2              $   569.7
                                                                                =========              =========
                 GOODWILL AND OTHER INTANGIBLES, NET:
                 Developed technology                                           $    59.3              $   -
                 Assembled work force                                                10.0                  -
                 Goodwill                                                            85.7                  -
                 Additional minimum pension liability                                 2.6                  -
                                                                                ------------           --------------
                      Total goodwill and other intangibles                          157.6                  -
                 Less: Accumulated amortization                                     (16.8)                 -
                                                                                ---------              --------------
                                                                                $   140.8              $   -
                                                                                =========              =============





     Depreciation expense totaled $135.8 million and $60.4 million for 2000 and
the period from August 4, 1999 to December 31, 1999, respectively.

NOTE 5: INVESTMENTS IN JOINT VENTURES

    The Company has interests in two joint ventures which are accounted for
using the equity method. The investment in each joint venture approximates the
Company's underlying equity interest in each joint venture. Investments in these
joint ventures totaled $45.3 and $40.4 million at December 31, 2000 and 1999,
respectively, while the Company's equity in the related earnings totaled $4.4
million and $1.4 million for 2000 and



                                                                           30/31


   28
for the period from August 4, 1999 through December 31, 1999, respectively.
Summarized financial information for the joint ventures is as follows (in
millions):




                                                                  SEMICONDUCTOR
                                              LESHAN-PHOENIX       MINIATURES
                                               SEMICONDUCTOR        PRODUCTS
                                                   LTD.              MALAYSIA       TOTAL
                                              ------------        ------------      -----
Country location                                  China            Malaysia
Percentage ownership                               51%                50%

                                                                           
AS OF DECEMBER 31, 2000
Current assets                                     $ 19.4           $ 21.8          $ 41.2
Noncurrent assets                                   110.4            115.1           225.5
                                                    -----            -----           -----
Total assets                                       $129.8           $136.9          $266.7
                                                   ======           ======          ======
Current liabilities                                $ 16.3           $ 12.7          $ 29.0
Noncurrent liabilities                               68.8             97.9           166.7
Venture equity                                       44.7             26.3            71.0
                                                    -----            -----           -----
Total liabilities and equity                       $129.8           $136.9          $266.7
                                                   ======           ======          ======

AS OF DECEMBER 31, 1999
Current assets                                     $ 16.2           $ 15.0          $ 31.2
Noncurrent assets                                    61.1            109.0           170.1
                                                    -----            -----           -----
Total assets                                       $ 77.3           $124.0          $201.3
                                                   ======           ======          ======

Current liabilities                                $ 11.1           $ 37.8          $ 48.9
Noncurrent liabilities                               28.3             45.1            73.4
Venture equity                                       37.9             41.1            79.0
                                                    -----            -----           -----
Total liabilities and equity                       $ 77.3           $124.0          $201.3
                                                   ======           ======          ======


YEAR ENDED DECEMBER 31, 2000
Net sales                                          $ 77.8           $101.1          $178.9
Gross profit                                         10.1             10.3            20.4
Net income                                            5.4              2.7             8.1

AUGUST 4, 1999 THROUGH DECEMBER 31,  1999
Net sales                                          $ 16.3           $ 37.0          $ 53.3
Gross profit                                          2.2              7.6             9.8
Net income (loss)                                    (0.8)             3.6             2.8


    In connection with the Recapitalization, the Company loaned Leshan-Phoenix
Semiconductor Ltd. ("Leshan") $28.3 million to refinance third-party
non-recourse loans. During 2000, the Company loaned Leshan an additional $30.0
million to finance facility expansion. The Company's loans to Leshan bear
interest at 10.5%, payable quarterly, and are included in other assets in the
consolidated balance sheets.

    As part of the joint venture agreement for Semiconductor Miniatures Products
Malaysia Sdn. Bhd. ("SMP"), the Company's joint venture partner, Philips
Semiconductors International B.V. ("Philips"), was provided the right to
purchase the Company's interest between January 2001 and July 2002. On February
1, 2001, Philips exercised its purchase right, acquiring the entire ownership
interest in SMP held by the Company. This transaction resulted in proceeds of
approximately $20.4 million and a pre-tax gain of approximately $3.2 million.

NOTE 6: RESTRUCTURING CHARGES

  2000

    In March 2000, the Company recorded a $4.8 million charge to cover costs
associated with a restructuring program at its manufacturing facility in
Guadalajara, Mexico. The charge included $3.2 million to cover employee
separation costs associated with the termination of approximately 500 employees
and $1.6 million for asset impairments that were charged directly against the
related assets.

    In September 2000, the Company completed a detailed evaluation of the costs
to be incurred to complete the March 2000 restructuring. Based on this
evaluation, the Company released $0.8 million of its remaining restructuring
reserve for employee separation costs to income as a credit to restructuring
charges in the consolidated statement of operations and comprehensive income.
Also in conjunction with this evaluation, the Company recorded an additional
charge of $0.8 million for asset impairments that were charged directly against
the related assets. As of December 31, 2000, the remaining liability relating to
this restructuring program was $0.7 million.

1999

    In December 1999, the Company recorded a restructuring charge of $11.1
million, including $3.5 million to cover employee separation costs relating to
approximately 150 employees at a manufacturing facility in Mesa, Arizona that
was closed in December as well as $7.6 million to cover equipment write-downs at
that facility and other non-cash business exit costs that were charged directly
against the related assets. As of December 31, 2000, there was no remaining
liability relating to the 1999 restructuring program.

1998

    In June 1998, Motorola recorded a charge to cover restructuring costs
related to the consolidation of manufacturing operations, the exit of
non-strategic or poorly performing businesses and a reduction in worldwide
employment by 20,000 employees. Asset impairment and other charges were also
recorded for the write-down of assets which became impaired as a result of
current business conditions or business portfolio decisions. The Company's
charges related to these actions totaled $189.8 million and consisted of $13.2
million relating to the consolidation of manufacturing operations in Arizona and
the Philippines, $20.7 million for costs relating to the exit of certain
businesses, $102.0 million for separation costs associated with the planned
reductions of 3,900 employees and $53.9 million for asset impairments that were
charged directly against property, plant and equipment.

   29
    As of the date of the Recapitalization, the Company had spent $92.8 million
in connection with the related restructuring actions including $3.8 million for
the consolidation of manufacturing operations, $15.8 million for business exits
and $73.2 million for employee separations costs relating to approximately 3,000
employees. In connection with the Recapitalization, Motorola agreed to retain
the remaining employee separation reserve of $28.8 million to cover
approximately 900 employees who were to remain employees of and be released by
Motorola. At August 4, 1999, the Company had remaining reserves of $9.4 million
relating to the consolidation of manufacturing operations and $4.9 million for
business exits for a total restructuring reserve of $14.3 million.

    In December 1999, the Company completed a detailed evaluation of the costs
to be incurred to complete the remaining restructuring actions. Based on this
evaluation, the Company released $7.4 million of its remaining 1998
restructuring reserve to income as a credit to restructuring charges in the
consolidated statement of operations and comprehensive income. As of December
31, 2000, there was no remaining liability relating to the 1998 restructuring
program.

    A summary of activity in the Company's restructuring reserves is as follows
(in millions):



                                                            
    Balance, August 4, 1999                                    $   14.3

    Plus: December 1999 employee separation charge                  3.5
    Less: Payments charged against the reserve
                                                                   (0.9)
    Less: Reserve released to income                               (7.4)
                                                               --------

    Balance, December 31, 1999                                      9.5

    Plus: March 2000 employee separation charge                     3.2
    Less: Payments charged against the reserve                    (11.2)
    Less: Reserve released to income                               (0.8)
                                                               --------

    Balance, December 31, 2000                                 $    0.7
                                                               ========



    Restructuring charges are summarized as follows (in millions):



                                                                                                         AUGUST 4, 1999
                                                                                  YEAR ENDED                THROUGH
                                                                                  DECEMBER 31,            DECEMBER 31,
                                                                                      2000                    1999
                                                                                 --------------          --------------
                                                                                                   
              Reserve released to income                                           $     (0.8)               $  (7.4)
              Restructuring charge (including non-cash portion)                           5.6                   11.1
                                                                                   ----------                -------
                                                                                   $      4.8                $   3.7
                                                                                   ==========                =======


NOTE 7: LONG-TERM DEBT

    Long-term debt consists of the following (dollars in millions):



                                                     AMOUNT OF       DECEMBER 31, 2000                 DECEMBER 31, 1999
                                                     FACILITY      INTEREST RATE    BALANCE         INTEREST RATE     BALANCE
                                                     --------      -------------    -------         -------------     -------
                                                                                                      
    Senior bank facilities:
      Tranche A                                      $ 200.0           9.438%       $    18.4            8.927%      $   125.5
      Tranche B                                        325.0          10.250%           314.0            9.313%          325.0
      Tranche C                                        350.0          10.500%           338.2            9.563%          350.0
      Tranche D                                        200.0           9.750%           198.7              --               --
      Revolver                                         150.0             --                --              --               --
                                                                                    ---------                        ---------
                                                                                        869.3                            800.5
    12% senior subordinated notes due 2009                                              260.0                            400.0
    10% junior subordinated note payable to
      Motorola due 2011 (including accrued
      interest of $13.5 and $3.8)                                                       104.5                             94.8
    2.25% note payable due 2010 (Japan)                                                  24.5                               --
    Less: Current maturities                                                             (5.6)                              --
                                                                                    ---------                        ---------
                                                                                    $ 1,252.7                        $ 1,295.3
                                                                                    =========                        =========



                                                                           32/33


   30

    Borrowings under the Tranche A, B, C and D facilities amortize within six to
eight years. The Tranche A facility includes a delayed-draw facility of $134.5
million, of which $0 and $60.0 million had been borrowed as of December 31, 2000
and 1999, respectively. Although no amounts are outstanding under the Company's
revolving credit facility as of December 31, 2000, the amount available has been
reduced by $13.5 million for letters of credit issued on behalf of the Company.
The Company is obligated to pay a fee for unutilized commitments at a rate of
 .50% per annum. Prepayment of borrowings under the Tranche B and C facilities
require a premium of 2% of the principal amount prepaid prior to August 4, 2000
and 1% of the principal amount prepaid during the period from August 4, 2000 to
August 4, 2001.

    Except as discussed below, the senior subordinated notes may not be redeemed
prior to August 1, 2004. Redemption prices range from 106% of the principal
amount if redeemed in 2004 to 100% if redeemed in 2008 or thereafter. Up to 35%
of the aggregate principal amount of the senior subordinated notes may be
redeemed prior to August 4, 2002 with the net cash proceeds of a public equity
offering at a redemption price equal to 112% of the principal amount redeemed.

    On May 3, 2000 the Company completed the initial public offering of its
common stock. A portion of the net proceeds were used to redeem $140 million of
the senior subordinated notes and to prepay $131 million of the loans
outstanding under the senior bank facilities (see Note 1).

    On October 27, 2000 the Company's Japanese subsidiary borrowed $26.1 million
from a Japanese bank for expansion of facilities in Japan. Interest is due
semi-annually. The loan matures over ten years with semi-annual principal
payments commencing in 2003.

    Interest on the senior subordinated notes is payable semi-annually. Interest
on the junior subordinated note compounds semi-annually, and is due at maturity.

    Borrowings under the senior bank facilities bear interest, payable
quarterly, at rates selected by the Company based on LIBOR or the alternate base
rate defined in the related agreement plus a spread as follows:



                                                                          ALTERNATE
                                                               LIBOR      BASE RATE
                                                               -----      ---------
                                                                    
                                   Tranche A                   +2.75%      +1.75%
                                   Tranche B                   +3.50%      +2.50%
                                   Tranche C                   +3.75%      +2.75%
                                   Tranche D                   +3.00%      +2.00%
                                   Revolver                    +2.75%      +1.75%


    The senior bank facilities as well as the senior subordinated notes contain
various covenants and restrictions, including restrictions on the payment of
dividends under certain circumstances, and require that substantially all of the
Company's assets be pledged as collateral.

    Annual maturities of long-term debt are as follows (in millions):




                                   YEAR  ENDING  DECEMBER 31:
                                   --------------------------
                                                                         
                                   2001                                     $     5.6
                                   2002                                          11.7
                                   2003                                          14.3
                                   2004                                          17.8
                                   2005                                         164.7
                                   Thereafter                                 1,044.2
                                                                            ---------
                                                                            $ 1,258.3
                                                                            =========


    In connection with the Recapitalization, the Company refinanced third-party
non-recourse loans of the majority-owned joint ventures located in the Czech
Republic totaling $44.8 million with intercompany loans.

    In connection with the Recapitalization, the Company and SCI LLC, its
primary domestic operating subsidiary (collectively, the "Issuers"), issued
$400.0 million senior subordinated notes due 2009. As of December 31, 2000,
$260.0 million of the senior subordinated notes were outstanding. The Company's
other domestic subsidiaries (collectively, the "Guarantor Subsidiaries") have
jointly and severally, irrevocably and unconditionally guaranteed the Issuers'
obligations under the senior subordinated notes. The Guarantor Subsidiaries
include holding companies whose net assets consist primarily of investments in
the Company's foreign joint ventures in China, Malaysia and the Czech Republic
and nominal equity interests in certain of the Company's foreign subsidiaries as
well as Semiconductor Components Industries of Rhode Island, Inc. The foreign
joint ventures and the Company's foreign subsidiaries (collectively, the
"Non-Guarantor Subsidiaries") themselves are not guarantors of the senior
subordinated notes.

   31
    The Company does not believe that the separate financial statements and
other disclosures concerning the Guarantor Subsidiaries provide any additional
information that would be material to investors in making an investment
decision. Condensed consolidating financial information for the Issuers, the
Guarantor Subsidiaries and the Non-Guarantor Subsidiaries is as follows (in
millions):

As of and for the year ended December 31, 2000




                                                    Issuers
                                            -----------------------
                                               ON                                        Non-
                                          Semiconductor                 Guarantor      Guarantor
                                           Corporation       SCI LLC   Subsidiaries   Subsidiaries   Elimination        Total
                                           -----------       -------   ------------   ------------   -----------        -----
                                                                                                     
Receivables, net                            $     --        $  118.2     $     --        $  153.0       $     --       $  271.2
Inventories                                       --            48.4          6.6           261.6          (58.5)         258.1
Other current assets                              --            81.7         (0.4)          179.7            8.2          269.2
                                            --------        --------     --------        --------       --------       --------
 Total current assets                             --           248.3          6.2           594.3          (50.3)         798.5

Property, plant and equipment, net                --           157.5         52.4           438.5           (0.2)         648.2
Deferred income taxes                             --           278.1         14.2            (5.5)            --          286.8
Goodwill and other intangibles                    --              --        140.8              --             --          140.8
Investments and other assets, net              429.4           340.8         57.8             5.6         (684.9)         148.7
                                            --------        --------     --------        --------       --------       --------
 Total assets                               $  429.4        $1,024.7     $  271.4        $1,032.9       $ (735.4)      $2,023.0
                                            ========        ========     ========        ========       ========       ========

Accounts payable                            $     --        $   62.0     $    7.0        $  106.0       $     --       $  175.0
Accrued expenses and other current
     liabilities                                (3.2)          124.4         10.4            97.2            1.3          230.1
                                            --------        --------     --------        --------       --------       --------
 Total current liabilities                      (3.2)          186.4         17.4           203.2            1.3          405.1

Long-term debt(1)                              260.0         1,228.2           --            24.5         (260.0)       1,252.7
Other long-term liabilities                       --             9.7           --            11.1             --           20.8
Intercompany(1)                               (165.1)         (782.6)       150.4           537.3          260.0             --
                                            --------        --------     --------        --------       --------       --------
 Total liabilities                              91.7           641.7        167.8           776.1            1.3        1,678.6
Minority interests                                --              --           --              --            6.7            6.7
Stockholders' equity (deficit)                 337.7           383.0        103.6           256.8         (743.4)         337.7
                                            --------        --------     --------        --------       --------       --------
Liabilities, minority interests and
 stockholders' equity (deficit)             $  429.4        $1,024.7     $  271.4        $1,032.9       $ (735.4)      $2,023.0
                                            ========        ========     ========        ========       ========       ========

Revenues                                    $     --        $2,245.8     $  122.4        $2,504.5      $(2,798.8)      $2,073.9
Cost of sales                                     --         1,765.6         92.0         2,256.4       (2,759.0)       1,355.0
                                            --------        --------     --------        --------       --------       --------
Gross profit                                      --           480.2         30.4           248.1          (39.8)         718.9
                                            --------        --------     --------        --------       --------       --------
Research and development                          --            36.8         13.0            19.4             --           69.2
Selling and marketing                             --            56.9          6.4            36.8             --          100.1
General and administrative                        --           180.7          5.0            47.7             --          233.4
Amortization of goodwill and other
 intangibles                                      --              --         16.8              --             --           16.8
Write-off of acquired in-process
 research and development                         --              --         26.9              --             --           26.9
Restructuring charges                             --              --           --             4.8             --            4.8
                                            --------        --------     --------        --------       --------       --------
Total operating expenses                          --           274.4         68.1           108.7             --          451.2
                                            --------        --------     --------        --------       --------       --------
Operating income (loss)                           --           205.8        (37.7)          139.4          (39.8)         267.7
Interest expense, net                             --           (78.5)       (14.3)          (38.4)            --         (131.2)
Equity earnings                                 71.1            24.1          6.3              --          (97.1)           4.4
                                            --------        --------     --------        --------       --------       --------
Income (loss) before taxes, minority
 interests and extraordinary loss               71.1           151.4        (45.7)          101.0         (136.9)         140.9
Provision for income taxes                        --           (58.9)        20.8           (21.5)           9.5          (50.1)
Minority interests                                --              --           --              --           (2.2)          (2.2)
Extraordinary loss on prepayment of debt
 (net of income tax)                              --           (17.5)          --              --             --          (17.5)
                                            --------        --------     --------        --------       --------       --------
Net income (loss)                           $   71.1        $   75.0     $  (24.9)       $   79.5       $ (129.6)      $   71.1
                                            ========        ========     ========        ========       ========       ========



                                                        (continued on next page)


                                                                           34/35



   32
(continued from previous page)



                                                    Issuers
                                            -----------------------
                                               ON                                        Non-
                                          Semiconductor                 Guarantor      Guarantor
                                           Corporation       SCI LLC   Subsidiaries   Subsidiaries   Elimination        Total
                                           -----------       -------   ------------   ------------   -----------        -----
                                                                                                     

Net cash provided by (used in)
 operating activities                       $     --        $  396.1     $    8.9        $ (103.7)      $     --       $  301.3
Cash flows from investing activities:
 Purchases of property, plant and
  equipment                                       --           (49.4)       (10.0)         (139.4)            --       $ (198.8)
 Investment in business, net of cash
  acquired                                        --          (253.2)          --              --             --         (253.2)
 Investments in joint ventures and other          --            (2.5)          --              --             --           (2.5)
 Acquisition of minority interests in
  consolidated subsidiaries                       --              --           --            (1.5)            --           (1.5)
 Loans to unconsolidated joint venture            --           (30.0)          --              --             --          (30.0)
 Proceeds from sales of property, plant
  and equipment                                   --             4.8           --            13.3             --           18.1
                                            --------        --------     --------        --------       --------       --------
   Net cash used in investing activities          --          (330.3)       (10.0)         (127.6)            --         (467.9)
                                            --------        --------     --------        --------       --------       --------
Cash flows from financing activities:
 Proceeds from initial public offering,
  net of offering expenses                        --           514.8           --              --             --          514.8
 Proceeds from borrowings                         --           200.0           --            26.1             --          226.1
 Intercompany loans                               --          (280.0)          --           280.0             --             --
 Intercompany loan repayments                     --            41.5           --           (41.5)            --             --
 Payment of debt issuance costs                   --            (3.2)          --              --             --           (3.2)
 Repayment of senior credit facilities,
  including prepayment penalty                    --          (131.5)          --              --             --         (131.5)
 Repayment of senior subordinated notes,
  including prepayment penalty                    --          (156.8)          --              --             --         (156.8)
 Redemption of preferred stock,
  including accrued dividends                     --          (228.4)          --              --             --         (228.4)
 Proceeds from exercise of stock options
  and issuance of common stock
  under the employee stock purchase plan          --             7.8           --              --             --            7.8
                                            --------        --------     --------        --------       --------       --------
   Net cash (used in) provided by
    financing activities                          --           (35.8)          --           264.6             --          228.8
                                            --------        --------     --------        --------       --------       --------
Effect of exchange rate changes
 on cash and cash equivalents                     --              --           --            (0.1)            --           (0.1)
                                            --------        --------     --------        --------       --------       --------
Net increase (decrease) in cash and
 cash equivalents                                 --            30.0         (1.1)           33.2             --           62.1
Cash and cash equivalents, beginning
 of period                                        --            14.9           --           111.9             --          126.8
                                            --------        --------     --------        --------       --------       --------
Cash and cash equivalents, end of
 period                                     $     --        $   44.9     $   (1.1)       $  145.1       $     --       $  188.9
                                            --------        --------     --------        --------       --------       --------



   33

As of December 31, 1999 and for the period from August 4, 1999 to December 31,
1999



                                                               Issuers
                                                     ------------------------
                                                           ON                                     Non-
                                                     Semiconductor                 Guarantor    Guarantor
                                                       Corporation    SCI LLC     Subsidiaries Subsidiaries Elimination     Total
                                                     -------------    -------     ------------ ------------ -----------     -----
                                                                                                        
Receivables, net                                        $     --     $   89.5       $     --    $  163.5     $   (3.3)    $  249.7
Inventories                                                   --        106.0             --       131.4        (31.2)       206.2
Other current assets                                          --         37.7             --       143.5           --        181.2
                                                        --------     --------       --------    --------     --------     --------
 Total current assets                                         --        233.2             --       438.4        (34.5)       637.1
Property, plant and equipment, net                            --        163.7             --       406.1         (0.1)       569.7
Deferred income taxes                                         --        291.8             --        (2.8)          --        289.0
Investments and other assets                               392.9        245.8           54.6         3.6       (575.9)       121.0
                                                        --------     --------       --------    --------     --------     --------
 Total assets                                           $  392.9     $  934.5       $   54.6    $  845.3     $ (610.5)    $1,616.8
                                                        ========     ========       ========    ========     ========     ========
Accounts payable                                        $     --     $   58.4       $    0.7    $   73.3     $   (9.9)    $  122.5
Accrued expenses and other current liabilities                --         99.1             --       104.3          1.4        204.8
                                                        --------     --------       --------    --------     --------     --------
 Total current liabilities                                    --        157.5            0.7       177.6         (8.5)       327.3

Long-term debt(1)                                          400.0      1,295.3             --          --       (400.0)     1,295.3
Other long-term liabilities                                   --          2.6             --         9.6           --         12.2
Intercompany(1)                                             21.0       (859.9)            --       466.3        372.6           --
                                                        --------     --------       --------    --------     --------     --------
 Total liabilities                                         421.0        595.5            0.7       653.5        (35.9)     1,634.8
Minority interests                                            --           --             --          --         10.1         10.1
Redeemable preferred stock                                 219.6           --             --          --           --        219.6
Stockholder's equity (deficit)                            (247.7)       339.0           53.9       191.8       (584.7)      (247.7)
                                                        --------     --------       --------    --------     --------     --------
Liabilities, minority interests, redeemable
 preferred stock and stockholders' equity (deficit)     $  392.9     $  934.5       $   54.6    $  845.3     $ (610.5)    $1,616.8
                                                        ========     ========       ========    ========     ========     ========
Revenues                                                $     --     $  783.4       $     --    $  538.0     $ (522.7)    $  798.7
Cost of sales                                                 --        652.1             --       443.9       (522.7)       573.3
                                                        --------     --------       --------    --------     --------     --------
Gross profit                                                  --        131.3             --        94.1           --        225.4
                                                        --------     --------       --------    --------     --------     --------
General and administrative                                    --         49.8             --        27.5           --         77.3
Other operating expenses                                      --         37.0             --        11.9         (4.3)        44.6
                                                        --------     --------       --------    --------     --------     --------
 Total operating expenses                                     --         86.8             --        39.4         (4.3)       121.9
                                                        --------     --------       --------    --------     --------     --------
Operating income                                              --         44.5             --        54.7          4.3        103.5
Interest expense, net                                         --        (38.8)            --       (17.1)          --        (55.9)
Equity earnings                                             29.8         21.5            3.0          --        (52.9)         1.4
                                                        --------     --------       --------    --------     --------     --------
Income before taxes and minority interests                  29.8         27.2            3.0        37.6        (48.6)        49.0
Provision for income taxes                                    --         (4.0)            --       (13.4)        (0.7)       (18.1)
Minority interests                                            --           --             --          --         (1.1)        (1.1)
                                                        --------     --------       --------    --------     --------     --------
Net income                                              $   29.8     $   23.2       $    3.0    $   24.2     $  (50.4)    $   29.8
                                                        ========     ========       ========    ========     ========     ========


                                                        (continued on next page)



                                                                           36/37

   34
(continued from previous page)



                                                               Issuers
                                                     ------------------------
                                                           ON                                     Non-
                                                     Semiconductor                 Guarantor    Guarantor
                                                       Corporation    SCI LLC     Subsidiaries Subsidiaries Elimination     Total
                                                     -------------    -------     ------------ ------------ -----------     -----
                                                                                                        
Net cash provided by (used in) operating
 activities                                             $     --     $  137.5       $    4.9    $ (101.7)    $     --     $   40.7
Cash flows from investing activities:
 Purchases of property, plant and equipment                   --         (1.8)            --       (62.2)          --        (64.0)
 Loans to unconsolidated joint venture                        --        (28.3)            --          --           --        (28.3)
 Investments in joint ventures and other                      --           --           (4.9)         --           --         (4.9)
 Proceeds from sales of property, plant and
  equipment                                                   --           --             --         1.8           --          1.8
                                                        --------     --------       --------    --------     --------     --------
  Net cash used in investing activities                       --        (30.1)          (4.9)      (60.4)          --        (95.4)
                                                        --------     --------       --------    --------     --------     --------
Cash flows from financing activities:
 Proceeds from issuance of common stock to an
  affiliate of Texas Pacific Group                            --        187.5             --          --           --        187.5
  Proceeds from issuance of redeemable preferred
   stock to an affiliate of Texas Pacific Group               --        150.0             --          --           --        150.0
  Proceeds from borrowings under senior
   credit facilities                                          --        800.5             --          --           --        800.5

 Proceeds from issuance of senior subordinated
  notes                                                       --        400.0             --          --           --        400.0
 Payment of debt of issuance costs                            --        (52.6)            --          --           --        (52.6)
 Intercompany loans                                           --       (290.3)            --       290.3           --           --
 Intercompany loan repayments                                            15.9             --       (15.9)          --           --
 Repayment of joint venture debt                              --        (44.8)            --          --           --        (44.8)
 Net cash payments to Motorola in connection with
  Recapitalization                                            --     (1,258.7)            --          --           --     (1,258.7)
                                                        --------     --------       --------    --------     --------     --------
 Net cash (used in) provided by financing
  activities                                                  --        (92.5)            --       274.4           --        181.9
                                                        --------     --------       --------    --------     --------     --------
Effect of exchange rate changes on cash and cash
 equivalents                                                  --           --             --        (0.4)          --         (0.4)
                                                        --------     --------       --------    --------     --------     --------
Net increase in cash and cash equivalents                     --         14.9             --       111.9           --        126.8
Cash and cash equivalents, beginning of period                --           --             --          --           --           --
                                                        --------     --------       --------    --------     --------     --------
Cash and cash equivalents, end of period                $     --     $   14.9       $     --    $  111.9     $     --     $  126.8
                                                        ========     ========       ========    ========     ========     ========



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


NOTE 8: INCOME TAXES

    Geographic sources of income before income taxes, minority interests and
extraordinary loss are as follows (in millions):



                                                                                                        AUGUST 4, 1999
                                                                                   YEAR ENDED              THROUGH
                                                                                  DECEMBER 31,           DECEMBER 31,
                                                                                     2000                    1999
                                                                                  ------------          --------------
                                                                                                  
              United States                                                        $   65.4                 $  10.8
              Foreign                                                                  75.5                    38.2
                                                                                   --------                 -------
                                                                                   $  140.9                 $  49.0
                                                                                   ========                 =======


    The provision for income taxes is as follows (in millions):



                                                                                                        AUGUST 4, 1999
                                                                                  YEAR ENDED                 THROUGH
                                                                                 DECEMBER 31,              DECEMBER 31,
                                                                                    2000                       1999
                                                                                 ------------           ---------------
                                                                                                  
              Current
                Federal                                                            $ 37.1                    $  12.3
                State and local                                                       4.6                        1.7
                Foreign                                                              20.0                       21.7
                                                                                   ------                    -------
                                                                                     61.7                       35.7
                                                                                   ------                    -------
              Deferred
                Federal                                                              (8.8)                      (7.9)
                State and local                                                      (1.2)                      (1.1)
                Foreign                                                              (1.6)                      (8.6)
                                                                                   -------                   -------
                                                                                    (11.6)                     (17.6)
                                                                                   ------                    -------
                                                                                   $ 50.1                     $ 18.1
                                                                                   ======                     ======

   35
    A reconciliation of the U.S. federal statutory income tax rate to the
Company's effective income tax rate is as follows:



                                                                                                        AUGUST 4, 1999
                                                                                  YEAR ENDED                THROUGH
                                                                                 DECEMBER 31,             DECEMBER 31,
                                                                                     2000                     1999
                                                                                 ------------           --------------
                                                                                                  
              U.S. federal statutory rate                                           35.0%                     35.0%
              Increase (decrease) resulting from:
                State and local taxes, net of federal tax benefit                    2.8                       1.1
                Foreign withholding taxes                                            2.0                       1.4
                Foreign rate differential                                           (3.5)                     (2.6)
                Other                                                               (0.7)                      2.1
                                                                                   ------                    -----
                                                                                    35.6%                     37.0%
                                                                                   =====                     =====


    Deferred tax assets (liabilities) are as follows (in millions):



                                                                                               DECEMBER 31,
                                                                                     -------------------------------
                                                                                      2000                     1999
                                                                                     ------                  -------
                                                                                                       
              Tax-deductible goodwill                                                $271.5                  $ 297.6
              Reserves and accruals.                                                   25.0                     16.8
              Inventories                                                              14.4                      7.3
              Fixed Assets                                                              9.1                     (9.6)
              Other                                                                     7.5                      5.3
                                                                                     ------                  -------
                                                                                     $327.5                  $ 317.4
                                                                                     ======                  =======


    Realization of deferred tax assets is dependent upon the Company generating
sufficient taxable income in the future. Based on the Company's history of
profitable operations, management has concluded that it is more likely than not
that the Company will ultimately realize the full benefit of its deferred tax
assets. Accordingly, the Company has not provided a valuation allowance for its
net deferred tax assets.

    Income taxes have not been provided in the U.S. on the Company's share
($139.5 million) of undistributed earnings of foreign subsidiaries over which it
has sufficient influence to control the distribution of such earnings and has
determined that such earnings have been reinvested indefinitely. These earnings
could become subject to additional tax if they were remitted as dividends, if
foreign earnings were lent to any of the Company's U.S. subsidiaries, or if the
Company sells its stock in the subsidiaries. The Company estimates that
repatriation of these foreign earnings would generate additional foreign tax
withholdings of $12.2 million and federal income tax, net of foreign tax
credits, of $16.1 million.

NOTE 9: REDEEMABLE PREFERRED STOCK

    In connection with the Recapitalization, the Company issued 2,090 shares of
its 12% mandatorily redeemable preferred stock with an original liquidation
value of $209 million. Dividends on the preferred stock were payable quarterly
and compound to the extent not paid. The Company redeemed all outstanding
preferred stock with the net proceeds from the Company's initial public offering
(see Note 1).

NOTE 10: STOCK OPTIONS

    1999 FOUNDERS STOCK OPTION PLAN

     The Company has adopted the ON Semiconductor 1999 Founders Stock Option
Plan ("the 1999 Plan"), an incentive plan for key employees, directors and
consultants. A total of 11,576,666 shares of the Company's common stock have
been reserved for issuance under the 1999 Plan. The 1999 Plan is administered by
the Board of Directors or a committee thereof, which is authorized to, among
other things, select the key employees, directors and consultants who will
receive grants and determine the exercise prices and vesting schedules of the
options. Prior to the existence of a public market for the Company's common
stock, fair market value was determined by the Board of Directors.

     Generally, the options vest over a period of four years, with approximately
8% becoming immediately vested and exercisable on the grant date. All
outstanding options vest automatically upon a change of control (as defined in
the plan), provided the option holder is employed by the Company on the date of
the change in control. Upon the termination of an option holder's employment,
all unvested options will immediately terminate and vested options will
generally remain exercisable for a period of 90 days after date of termination
(one year in the case of death or disability).

    2000 STOCK INCENTIVE PLAN

    On February 17, 2000, the Company adopted the 2000 Stock Incentive Plan
("the 2000 Plan") to provide key employees, directors and consultants with
various equity-based incentives as described in the plan document. A total of
10.0 million shares of the Company's common stock have been reserved for grants
under the 2000 Plan. The 2000 Plan is administered by the Board of Directors or
a committee thereof, which is authorized to determine, among other things, the
key employees, directors or consultants who will receive awards under the plan,
the amount and type of award, exercise prices or performance criteria, if
applicable, and vesting schedules.

    At December 31, 2000 and 1999, respectively, 6,596,326 and 1,475,348 of
common stock were available for issuance under the plans.

     Additional information with respect to stock option plan activity is as
follows:



                                           OUTSTANDING OPTIONS
                                    -------------------------------------
                                                         WEIGHTED AVERAGE
                                    NUMBER OF SHARES      EXERCISE PRICE
                                    ----------------     ----------------
                                                   
August 4, 1999                                  -
  Grants                               10,101,318             $ 1.50
                                       ----------
December 31, 1999                      10,101,318               1.50
 Grants                                 5,525,770              15.18
 Exercises                               (601,646)              1.67
 Cancellations                           (646,748)              7.71
                                       ----------
December 31, 2000                      14,378,694             $ 6.46
                                       ==========




                                                                           38/39


   36
The following tables summarize options outstanding and options exercisable at
December 31, 2000:



                                                   OUTSTANDING OPTIONS
                                 ------------------------------------------------------
                                                         WEIGHTED
                                                          AVERAGE
                                                        CONTRACTUAL      WEIGHTED AVERAGE
RANGE OF EXERCISE PRICES         NUMBER OF SHARES     LIFE (IN YEARS)     EXERCISE PRICE
- ------------------------         ----------------     ---------------     --------------
                                                                
$1.50-$1.50                           9,137,008             8.69              $1.50
$9.03-$16.00                          4,710,435             9.43              14.67
$17.37-$21.38                           531,251             9.57              19.23
                                     ----------
Totals                               14,378,694                               $6.46
                                     ==========




                                                   EXERCISABLE OPTIONS
                                 ------------------------------------------------------
                                                         WEIGHTED
                                                          AVERAGE
                                                        CONTRACTUAL    WEIGHTED AVERAGE
EXERCISE PRICES                  NUMBER OF SHARES     LIFE (IN YEARS)    EXERCISE PRICE
- ---------------                  ----------------     ---------------    --------------
                                                              
$1.50                                  2,258,574              8.69             $1.50
$16.00                                   324,391              9.32             16.00
                                       --------
Totals                                 2,582,965                               $3.32
                                       =========


     These options will expire if not exercised at specific dates through
November 2010. Exercise prices for options exercised during 2000 ranged from
$1.50 to $16.00.

     During 2000, an employee of the Company was granted 80,000 stock
appreciation rights with a option price of $16.00.

     In 2000, the Company granted certain consultants options to purchase
approximately 91,000 shares of common stock at exercise prices ranging from
$1.50 to $16.00 per share. The aggregate estimated fair value of these options
of $1.2 million is being recognized as expense over the remaining service period
of the respective consulting agreements. Compensation expense related to these
stock options was approximately $700,000.

     In 1999, the Company paid its Chairman of the Board a consulting fee of
$100,000 and granted him an option to purchase 200,000 shares of common stock
for services rendered in connection with the Recapitalization. Also in 1999, the
Company paid an entity owned by one of its directors a consulting fee of
$1,750,000 and granted that director an option to purchase 410,000 shares of
common stock for services rendered in connection with the Recapitalization. The
options, which have an exercise price of $1.50 per share, were recorded as a
charge to accumulated deficit at their estimated fair value of $600,000.

2000 EMPLOYEE STOCK PURCHASE PLAN

     On February 17, 2000, the Company adopted the 2000 Employee Stock Purchase
Plan. Subject to local legal requirements, each of the Company's full-time
employees has the right to elect to have up to 10% of their payroll applied
towards the purchase of shares of the Company's common stock at a price equal to
85% of the fair market value of such shares as determined under the plan.
Employees will be limited to annual purchases of $25,000 under this plan. During
2000, employees purchased 978,123 shares under the plan. The Company has
reserved 1.5 million shares of common stock for issuance under this plan.

     As permitted by SFAS 123, the Company measures compensation expense in
accordance with APB 25. Had the Company determined compensation expense in
accordance with SFAS 123, the Company's net income for 2000 and for the period
from August 4, 1999 through December 31, 1999 would have been reduced to the
pro-forma amounts indicated below (in millions):



                                                                                                   AUGUST 4, 1999
                                                                                 YEAR ENDED            THROUGH
                                                                                 DECEMBER 31,        DECEMBER 31,
                                                                                    2000                1999
                                                                                ------------       ---------------
                                                                                             
              As reported                                                          $ 71.1              $ 29.8
              Pro-forma                                                              63.7                29.5


     The fair value of options granted in 2000 and 1999 reported below has been
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted average assumptions:



Employee Stock Options                      2000     1999
- ----------------------                      -------------
                                               
Expected life (in years)                    5.00     5.00
Risk-free interest rate                     6.41%    5.90%
Volatility                                  0.60     0.00




Employee Stock Purchase Plan                2000     1999
- ----------------------------                -------------
                                                
Expected life (in years)                      .33     n/a
Risk-free interest rate                     6.20%     n/a
Volatility                                  0.60      n/a


    The weighted average estimated fair value of employee stock options granted
during 2000 and 1999 was $8.04 and $0.39 per share, respectively. The
weighted-average estimated fair value of shares sold under the 2000 Employee
Stock Purchase Plan during 2000 was $3.73.


NOTE 11: FINANCIAL INSTRUMENTS

    As a multinational business, the Company's transactions are denominated in a
variety of currencies. When appropriate, the Company uses forward foreign
currency contracts to reduce its overall exposure to the effects of currency
fluctuations on its results of operations and cash flows. The Company's policy
prohibits speculation on financial instruments, trading in currencies for which
there are no underlying exposures, or entering into trades for any currency to
intentionally increase the underlying exposure.

    The Company's foreign exchange management strategy provides that foreign
subsidiaries provide forecasts of their foreign currency exposures. The Company
then aggregates the forecasted amounts and enters into foreign currency
contracts in order to create an offset to the underlying exposures. Losses or
gains on the underlying cash flows or investments offset gains or losses on the
financial instruments. The Company primarily hedges existing assets and
liabilities and cash flows associated with transactions currently on its balance
sheet.
   37
    At December 31, 2000 and 1999, the Company had net outstanding foreign
exchange contracts with notional amounts of $29.7 million and $128.0 million,
respectively. Most of the contracts, which were obtained through Motorola,
mature within two months with the longest maturity extending eight months.
Management believes that these financial instruments should not subject the
Company to undue risk due to foreign exchange movements because gains and losses
on these contracts should offset losses and gains on the assets, liabilities and
transactions being hedged. The following schedule shows the largest net foreign
exchange hedge positions in U.S. dollars as of December 31, 2000 and 1999 (in
millions):



                                                                            DECEMBER 31,      DECEMBER 31,
                                                                               2000              1999
                                                                             BUY (SELL)        BUY (SELL)
                                                                             ----------        ----------
                                                                                         
                                 Japanese Yen                                 $(58.6)           $(94.0)
                                 Malaysian Ringgit                              19.4             (18.0)
                                 Euro                                            6.6             (19.0)
                                 Mexican Peso                                    1.1              47.0
                                 British Pound                                  (1.5)            (24.0)


    The Company is exposed to credit-related losses if counterparties to
financial instruments fail to perform their obligations. Motorola is the
counterparty for all of the Company's foreign exchange contracts, and no
credit-related losses are anticipated. For 2000 and for the period August 4,
1999 to December 31, 1999 aggregate foreign currency transaction gains totaled
$6.9 million and $2.2 million, respectively.

    At December 31, 2000, the Company had four interest rate swaps which were
entered into in August and December 2000.

These derivatives, required by the credit agreement relating to the senior bank
facilities, are floating-to-fixed interest rate swaps based on LIBOR with
quarterly interest rate resets. Amounts to be paid or received under the
contracts are recorded as an adjustment to interest expense. The aggregate
notional amount of these swaps totals $255 million and is used solely as the
basis for which the payment streams are calculated and exchanged. The notional
amount is not a measure of the exposure to the Company through the use of the
swaps. The interest rate swaps expire during the years 2002 through 2004.

    At December 31, 2000, the Company had no outstanding commodity derivatives,
currency swaps or options relating to either its debt instruments or
investments. The Company does not have any derivatives to hedge the value of its
equity investments in affiliated companies.

NOTE 12: FAIR VALUE OF FINANCIAL INSTRUMENTS

    The Company uses the following methods to estimate the fair values of its
financial instruments:

CASH AND CASH EQUIVALENTS

    The carrying amount approximates fair value due to the short-term maturities
of such instruments.

LONG-TERM DEBT

    The fair value of amounts outstanding under the Company's senior bank
facilities approximate fair value because these borrowing have variable interest
rate terms. The fair values of the Company's other long-term borrowings are
determined by obtaining quoted market prices if available or market prices for
comparable debt instruments.

FOREIGN CURRENCY EXCHANGE CONTRACTS

    Forward foreign exchange contracts are valued at current foreign exchange
rates for contracts with similar maturities.

INTEREST RATE SWAP AGREEMENTS

    The fair values of interest rate swaps are the amounts at which they could
be settled and are estimated by obtaining quotes from brokers.

REDEEMABLE PREFERRED STOCK

    The fair value of the Company's redeemable preferred stock was determined
using a discounted cash flow analysis, based on estimated interest rates for
similar preferred stock instruments.

    The carrying amounts and fair values of the Company's financial instruments
at December 31, 2000 and 1999 are as follows (in millions):




                                                        2000                            1999
                                                        ----                            ----
                                             CARRYING                         CARRYING
                                              AMOUNT         FAIR VALUE         AMOUNT         FAIR VALUE
                                             --------        ----------       --------         ----------
                                                                                   
  Long-term debt                            $(1,252.7)       $(1,260.3)       $(1,295.3)       $(1,321.0)
  Forward foreign exchange contracts             5.8              5.8             (7.4)            (7.4)
  Interest rate swaps                             --             (2.1)              --               --
  Redeemable preferred stock                      --               --           (219.6)          (248.0)


NOTE 13: COMMITMENTS AND CONTINGENCIES

    LEASES

    The following is a schedule by year of future minimum lease obligations
under non-cancelable operating leases as of December 31, 2000 (in millions):



                              YEAR ENDING DECEMBER 31:
                              -------------------------
                                                                                       
                              2001                                                        $10.7
                              2002                                                          9.7
                              2003                                                          6.7
                              2004                                                          3.6
                              2005                                                          2.5
                              Thereafter                                                    8.8
                                                                                          -----
                                                                                          $42.0




                                                                           40/41


   38
    The Company's existing leases do not contain significant restrictive
provisions; however, certain leases contain renewal options and provisions for
payment by the Company of real estate taxes, insurance and maintenance costs.
Total rent expense for 2000 and the period from August 4, 1999 through December
31, 1999 was $13.0 and $7.0 million, respectively.

    LEGAL MATTERS

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

NOTE 14: EMPLOYEE BENEFIT PLANS

   PENSION PLANS

    The Company has a noncontributory pension plan that, prior to its amendment
in November 1999, covered most U.S. employees who were also formerly employees
of Motorola, after one year of service. The benefit formula is dependent upon
employee earnings and years of service. The Company's policy is to fund the plan
in accordance with the requirements and regulations of the Internal Revenue
Code. Benefits under the pension plan are valued based upon the projected unit
credit cost method.

    In November 1999, the Company's U.S. pension plan was amended so that
benefit accruals under the plan will be discontinued effective December 31, 2004
for those employees whose combined age and years of service (in complete years)
equaled or exceeded 65 at August 4, 1999. Benefit accruals under the plan for
all other employees were discontinued effective December 31, 2000. Employees
will be entitled to redirect their vested account balances into a qualified
individual retirement account, the Company's defined contribution plans
described below, an annuity contract or to receive a lump-sum distribution. This
plan curtailment resulted in a reduction in the plan's benefit obligation of
$12.6 million in 1999. After recognition of the related unrecognized prior
service cost and other charges, the Company recognized a net curtailment gain of
$0.5 million during the period from August 4, 1999 through December 31, 1999.

    The Company plans to terminate the U.S. pension plan, effective April 15,
2001. The plan termination is subject to the approval of the Pension Benefit
Guaranty Corporation, the government agency that regulates plan terminations.
The Company also anticipates seeking the approval of the Internal Revenue
Service with respect to the termination of the plan. On the proposed termination
date of April 15, 2001, the Company intends to terminate the plan in a standard
termination, which requires plan assets be sufficient to provide all benefits
for all participants and beneficiaries of deceased participants.

    Certain of the Company's foreign subsidiaries provide retirement plans for
substantially all of their employees. The plans conform to local practice in
terms of providing minimum benefits mandated by law, collective agreements or
customary practice. Benefits under all foreign pension plans are valued using
the projected unit credit cost method.

   39

    The following is a summary of the status of the pension plans and the net
periodic pension cost (dollars in millions):



                                                               2000                                       1999
                                              -------------------------------------       -------------------------------------
                                                U.S.          FOREIGN                       U.S.          FOREIGN
                                              PENSION         PENSION                     PENSION         PENSION
                                                PLAN           PLANS          TOTAL         PLAN            PLANS         TOTAL
                                                ----           -----          -----         ----            -----         -----
                                                                                                       
Change in benefit obligation:
  Benefit obligation, beginning of
  period                                       $ 67.1         $ 34.3          $101.4       $ 74.8          $ 30.2        $105.0
  Service cost                                    4.7            2.6             7.3          2.5             1.1           3.6
  Interest cost                                   4.5            2.0             6.5          2.4             0.8           3.2
  Plan curtailment (gain)                          --             --              --        (12.6)             --         (12.6)
  Actuarial loss (gain)                           4.7           (2.5)            2.2           --              --            --
  Benefits paid                                  (3.6)          (0.7)           (4.3)          --            (0.1)         (0.1)
  Translation loss (gain)                          --           (2.9)           (2.9)          --             2.3           2.3
                                               ------         ------          ------       ------          ------        ------
  Benefit obligation, end of period            $ 77.4         $ 32.8          $110.2       $ 67.1          $ 34.3        $101.4
                                               ======         ======          ======       ======          ======        ======
Change in Plan Assets:
  Fair value, beginning of period              $ 61.8         $ 18.4          $ 80.2       $ 60.5          $ 13.5        $ 74.0
  Actual return on plan assets                    2.3           (1.0)            1.3          1.3             0.3           1.6
  Employer contributions                           --            2.6             2.6           --             3.4           3.4
  Benefits paid                                  (3.6)          (1.0)           (4.6)          --            (0.1)         (0.1)
  Translation gain (loss)                          --           (0.9)           (0.9)          --             1.3           1.3
                                               ------         ------          ------       ------          ------        ------
  Fair value, end of period                    $ 60.5         $ 18.1          $ 78.6       $ 61.8          $ 18.4        $ 80.2
                                               ======         ======          ======       ======          ======        ======
Balances, end of period:
  Pension benefit obligation                   $(77.4)        $(32.8)        $(110.2)      $(67.1)         $(34.3)      $(101.4)
  Fair value of plan assets                      60.5           18.1            78.6         61.8            18.4          80.2
                                               ------         ------          ------       ------          ------        ------
  Funded status                                 (16.9)         (14.7)          (31.6)        (5.3)          (15.9)        (21.2)
  Unrecognized net actuarial loss                 7.6           (0.7)            6.9           --             0.3           0.3
  Unrecognized prior service cost                 2.6            4.9             7.5          2.8             6.1           8.9
                                               ------         ------          ------       ------          ------        ------
Net liability recognized, end of period        $ (6.7)        $(10.5)         $(17.2)      $ (2.5)         $ (9.5)       $(12.0)
                                               ======         ======          ======       ======          ======        ======

The net liability recognized in the
consolidated balance sheets consists
of the following :
Accrued benefit liability                      $ (9.6)        $(10.5)         $(20.1)      $ (2.5)         $ (9.5)       ($12.0)
Intangible asset                                  2.6             --             2.6           --            --              --
Accumulated other comprehensive income            0.3             --             0.3           --            --              --
                                               ------         ------          ------       ------          ------        ------
Net liability recognized, end of period        $ (6.7)        $(10.5)         $(17.2)      $ (2.5)         $ (9.5)       $(12.0)
                                               ======         ======          ======       ======          ======        ======

Assumptions related to the pension plans
are as follows:
  Discount rate                                   6.8%          5.76%                         6.8%           6.22%
  Expected return on assets                       8.5%          7.46%                         8.5%           5.15%
  Rate of compensation increase                   5.0%          4.75%                         5.0%           7.91%

Components of net periodic pension cost:
  Service cost                                 $  4.7         $  2.6          $  7.3       $  2.5          $  1.0        $  3.5
  Interest cost                                   4.5            2.0             6.5          2.4             0.8           3.2
  Expected return on assets                      (5.2)          (1.5)           (6.7)        (2.4)           (0.5)         (2.9)
  Amortization of prior service cost              0.2            0.6             0.8          0.5             0.2           0.7
  Curtailment gain                                 --             --              --         (0.5)             --          (0.5)
                                               ------         ------          ------       ------          ------        ------
Net periodic pension cost                      $  4.2         $  3.7          $  7.9       $  2.5          $  1.5        $  4.0
                                               ======         ======          ======       ======          ======        ======





                                                                           42/43

   40
    The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $107.5 million, $96.1 million and $76.5 million,
respectively as of December 31, 2000 and $95.4 million, $80.3 million and $74.9
million, respectively as of December 31, 1999.

DEFINED CONTRIBUTION PLANS

    The Company has a deferred compensation plan ("the Savings Plan") for all
eligible U.S. employees established under the provisions of Section 401(k) of
the Internal Revenue Code. Eligible employees may contribute a percentage of
their salary subject to certain limitations. For the period from August 4, 1999
through December 31, 1999, there were no Company matching contributions to the
Savings Plan; however, U.S. employees were eligible for a profit sharing
contribution. The Company recognized $1.3 million expense for the profit sharing
feature of the Savings Plan for the period from August 4, 1999 through December
31, 1999. No profit sharing contribution was made for 2000. Effective January 1,
2000, the Company began matching of 100% of the first 4% of employee
contributions, and 50% of the next 4% of employee contributions, as defined in
the Savings Plan. The Company recognized $7.1 million of expense relating to
matching contributions in 2000. Participants are at all times fully vested in
their contributions and the Company's contributions.

    Certain foreign subsidiaries have defined contribution plans in which
eligible employees participate. The Company recognized compensation expense of
$1.0 million and $0.4 million relating to these plans during 2000 and the period
from August 4, 1999 through December 31, 1999, respectively.

NOTE 15: SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

    The Company's non-cash financing activities and cash payments for interest
and income taxes are as follows (in millions):




                                                                          AUGUST 4, 1999
                                                           YEAR ENDED         THROUGH
                                                          DECEMBER 31,     DECEMBER 31,
                                                              2000             1999
                                                          ------------    --------------
                                                                    
Non-cash financing activities:
  Issuance of common stock to Motorola                      $   --           $ 17.5
  Issuance of redeemable preferred stock to Motorola            --             59.0
  Issuance of junior subordinated note to Motorola              --             91.0
Cash paid for:
  Interest                                                   131.2             20.7
  Income taxes                                                54.2              5.9


NOTE 16: RELATED PARTY TRANSACTIONS

    In connection with the Recapitalization, the Company paid Texas Pacific
Group a financial advisory fee in the amount of $25.0 million. The Company has
also agreed to pay Texas Pacific Group an annual management fee of up to $2.0
million. In connection with the Cherry acquisition in April 2000, the Company
paid Texas Pacific Group a $2.0 million advisory fee in-lieu of the annual
management fee for 2000. Management fees payable to Texas Pacific Group for the
period from August 4, 1999 through December 31, 1999 were $0.8 million and are
included in general and administrative expense.

    In connection with the Recapitalization, Motorola assigned, licensed and
sublicensed to the Company intellectual property in connection with the products
the Company plans to offer (including a limited use of the Motorola trade name
for one year and a transition statement, "formerly a division of Motorola," for
an additional year thereafter). In addition, Motorola has agreed to continue
providing information technology, human resources, supply management, logistics
and finance services for agreed upon periods of time while the Company
determines the most cost-effective means to obtain such services. Motorola has
also agreed to continue providing manufacturing and assembly services, to
continue using similar services the Company provides to them, to continue
selling to the Company depreciated equipment to support the Company's capacity
expansion and to lease real estate to the Company.

    The manufacturing and assembly services that the Company and Motorola have
agreed to continue to provide to each other are at prices intended to
approximate each party's cost of providing the services and are fixed throughout
the term of the agreements. Subject to the Company's right to cancel upon six
months' written notice, the Company has minimum commitments to purchase
manufacturing services from Motorola of approximately $56 million, $45 million
and $44 million in years 2001, 2002 and 2003, respectively.

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




                                                                                                         AUGUST 4, 1999
                                                                                       YEAR ENDED            THROUGH
                                                                                       DECEMBER 31,        DECEMBER 31,
                                                                                           2000                1999
                                                                                       ------------      --------------
                                                                                                   
              Purchases of manufacturing services from Motorola                         $162.3              $101.3
              Cost of other services, rent and equipment purchased from
                Motorola                                                                    96.0                21.2

   41
NOTE 17: SEGMENT INFORMATION

    The Company is engaged in the design, development, manufacture and marketing
of a wide variety of semiconductor components for the semiconductor industry and
original equipment manufacturers and operates in one segment. The Company
operates in various geographic locations. Sales to unaffiliated customers have
little correlation with the location of manufacture. It is, therefore, not
meaningful to present operating profit by geographic location. The Company
conducts a substantial portion of its operations outside of the United States
and is subject to risks associated with non-U.S. operations, such as political
risks, currency controls and fluctuations, tariffs, import controls and air
transportation.

    Property, plant and equipment by geographic location is summarized as
follows (in millions):



                                                                                              DECEMBER 31,
                                                                                           ------------------
                                                                                             2000      1999
                                                                                           -------   --------
                                                                                               
              The Americas (primarily the U.S. and Mexico)                                 $ 275.9   $  221.4
              Asia/Pacific                                                                   171.1      159.7
              Europe                                                                         103.0       89.0
              Japan                                                                           98.2       99.6
                                                                                           -------   --------
                                                                                           $ 648.2   $  569.7
                                                                                           =======   ========


    Total revenues to unaffiliated customers by geographic location, including
local sales and exports made by operations within each area are summarized as
follows (in millions):



                                                                                                     AUGUST 4, 1999
                                                                                    YEAR ENDED           THROUGH
                                                                                   DECEMBER 31,       DECEMBER 31,
                                                                                       2000               1999
                                                                                   ------------      --------------
                                                                                               
              The Americas (primarily the U.S. and Mexico)                           $  965.1          $  375.4
              Asia/Pacific                                                              551.5             183.6
              Europe                                                                    414.8             144.9
              Japan                                                                     142.5              94.8
                                                                                     --------          --------
                                                                                     $2,073.9          $  798.7
                                                                                     ========          ========


    Sales to Motorola and two other customers accounted for approximately 10%,
11% and 12%, respectively of the Company's total revenue during 2000, compared
to approximately 16%, 10% and 9%, respectively of the Company's total revenue
for the period from August 4, 1999 to December 31, 1999.


NOTE 18: SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):

Consolidated quarterly financial information for 2000 and for the period from
August 4, 1999 through December 31, 1999 follows (in millions, except per share
data):



                                                                   2000                                           1999
                                                                   ----                                           ----
Quarter ended                               April 1       July 1(1)     September 30    December 31    October 2(2)    December 31
                                            -------      ----------     ------------    -----------    ------------    -----------
                                                                                                     
Total revenues                              $ 486.8        $ 550.5         $ 543.2        $ 493.4        $ 329.0        $ 469.7

Gross profit                                  163.4          192.8           194.0          168.7           88.2          137.2

Net income before extraordinary loss           25.5           15.5            29.9           17.7           10.8           19.0


Net income (loss)                           $  25.5        $  (2.0)        $  29.9        $  17.7        $  10.8        $  19.0

Diluted net income (loss)  before
extraordinary item per common share         $  0.13        $  0.08         $  0.17        $  0.10        $  0.04        $  0.09

Diluted net income (loss) per
common  share                               $  0.13        $ (0.03)        $  0.17        $  0.10        $  0.04        $  0.09


(1) During the quarter ended July 1, 2000 the Company incurred a pre-tax charge
of $26.9 million relating to the write-off of in-process research and
development relating to the Cherry acquisition described in Note 3.
Additionally, the Company incurred a charge of $29.2 million ($17.5 million
after tax) relating to prepayment penalties, redemption premiums and the
write-off of debt issuance costs. As described in Note 1, this charge was
treated as an extraordinary loss in the accompanying financial statements.

(2) Includes the period from August 4, 1999 to October 2, 1999.




                                                                           44/45


   42

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Motorola, Inc.:

    We have audited the accompanying combined statements of revenues less direct
and allocated expenses before taxes for Semiconductor Components Group of
Motorola, Inc. ("the Company" or "the Business") for the period from January 1,
1999 through August 3, 1999 and the year ended December 31, 1998. These combined
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined statements based on
our audits.

    We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the statements. We believe that our audits provide a reasonable basis for our
opinion.

    The accompanying combined statements were prepared to comply with the rules
and regulations of the Securities and Exchange Commission and on the basis of
presentation as described in Note 1. The accompanying combined statements
present the combined revenues less direct and allocated expenses before taxes of
the Business, and are not intended to be a complete presentation of the
Business' financial position, results of operations or cash flows. The results
of operations before taxes are not necessarily indicative of the results of
operations before taxes that would be recorded by the Company on a stand-alone
basis.

    In our opinion, the accompanying combined statements present fairly, in all
material respects, the combined revenues less direct and allocated expenses
before taxes for the period from January 1, 1999 through August 3, 1999 and the
year ended December 31, 1998, on the basis described in Note 1, in conformity
with accounting principles generally accepted in the United States of America.

                                        /s/ KPMG LLP
                                        KPMG LLP

Phoenix, Arizona
January 7, 2000


   43

SEMICONDUCTOR COMPONENTS GROUP OF
MOTOROLA, INC.

COMBINED STATEMENTS OF REVENUES LESS DIRECT AND
ALLOCATED EXPENSES BEFORE TAXES



                                                        PERIOD
                                                         FROM
                                                    JANUARY 1, 1999      YEAR
                                                        THROUGH          ENDED
                                                     AUGUST 3, 1999  DECEMBER 31, 1998
                                                     --------------  -----------------
                                                              (IN MILLIONS)
                                                               
Revenues:
  Net sales -- trade                                    $  895.4       $1,495.3
  Foundry revenues                                          91.0          162.3
                                                        --------       --------
Total revenues                                             986.4        1,657.6
                                                        --------       --------
Direct and allocated costs and expenses:
  Cost of sales                                            711.3        1,222.3
  Research and development                                  34.3           67.5
  Selling and marketing                                     39.0           92.4
  General and administrative                                89.4          205.7
  Restructuring and other charges                             --          189.8
                                                        --------       --------
  Operating costs and expenses                             874.0        1,777.7
                                                        --------       --------
                                                           112.4         (120.1)
                                                        --------       --------
Other income (expenses):
  Equity in earnings from joint ventures                     2.4            5.7
  Interest expense                                          (9.1)         (19.8)
  Minority interest in earnings of consolidated
     entities                                               (0.9)          (2.1)
                                                        --------       --------
  Other expenses, net                                       (7.6)         (16.2)
                                                        --------       --------
     Revenues less direct and allocated expenses
       before taxes                                     $  104.8       $ (136.3)
                                                        ========       ========



See accompanying notes to combined financial statements.



                                                                           46/47


   44

SEMICONDUCTOR COMPONENTS GROUP OF
MOTOROLA, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

(1) BASIS OF PRESENTATION

    The Semiconductor Components Group ("SCG" or "the Business") is defined as
the discrete and integrated circuits standard products of the Semiconductor
Products Sector ("SPS") of Motorola, Inc. ("Motorola"), including Power BiPolar,
Rectifiers, Thyristors, Zeners, TMOS, Analog, ECL, Small Signal and Logic
Products. Manufacturing operations for the Business are primarily conducted in
plants in Guadalajara, Mexico, Carmona, Philippines, Seremban, Malaysia (2
Plants), Phoenix, Arizona, United States and Aizu, Japan (collectively referred
to as "SCG plants"). Certain manufacturing operations related to SCG products
are also performed at other SPS plants. Similarly, certain SCG plants perform
manufacturing operations related to other SPS product lines. SCG also has
investments in various joint ventures which are accounted for on the equity
method.

     Motorola performs cash management on a centralized basis and SPS processes
receivables and certain payables, payroll and other activity for SCG. Most of
these systems are not designed to track receivables, liabilities and cash
receipts and payments on a business specific basis. Accordingly, it is not
practical to determine certain assets and liabilities associated with the
business. Given these constraints, certain supplemental cash flow information is
presented in lieu of a statement of cash flows. (See Note 6.) Assets and
liabilities not specifically identifiable to the Business include:

        (A) Cash, cash equivalents and investments. Activity in SCG cash
    balances is recorded through the business equity account.

        (B) Trade accounts receivable and related allowances for bad debts and
    product returns. Trade receivable balances are maintained by customer, not
    by the Business. Estimated allowances for product returns are reflected in
    SCG net sales. Accounts receivable related to SCG are allocated through the
    business equity account.

        (C) Accounts payable related to trade purchases that are made centrally
    by SPS in the United States. Such purchases related to SCG are allocated to
    SCG through the business equity account.

        (D) Certain accrued liabilities for allocated corporate costs and
    environmental and pension costs which are allocated to SCG through the
    business equity account.

    The combined statements of revenues less direct and allocated expenses
before taxes include all revenues and costs attributable to the Business
including an allocation of the costs of shared facilities and overhead of
Motorola and SPS. In addition, certain costs incurred at SCG plants for the
benefit of other SPS product lines are allocated from SCG to the other SPS
divisions.

    All of the allocations and estimates in the combined statements of revenues
less direct and allocated expenses before taxes are based on assumptions that
management believes are reasonable under the circumstances. However, these
allocations and estimates are not necessarily indicative of the costs that would
have resulted if the Business had been operated on a stand-alone basis.

    Transactions between the Business and other Motorola and SPS operations have
been identified in the combined statements as transactions between related
parties to the extent practicable (See Note 2).

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    (a) BASIS OF COMBINATION

    All significant intercompany balances and transactions within the Business
have been eliminated.

    (b) REVENUE RECOGNITION

    Revenues from the sale of SCG semiconductor products is generally recognized
when shipped, with a provision for estimated returns and allowances recorded at
the time of shipment.

    (c) RELATED PARTY TRANSACTIONS

    SCG manufactures products for other sectors of Motorola. Sales of these
products are treated as external sales and are reflected in the accompanying
combined statements of revenues less direct and allocated expenses before taxes
with the related cost of sales. These sales totaled $76.1 million for the period
from January 1, 1999 through August 3, 1999 and $105.7 million for the year
ended December 31, 1998.

    SCG also manufactures products, at cost, for other SPS divisions and these
other divisions also manufacture products for SCG. The gross amounts charged
to/from SCG for these products are summarized as follows (in millions):



                                                                             JANUARY 1,
                                                                               1999
                                                                              THROUGH           YEAR ENDED
                                                                              AUGUST 3,         DECEMBER 31,
                                                                                1999                1998
                                                                                ----                ----
                                                                                          
        Manufacturing services performed by other SPS divisions on
          behalf of SCG                                                        $ 125.5            $ 266.8
                                                                               =======            =======
        Manufacturing services performed by SCG and transferred at
          actual production costs to other SPS divisions                       $  91.0            $ 162.3
                                                                               =======            =======


    A portion of manufacturing costs transferred from other SPS divisions to SCG
are capitalized into inventory at worldwide standard cost and are recorded as
cost of sales as related product sales are recognized. Variations between
worldwide standard cost and the actual costs transferred from other SPS
divisions are considered period costs and are immediately charged to operations.

    Where it is possible to specifically identify other operating costs with the
activities of SCG or other SPS product lines, these amounts have been charged or
credited directly to SCG or SPS product lines without allocation or
apportionment. Although a number of different approaches are used to allocate
shared or common costs, there is usually a predominant basis for each expense
category. Accordingly, research and development costs have been allocated from
SPS based predominately on dedicated spending. Research and development from
Motorola is first allocated to SPS and
   45
then allocated 20% to SCG as SCG is one of five divisions within SPS. Selling
and marketing expenses from SPS have been allocated 20% to SCG and general and
administrative expenses from Motorola and SPS have been allocated 20% to SCG.
Prior to changing to this allocation structure in July, 1997, allocations to SCG
for research and development, selling and marketing, and general and
administrative expenses were based on budgeted sales volume. This change had an
insignificant impact on the amount of the allocated costs.

    Total amounts allocated to SCG for research and development, selling and
marketing, and general and administrative expenses were as follows (in
millions):



                                                                JANUARY 1,
                                                                  1999
                                                                 THROUGH              YEAR ENDED
                                                                 AUGUST 3,            DECEMBER 31,
                                                                   1999                  1998
                                                                   ----                  ----
                                                                                
                     Research and development                     $ 13.3                $  33.1
                                                                  ======                =======
                     Selling and marketing                        $  2.2                $   3.7
                                                                  ======                =======
                     General and administrative                   $ 50.0                $ 115.2
                                                                  ======                =======


    These cost allocations are included in the accompanying combined statements
of revenues less direct and allocated expenses before taxes but are not
necessarily indicative of the costs that would be incurred by the Business on a
stand-alone basis.


    (d) INTEREST EXPENSE

    Motorola had net interest expense on a consolidated basis for all periods
presented. These amounts have been allocated to SPS and in turn to SCG in the
amount of approximately $7.5 million for the period from January 1, 1999 through
August 3, 1999 and $18.0 million for the year ended December 31, 1998, primarily
on the basis of net assets. SCG management believes this allocation is
reasonable, but it is not necessarily indicative of the cost that would have
been incurred if the Business had been operated on a stand-alone basis.

    (e) CURRENCIES AND FOREIGN CURRENCY INSTRUMENTS

    SCG's functional currency for all foreign operations is the U.S. dollar,
except for Japan and Europe which is the local currency. Accordingly, the net
effect of gains and losses from translation of foreign currency financial
statements into U.S. dollars is included in current operations. The net
translation gains and losses for Japan and Europe are not significant and are
included as a component of business equity. Gains and losses resulting from
foreign currency transactions are included in current operations and were not
significant for 1998 or the period from January 1, 1999 through August 3, 1999.

    (f) USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS

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

 (3) EMPLOYEE BENEFIT PLANS

    Employees of SCG participate in several Motorola retirement, employee
benefit, and incentive plans. These include (1) a profit sharing plan, (2) a
stock bonus plan, (3) a salary deferral 401(k) plan and (4) pension and
healthcare benefit plans. Motorola also has a stock option plan under which key
employees of SCG may be granted nonqualified or incentive stock options to
purchase shares of Motorola common stock. Certain key employees and certain
management of SCG also participate in various incentive arrangements based on
individual performance and Motorola/SPS/SCG profitability. The costs of these
programs were allocated from Motorola to SPS and then to SCG on the basis of
payroll costs and headcount and are not necessarily indicative of the costs that
would be incurred on a stand-alone basis.

    SCG employees in foreign countries participate in a retirement plan within
the country. In each case, the plan meets local and legal requirements of that
particular country and is based on defined years of service. Each country's plan
is unfunded and is accrued based on actuarially determined amounts.

(4) CONTINGENCIES

    Motorola is currently a defendant in certain legal actions relating to SCG.
In the opinion of management, the outcome of such litigation will not have a
material adverse effect on the business equity, operations or liquidity of SCG.

    Motorola is also involved in certain administrative and judicial proceedings
related to certain environmental matters at SCG locations. Based on information
currently available, management believes that the costs of these matters are not
likely to have a material adverse effect on business equity, operations or
liquidity of SCG.



                                                                           48/49


   46
(5) BUSINESS EQUITY

    Business equity represents Motorola's ownership interest in the recorded net
assets of SCG. All cash transactions, accounts receivable, accounts payable in
the United States, other allocations and intercompany transactions are reflected
in this amount. A summary of activity is as follows (in millions):




                                                                           JANUARY 1,
                                                                              1999
                                                                             THROUGH
                                                                            AUGUST 3,               YEAR ENDED
                                                                              1999               DECEMBER 31, 1998
                                                                           ----------            -----------------
                                                                                     (IN MILLIONS)
                                                                                           
       Balance at beginning of period                                        $ 681.0                 $ 866.4
       Revenues less direct and allocated expenses before taxes                104.8                  (136.3)
       Net intercompany activity                                               (83.9)                  (49.1)
                                                                             -------                 -------
       Balance at end of period                                              $ 701.9                 $ 681.0
                                                                             =======                 =======


(6) INDUSTRY AND GEOGRAPHIC INFORMATION

    The Business operates in one industry segment and is engaged in the design,
development, manufacture and marketing of a wide variety of semiconductor
products for the semiconductor industry and original equipment manufacturers.
SCG operates in various geographic locations. In the information that follows,
sales include local sales and exports made by operations within each area. To
control costs, a substantial portion of SCG's products are transported between
various SCG and SPS facilities in the process of being manufactured and sold.
Accordingly, it is not meaningful to present interlocation transfers between SCG
facilities on a stand alone basis. Sales to unaffiliated customers have little
correlation with the location of manufacture. It is, therefore, not meaningful
to present operating profit by geographical location.

    SCG conducts a substantial portion of its operations outside of the United
States and is subject to risks associated with non-U.S. operations, such as
political risks, currency controls and fluctuations, tariffs, import controls
and air transportation.

    Sales to unaffiliated customers by geographic location is summarized as
follows (in millions):



                                                                           JANUARY 1,
                                                                              1999
                                                                             THROUGH                  YEAR ENDED
                                                                            AUGUST 3,                DECEMBER 31,
                                                                              1999                       1998
                                                                           ----------                    ----
                                                                                               
                          United States                                      $ 465.0                  $  798.7
                          Germany                                               61.2                     108.0
                          Hong Kong                                             78.0                     107.4
                          Japan                                                 76.7                     127.4
                          Singapore                                             75.1                      98.2
                          Taiwan                                                33.9                      71.0
                          Other foreign countries                              196.5                     346.9
                                                                             -------                  --------
                               Total                                         $ 986.4                  $1,657.6
                                                                             =======                  ========


    As discussed in Note 2, sales to other sectors of Motorola are treated as
sales to unaffiliated customers.

(7) SUPPLEMENTAL CASH FLOW INFORMATION

    As described in Note 1, Motorola's cash management system is not designed to
track centralized cash and related financing transactions to the specific cash
requirements of the Business. In addition, SPS's transaction systems are not
designed to track receivables and certain liabilities and cash receipts and
payments on a business specific basis. Given these constraints, the following
data are presented to facilitate analysis of key components of cash flow
activity (in millions):




                                                                           JANUARY 1,
                                                                              1999
                                                                             THROUGH                  YEAR ENDED
                                                                            AUGUST 3,                DECEMBER 31,
                                                                              1999                       1998
                                                                           ----------                    ----
                                                                                              
                    Operating activities:
                      Revenues less direct and allocated expenses before
                    taxes                                                    $ 104.8                  $(136.3)




                                                                                                
                      Depreciation                                              77.4                    133.9
                      Impairment write down on property, plant and               --                      53.9
                    equipment
                      (Increase) decrease in inventories                       (27.5)                    30.4
                      Decrease in other current assets                           2.2                     (4.4)
                      Increase in other assets                                 (12.2)                     0.7
                      Increase (decrease) in accounts payable and
                    accrued expenses                                           (23.6)                    84.4
                      Increase (decrease) in non-current liabilities             2.4                      6.4
                                                                             -------                  -------
                    Cash flow from operating activities, excluding
                    Motorola financing and taxes                               123.5                    169.0
                    Investing activities:
                      Capital expenditures, net of transfers                   (39.6)                  (119.9)
                                                                             -------                  -------
                         Net financing provided to Motorola*                 $  83.9                  $  49.1
                                                                             =======                  =======


- ----------

*   The difference between cash flow from operating activities and investing
    activities does not necessarily represent the cash flows of the Business, or
    the timing of such cash flows, had it operated on a stand-alone basis.

(8) RESTRUCTURING AND OTHER CHARGES

    In June 1998, Motorola recorded a charge to cover restructuring costs
related to the consolidation of manufacturing operations, the exit of
non-strategic or poorly performing businesses and a reduction in worldwide
employment by 20,000 employees. Asset impairment and other charges were also
recorded for the writedown of assets which had become impaired as a result of
current business conditions or business portfolio decisions. Motorola recorded
its charge in the following restructuring categories:

   CONSOLIDATION OF MANUFACTURING OPERATIONS

    Consolidation of manufacturing operations relates to the closing of
production and distribution facilities and selling or disposing of the machinery
and equipment that was no longer needed and, in some cases, scrapping excess
assets that had no net realizable value. The buildings associated with these
production facilities, in many cases were sold to outside parties. Also included
in this restructuring category were costs
   47
related to shutting down or reducing the capacity of certain production lines.
In most cases, older facilities with older technologies or non-strategic
products were closed. Machinery and equipment write downs related to equipment
that would no longer be utilized comprised the majority of these costs. These
assets have been deemed to be held for use until such time as they are removed
from service and, therefore, no longer utilized in manufacturing products. An
assessment was made as to whether or not there was an asset impairment related
to the valuation of these assets in determining what the amount of the write
down included in the restructuring charge should be for this machinery and
equipment. This assessment utilized the anticipated future undiscounted cash
flows generated by the equipment as well as its ultimate value upon disposition.

    The charges in this restructuring category do not include any costs related
to the abandonment or sub-lease of facilities, moving expenses, inventory
disposals or write downs, or litigation or environmental obligations.

    As part of the consolidation of manufacturing operations, certain SPS
facilities in North Carolina, California, Arizona and the Philippines are being
closed as planned. SPS is consolidating its production facilities into fewer
integrated factories to achieve economies of scale and improved efficiencies and
to capitalize on new technologies that should reduce operating costs.

   BUSINESS EXITS

    Business exit costs include costs associated with shutting down businesses
that did not fit with Motorola's new strategy. In many cases, these businesses
used older technologies that produced non-strategic products. The long-term
growth and margins associated with these businesses were not in line with
Motorola's expectations given the level of investment and returns. Included in
these business exit costs were the costs of terminating technology agreements
and selling or liquidating interests in joint ventures that did not fit with the
new strategy of Motorola. Similar to consolidation of manufacturing operations,
the charges in this restructuring category did not include any costs related to
the abandonment or sublease of facilities, moving expenses, inventory disposals
or write downs, or litigation or environmental obligations.



   EMPLOYEE SEPARATIONS

    Employee separation costs represent the costs of involuntary severance
benefits for the 20,000 positions identified as subject to severance under the
restructuring plan and special voluntary termination benefits offered beginning
in the third quarter of 1998. The special voluntary termination benefits
provided for one week of pay for each year of service between years 1-10, two
weeks of pay for each year of service between years 11-19, and three weeks of
pay for each year of service for year 20 and greater. The majority of employees
who accepted special voluntary termination benefits did so by the end of the
year, although severance payments were not completed by that time. The majority
of the special voluntary termination benefits expired at the end of the
Company's fourth quarter of 1998.

    As of December 31, 1998, approximately 13,800 employees have separated from
Motorola through a combination of voluntary and involuntary severance programs.
Of the 13,800 separated employees, approximately 8,200 were direct employees and
5,600 were indirect employees. Direct employees are primarily non-supervisory
production employees, and indirect employees are primarily non-production
employees and production managers.

   ASSET IMPAIRMENTS AND OTHER CHARGES

    As a result of current and projected business conditions, Motorola wrote
down operating assets that became impaired. The majority of the assets written
down were used manufacturing equipment and machinery.

    The amount of impairment charge for the assets written down was based upon
an estimate of the future cash flows expected from the use of the assets, as
well as upon their eventual disposition. These undiscounted cash flows were then
compared to the net book value of the equipment, and impairment was determined
based on that comparison. Cash flows were determined at the facility level for
certain production facilities based upon anticipated sales value of the products
to be produced and the costs of producing the products at those facilities. In
cases in which sufficient cash flows were not going to be generated by the
equipment at those facilities, the assets were written down to their estimated
fair value. These estimated fair values were based upon what the assets could be
sold for in a transaction with an unrelated third party. Since the majority of
these assets were machinery and equipment, Motorola was able to utilize current
market prices for comparable equipment in the marketplace in assessing what
would be the fair value upon sale of the equipment.

    Building writedowns were based on marketability factors of the building in
the particular location.

    Assets held for use continue to be depreciated based on an evaluation of
their remaining useful lives and their ultimate values upon disposition. There
were no assets held for sale at December 31, 1998 nor were any impaired assets
disposed of prior to that date.

   SCG'S RESTRUCTURING CHARGE

    SCG's charges related to these actions were $189.8 million of which $53.9
million represented asset impairments charged directly against machinery and
equipment. SCG's employment reductions will total approximately 3,900 of which
approximately 3,000 (1,800 direct employees and 1,200 indirect employees) had
separated from SCG as of August 3, 1999.



                                                                           50/51


   48
    At December 31, 1998, $68.0 million of restructuring accruals remain
outstanding. The following table displays a rollforward to December 31, 1998 of
the accruals established during the second quarter of 1998:



                                                                                              ACCRUALS AT
                                                                      INITIAL     AMOUNTS     DECEMBER 31,
                                                                      CHARGES       USED         1998
                                                                      -------     -------     ------------
                                                                              (IN MILLIONS)
                                                                                     
                            Consolidation of manufacturing
                            operations                                $  13.2     $   --        $ 13.2
                            Business exits                               20.7         9.4         11.3
                            Employee separations                        102.0        58.5         43.5
                                                                      -------     -------       ------
                                 Total restructuring                    135.9        67.9         68.0
                                                                      -------     -------       ------
                            Asset impairments and other charges          53.9        53.9           --
                                                                      -------     -------       ------
                                 Total                                $ 189.8     $ 121.8       $ 68.0
                                                                      =======     =======       ======


     SCG's remaining accrual at December 31, 1998 of $13.2 million for the
consolidation of manufacturing operations represents the finalization of the
plant closings in Arizona and the Philippines. Within the business exits
category, the remaining accrual of $11.3 million at December 31, 1998 relates to
costs of exiting two unprofitable product lines. SCG's remaining accrual of
$43.5 million at December 31, 1998 for employee separations relates to the
completion of severance payments in Japan, Asia, the U.K. and Arizona.

    SCG's total amount used of $121.8 million through December 31, 1998 reflects
approximately $63.6 million in cash payments and $58.2 million in write-offs.
The remaining $68.0 million accrual balance at December 31, 1998 is expected to
be liquidated via cash payments.

    At August 3, 1999, $43.1 million of restructuring accruals remain
outstanding. The following table displays a rollforward from December 31, 1998
to August 3, 1999, of the accruals established during the second quarter of
1998:



                                         ACCRUALS AT      1999      ACCRUALS AT
                                         DECEMBER 31,    AMOUNTS      AUGUST 3,
                                             1998          USED          1999
                                         ------------    -------    -----------
                                                       (IN MILLIONS)
                                                           
Consolidation of manufacturing
operations                                  $13.2         $ 3.8         $ 9.4
Business exits                               11.3           6.4           4.9
Employee separations                         43.5          14.7          28.8
                                            -----         -----         -----
     Total restructuring                     68.0          24.9          43.1
                                            -----         -----         -----
Asset impairments and other charges            --            --            --
                                            -----         -----         -----
     Total                                  $68.0         $24.9         $43.1
                                            =====         =====         =====


    SCG's remaining accrual at August 3, 1999 of $9.4 million for the
consolidation of manufacturing operations represents the finalization of the
plant closings in Arizona and the Philippines. Within the business exits
category, the remaining accrual of $4.9 million at August 3, 1999 relates to
costs of exiting two unprofitable product lines. SCG's remaining accrual of
$28.8 million at August 3, 1999 for employee separations relates to the
completion of severance payments in Japan, Asia, the U.K. and Arizona. Motorola
retained the employee separation accrual of $28.8 million as of August 3, 1999,
to cover approximately 900 employees who will remain employees of, and be
released by Motorola.

    SCG's total 1999 amount used of $24.9 million through August 3, 1999
reflects cash payments. The remaining $43.1 million accrual balance at August 3,
1999 is expected to be liquidated via cash payments.

(9) INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

    SCG participates in joint ventures in China and Malaysia. The joint ventures
have been accounted for using the equity method. The investment in each joint
venture approximates the underlying equity interest of such joint venture.
Earnings from these joint ventures totaled $2.4 million for the period from
January 1, 1999 through August 3, 1999 and $5.7 million for the year ended
December 31, 1998.



                                                                        LESHAN-       SEMICONDUCTOR
                                                                        PHOENIX         MINIATURES
                                                                    SEMICONDUCTOR       PRODUCTS
                              JOINT VENTURE                              LTD.            MALAYSIA       TOTAL
              -------------------------------------------           --------------     ------------     -----
                                                                                      (IN MILLIONS)
                                                                                              
              Country Location                                            China         Malaysia
              SCG Ownership %(Direct)                                        55%             50%
              For the year ended December 31,
                1998
              Net sales                                                 $  21.5      $     56.7        $  78.2
              Gross profit                                              $   6.5      $     20.3        $  26.8
              Income from continuing operations                         $   5.6      $      5.6        $  11.2
              Net income                                                $   5.6      $      5.3        $  10.9
              For the period from January 1, 1999 through
                August 3, 1999
              Net sales                                                 $  15.0      $     40.7        $  55.7
              Gross profit                                              $   5.7      $      7.3        $  13.0
              Income from continuing operations                         $   4.4      $      1.4        $   5.8



                                                                                              
              Net income                                                $   4.4      $      1.4        $   5.8


(10) BUSINESS TRANSACTION

    On May 11, 1999, affiliates of the Texas Pacific Group entered into an
agreement with Motorola, providing for a Recapitalization of the Business and
certain related transactions, after which affiliates of Texas Pacific Group will
own approximately 91% and Motorola will own approximately 9% of the outstanding
voting stock of the Business. In addition, as part of these transactions, Texas
Pacific Group will receive 1,500 shares and Motorola will receive 590 shares of
mandatorily redeemable preferred stock of SCG Holding ("SCG Holding Preferred
Stock") and Motorola will receive $91 million of junior subordinated notes of
SCI LLC (the "Junior Subordinated Notes"). Cash payments to Motorola will be
financed through equity investments by affiliates of Texas Pacific Group,
borrowings under senior secured bank loan facilities and the issuance of senior
subordinated notes due 2009.

In connection with the Recapitalization and related transactions, it is
anticipated that certain wholly-owned domestic subsidiaries will be established
to serve as guarantors of the senior subordinated notes due 2009. Each guarantor
will jointly and severally, irrevocably and unconditionally guarantee the
obligations of the issuers under the notes. The net assets to be contributed to
these guarantor subsidiaries are expected to consist of SCG's equity interests
in its joint ventures in China, Malaysia and Eastern Europe, nominal interests
in certain foreign subsidiaries and a nominal amount of cash. The joint ventures
and foreign subsidiaries themselves are not expected to be guarantors of the
notes. The generated related earnings to be contributed to the guarantor
subsidiaries approximated $2.4 million for the period from January 1, 1999
through August 3, 1999 and $5.7 million for the year ended December 31, 1998.

   1
                                                                    EXHIBIT 21.1


                          ON SEMICONDUCTOR CORPORATION

                       List of Subsidiaries as of 12/31/00


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 Miniature Products (M) Sdn. Bhd. [JV] {Malaysia}
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}
    SCG (Japan) Ltd. {Japan}
    SCG Philippines, Incorporated {Philippines}
    SCG Asia Capital Pte. Ltd. {Malaysia}
    SCG Czech Design Center s.r.o. {Czech Republic}
    SCG India Private Ltd. {India}
    ON Semiconductor Hong Kong Design Limited {Hong Kong, 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}
                Semiconductor Components Industries Germany GmbH {Germany}
                SCG France SAS {France}
                SCGS AB {Sweden}[also d/b/a ON Semiconductor AB and
                                 Semiconductor Components Group Sweden AB]
                SCG Italy S.r.l. {Italy}
                Semiconductor Components Industries UK Limited {United Kingdom}
                    ON Semiconductor Limited {United Kingdom}


"{ }" Denotes jurisdiction

   1
[KPMG LETTERHEAD]

                        CONSENT OF INDEPENDENT AUDITORS


We consent to the incorporation by reference in the registration statements
(Nos. 333-34130 and 333-37638) filed on Form S-8 of our report dated
January 7, 2000 on the combined statements of revenues less direct and allocated
expenses before taxes of the Semiconductor Components Group of Motorola, Inc.
for the period from January 1, 1999 through August 3, 1999 and the year ended
December 31, 1998, which appears in the Annual Report to Stockholders, which is
incorporated by reference in this Annual Report on Form 10-K of On
Semiconductor Corporation for December 31, 2000.



                                           /s/ KPMG LLP


Phoenix, Arizona
March 29, 2001

   1
                                                                    Exhibit 23.2

                       CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-34130 and No. 333-37638) of ON Semiconductor
Corporation of our report dated February 1, 2001 relating to the financial
statements, which appears in the Annual Report to Stockholders, which is
incorporated in this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report dated February 1, 2001 relating to the
financial statement schedule, which appears in this Form 10-K.

/S/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP

Phoenix, Arizona
March 29, 2001

   1
                                                                    EXHIBIT 24.1
                                POWER OF ATTORNEY
                              (Curtis J. Crawford)


         I hereby appoint Steven P. Hanson, Dario Sacomani, and George H. Cave,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as Chairman of the Board of Directors of ON Semiconductor
Corporation and file with the Securities and Exchange Commission the
Corporation's Form 10-K annual report for 2000, and any amendments.

Dated:  March 13, 2001

                                                 /s/ Curtis J. Crawford
                                                     ---------------------------
                                                     CURTIS J. CRAWFORD
   2
                                POWER OF ATTORNEY
                                (David Bonderman)


         I hereby appoint Steven P. Hanson, Dario Sacomani, and George H. Cave,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of ON Semiconductor Corporation and file with the
Securities and Exchange Commission the Corporation's Form 10-K annual report for
2000, and any amendments.

Dated:  March 12, 2001

                                                 /s/ David Bonderman
                                                     ---------------------------
                                                     DAVID BONDERMAN
   3
                                POWER OF ATTORNEY
                               (Richard W. Boyce)


         I hereby appoint Steven P. Hanson, Dario Sacomani, and George H. Cave,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of ON Semiconductor Corporation and file with the
Securities and Exchange Commission the Corporation's Form 10-K annual report for
2000, and any amendments.

Dated:  March 13, 2001

                                                 /s/ Richard W. Boyce
                                                     ---------------------------
                                                     RICHARD W. BOYCE
   4
                                POWER OF ATTORNEY
                                (Justin T. Chang)


         I hereby appoint Steven P. Hanson, Dario Sacomani, and George H. Cave,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of ON Semiconductor Corporation and file with the
Securities and Exchange Commission the Corporation's Form 10-K annual report for
2000, and any amendments.

Dated:  March 13, 2001

                                                 /s/ Justin T. Chang
                                                     ---------------------------
                                                     JUSTIN T. CHANG
   5
                                POWER OF ATTORNEY
                               (William A. Franke)


         I hereby appoint Steven P. Hanson, Dario Sacomani, and George H. Cave,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of ON Semiconductor Corporation and file with the
Securities and Exchange Commission the Corporation's Form 10-K annual report for
2000, and any amendments.

Dated:  March 14, 2001

                                                 /s/ William A. Franke
                                                     ---------------------------
                                                     WILLIAM A. FRANKE
   6
                                POWER OF ATTORNEY
                             (Albert Hugo-Martinez)


         I hereby appoint Steven P. Hanson, Dario Sacomani, and George H. Cave,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of ON Semiconductor Corporation and file with the
Securities and Exchange Commission the Corporation's Form 10-K annual report for
2000, and any amendments.

Dated:  March 13, 2001

                                                 /s/ Albert Hugo-Martinez
                                                     ---------------------------
                                                     ALBERT HUGO-MARTINEZ
   7
                                POWER OF ATTORNEY
                                (John W. Marren)


         I hereby appoint Steven P. Hanson, Dario Sacomani, and George H. Cave,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of ON Semiconductor Corporation and file with the
Securities and Exchange Commission the Corporation's Form 10-K annual report for
2000, and any amendments.

Dated:  March 14, 2001

                                                 /s/ John W. Marren
                                                     ---------------------------
                                                     JOHN W. MARREN
   8
                                POWER OF ATTORNEY
                               (David M. Stanton)


         I hereby appoint Steven P. Hanson, Dario Sacomani, and George H. Cave,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of ON Semiconductor Corporation and file with the
Securities and Exchange Commission the Corporation's Form 10-K annual report for
2000, and any amendments.

Dated:  March 13, 2001

                                                 /s/ David M. Stanton
                                                     ---------------------------
                                                     DAVID M. STANTON
   9
                                POWER OF ATTORNEY
                               (Steven P. Hanson)


         I hereby appoint Michael Rohleder, Dario Sacomani, and George H. Cave,
and each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me on behalf of the registrant, ON Semiconductor Corporation, and/or as
a Director and/or Principal Executive Officer of ON Semiconductor Corporation
and file with the Securities and Exchange Commission the Corporation's Form 10-K
annual report for 2000, and any amendments.

Dated:  March 12, 2001

                                                 /s/ Steven P. Hanson
                                                     ---------------------------
                                                     STEVEN P. HANSON
   10
                                POWER OF ATTORNEY
                                (Dario Sacomani)


         I hereby appoint Steven P. Hanson, Michael Rohleder, and George H.
Cave, and each of them, my attorneys-in-fact, each with full power of
substitution, to sign for me on behalf of the registrant, ON Semiconductor
Corporation, and/or as a Principal Financial Officer and/or Principal Accounting
Officer of ON Semiconductor Corporation and file with the Securities and
Exchange Commission the Corporation's Form 10-K annual report for 2000, and any
amendments.

Dated:  March 13, 2001

                                                 /s/ Dario Sacomani
                                                     ---------------------------
                                                     DARIO SACOMANI



   11
                               POWER OF ATTORNEY
                               -----------------
                                (John J. Legere)

     I hereby appoint Steven P. Hanson, Dario Sacomani, and George H. Cave, and
each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of ON Semiconductor Corporation and file with the
Securities and Exchange Commission the Corporation's Form 10-K annual report for
2000, and any amendments.


Dated: March 16, 2001

                                   /s/ John J. Legere
                                   ------------------
                                   JOHN J. LEGERE
   12
                               POWER OF ATTORNEY
                              (Jerome N. Gregoire)


     I hereby appoint Steven P. Hanson, Dario Sacomani, and George H. Cave, and
each of them, my attorneys-in-fact, each with full power of substitution, to
sign for me as a Director of ON Semiconductor Corporation and file with the
Securities and Exchange Commission the Corporation's Form 10-K annual report for
2000, and any amendments.



Dated: March 27, 2001

                                                  /s/ Jerome N. Gregoire
                                                  ----------------------
                                                     JEROME N. GREGOIRE

   1
                                                                    EXHIBIT 99.1


                                  RISK FACTORS


    You should carefully consider the risks described below and other
information in the Form 10-K to which this document is an exhibit and subsequent
reports filed with the Securities and Exchange Commission before making any
decision to invest in our securities. If any of the following risks actually
occurs, our business, financial condition or operating results could be
materially adversely affected, the trading prices of our securities could
decline, and you could lose all or part of your investment.

1.       RISKS RELATED TO OUR BUSINESS

    CYCLICAL INDUSTRY AND GENERAL ECONOMY -- WITH INDUSTRY AND/OR ECONOMIC
    DOWNTURN OUR RESULTS OF OPERATIONS AND BUSINESS COULD BE ADVERSELY AFFECTED.

    The semiconductor industry is highly cyclical and is generally characterized
by average selling price fluctuations. Since the fourth quarter of 1997, we have
experienced significant declines in the pricing of our products as customers
reduced demand and manufacturers reduced prices to avoid a significant decline
in capacity utilization. We believe these pricing declines were due primarily to
the Asian economic crisis and excess semiconductor manufacturing capacity. In
the second half of 2000 there was a sharp slowdown in the economy that
negatively impacted the semiconductor industry and our business. In the fourth
quarter of 2000 we announced lower than expected revenue and earnings per share
for our business for the quarter due to lower customer demand and delayed or
cancelled customer orders. Entering 2001, we continue to experience slowing
demand for our products as customers continue to delay or cancel bookings in
order to manage their inventories in line with incoming business. With the
recent economic downturn, our customers are unable to provide us with much
visibility as to their expected requirements. We cannot assure you of a timely
recovery of either the semiconductor industry or general economy. We also cannot
assure you that either the semiconductor market or the general economy will not
experience subsequent, and possibly more severe and/or prolonged, downturns in
the future. Additionally, we cannot assure you that the present or any future
downturn in either the semiconductor market or the general economy will not have
a material adverse effect on our results of operations or business.

    COST REDUCTIONS AND RESTRUCTURING PROGRAM -- COMPLETION AND IMPACT OF
    REDUCTIONS AND PROGRAM COULD ADVERSELY IMPACT OUR BUSINESS.

    As a result of the recent semiconductor industry and economic downturns, we
are attempting to manage our resources prudently. We plan to continue to adjust
our cost structure to limit the impact of reduced revenue on profitability. Cost
reduction actions include accelerating our manufacturing moves into lower cost
regions, transitioning higher-cost external supply to internal manufacturing,
working with our material suppliers to further lower costs and aggressively
streamlining our overhead. As part of our cost reduction actions, we expect to
incur a restructuring charge in the first quarter of 2001 estimated to be
approximately $30-$40 million (before income taxes and cash portion). Our
ability to complete the implementation of these cost reductions and
restructuring program and the impact of these actions on our ability to
effectively compete are subject to risks and uncertainties. Because the actions
involve many aspects of our business, the reductions and program could adversely
impact productivity to an extent we have not anticipated. Even if we fully
execute and implement the actions and they generate the anticipated cost
savings, there may be other factors that adversely impact our profitably and
business.

    SHORT-TERM PERFORMANCE -- FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS
    MAY CAUSE OUR STOCK
   2
    PRICE TO DECLINE.

    Given the nature of the markets in which we participate, we cannot reliably
predict future revenues and profitability, and unexpected changes may cause us
to adjust our operations. A high proportion of our costs are fixed, due in part
to our significant sales, research and development and manufacturing costs.
Thus, small declines in revenue could disproportionately affect our operating
results in a quarter. Factors that could affect our quarterly operating results
include:

    -   the timing and size of orders from our customers, including
        cancellations and reschedulings;

    -   the timing of introduction of new products;

    -   the gain or loss of significant customers, including as a result of
        industry consolidation;

    -   seasonality in some of our target markets;

    -   changes in the mix of products we sell;

    -   changes in demand by the end users of our customers' products;

    -   market acceptance of our current and future products;

    -   variability of our customers' product life cycles;

    -   changes in manufacturing yields or other factors affecting the cost of
        goods sold, such as the cost and availability of raw materials and the
        extent of utilization of manufacturing capacity;

    -   changes in the prices of our products, which can be affected by the
        level of our customers' and end users' demand, technological change,
        product obsolescence or other factors; and

    -   cancellations, changes or delays of deliveries to us by our third-party
        manufacturers, including as a result of the availability of
        manufacturing capacity and the proposed terms of manufacturing
        arrangements.

    NEW PRODUCT DEVELOPMENT AND TECHNOLOGICAL CHANGE -- AN INABILITY TO
    INTRODUCE NEW PRODUCTS COULD ADVERSELY AFFECT US, AND CHANGING TECHNOLOGIES
    OR CONSUMPTION PATTERNS COULD REDUCE THE DEMAND FOR OUR PRODUCTS.

    Rapidly changing technologies and industry standards, along with frequent
new product introductions, characterize the industries that are currently the
primary end-users of semiconductors. As these industries evolve and introduce
new products, our success will depend on our ability to adapt to such changes in
a timely and cost-effective manner by designing, developing, manufacturing,
marketing and providing customer support for our own new products and
technologies.

    We cannot assure you that we will be able to identify changes in the product
markets of our customers and end-users and adapt to such changes in a timely and
cost-effective manner. Nor can we assure you that products or technologies that
may be developed in the future by our competitors and others will not render our
products or technologies obsolete or noncompetitive. A fundamental shift in
technologies or consumption patterns in our existing product markets or the
product markets of our customers or end users could have a material adverse
effect on our business or prospects.

    COMPETITION -- COMPETITION IN OUR INDUSTRY COULD PREVENT US FROM MAINTAINING
    OUR LEVEL OF REVENUES AND FROM RAISING PRICES TO REFLECT INCREASES IN COSTS.

    The semiconductor industry, particularly the market for semiconductor
components, is highly


                                      -2-
   3
competitive. Although only a few companies compete with us in all of our product
lines, we face significant competition within each of our product lines from
major international semiconductor companies as well as smaller companies focused
on specific market niches. Many of these competitors have substantially greater
financial and other resources than we have with which to pursue development,
engineering, manufacturing, marketing and distribution of their products and are
better able than we are to withstand adverse economic or market conditions. In
addition, companies not currently in direct competition with us may introduce
competing products in the future. Significant competitors in the broadband and
advanced logic market include AMCC, Micrel and Vitesse. Significant competitors
in the power management and standard analog market include Analog Devices,
Fairchild, Linear Technology, Maxim Integrated Products, National Semiconductor,
ST Microelectronics and Texas Instruments. Significant competitors in the
standard semiconductor product market include Fairchild, International
Rectifier, Philips, Rohm, ST Microelectronics, Texas Instruments and Toshiba.
The semiconductor components industry has also been undergoing significant
restructuring and consolidations that could adversely affect our
competitiveness.

    Because our components are often building block semiconductors that in some
cases can be integrated into more complex integrated circuits, we also face
competition from manufacturers of integrated circuits, application-specific
integrated circuits and fully customized integrated circuits, as well as
customers who develop their own integrated circuit products.

    We compete in different product lines to various degrees on the basis of
price, quality, technical performance, product features, product system
compatibility, customized design, availability, delivery timing and reliability
and sales and technical support. Gross margins in the industry vary by
geographic region depending on local demand for the products in which
semiconductors are used, such as personal computers, industrial and
telecommunications equipment, consumer electronics and automotive goods. In
regions where there is a strong demand for such products, price pressures may
also emerge as competitors attempt to gain a greater market share by lowering
prices. Our ability to compete successfully depends on elements both within and
outside of our control, including industry and general economic trends.

    MANUFACTURING RISKS -- UNLESS WE MAINTAIN MANUFACTURING EFFICIENCY AND AVOID
    MANUFACTURING DIFFICULTIES, OUR FUTURE PROFITABILITY COULD BE ADVERSELY
    AFFECTED.

    Manufacturing semiconductor components involves highly complex processes
that require advanced and costly equipment. We and our competitors continuously
modify these processes in an effort to improve yields and product performance.
Impurities or other difficulties in the manufacturing process can lower yields.
Our manufacturing efficiency will be an important factor in our future
profitability, and we cannot assure you that we will be able to maintain our
manufacturing efficiency or increase manufacturing efficiency to the same extent
as our competitors.

    From time to time we have experienced difficulty in beginning production at
new facilities or in effecting transitions to new manufacturing processes that
have caused us to suffer delays in product deliveries or reduced yields. We
cannot assure you that we will not experience manufacturing problems in
achieving acceptable yields or experience product delivery delays in the future
as a result of, among other things, capacity constraints, construction delays,
upgrading or expanding existing facilities or changing our process technologies,
any of which could result in a loss of future revenues. Our results of
operations could also be adversely affected by the increase in fixed costs and
operating expenses related to increases in production capacity if revenues do
not increase proportionately.

    LACK OF INDEPENDENT OPERATING HISTORY -- IF THE ASSUMPTIONS WE HAVE USED TO
    ESTIMATE FUTURE OPERATING RESULTS ARE INCORRECT OR IF WE ENCOUNTER
    UNEXPECTED COSTS OR OTHER PROBLEMS, OUR PROFITABILITY COULD BE ADVERSELY
    AFFECTED.

    Prior to our recapitalization, Motorola allocated to us, as one of several
divisions within its Semiconductor Products Sector, a percentage of the expenses
related to services Motorola provided to us and other divisions of its
Semiconductor Products Sector. During 1998, we incurred approximately $298
million in costs for general, administrative, selling and marketing expenses, of
which Motorola allocated to


                                      -3-
   4
us approximately $119 million for services shared with other divisions of its
Semiconductor Products Sector.

    As part of our recapitalization, we identified the specific services that we
believed were necessary to our business and that we would not be able initially
to provide ourselves. Motorola agreed to provide or arrange for the provision of
these services, including information technology, human resources, supply
management and finance services, for a limited period of time to facilitate our
transition to a stand-alone company. In addition, Motorola agreed to continue to
provide worldwide shipping and freight services to us for a period of up to
three years after our recapitalization using the cost allocation method Motorola
previously used with us. During 2000, we incurred expenses of approximately $96
million under these arrangements with Motorola.

    We believe that the scope of the agreements we entered into with Motorola as
part of our recapitalization and the time frames, pricing and other terms should
provide us sufficient time to effect our transition to a stand-alone company
with minimal disruption to our business, and that we will ultimately be able to
provide these services ourselves or identify third-party suppliers to provide
such services on terms not materially less favorable to us than the terms of our
arrangements with Motorola. We cannot, however, assure you that we have
correctly anticipated the required levels of services to be provided by Motorola
or that we will be able to obtain similar services on comparable terms upon
termination of our agreements with Motorola. Any material adverse change in
Motorola's ability to supply these services could have a material adverse effect
on our business or prospects.

    As part of Motorola, we had a number of formal and informal arrangements
with other divisions of Motorola's Semiconductor Products Sector that provided
us with equipment, finished products and other goods and services. Except as
provided for in the agreements between Motorola and us, future business dealings
between Motorola and us will be on an arm's length basis. There can be no
assurance that the arm's length nature of any future business relationship with
Motorola will be as beneficial for us as our past relationship to Motorola.

    DEPENDENCE ON MOTOROLA AND OTHER KEY CUSTOMERS FOR OUR PRODUCTS AND SERVICES
    -- IF WE WERE TO LOSE ONE OR MORE OF OUR LARGE CUSTOMERS, OUR REVENUES AND
    PROFITABILITY COULD BE ADVERSELY AFFECTED.

    Motorola has historically constituted our largest original equipment
manufacturer customer and accounted for approximately 7.2% of our net product
revenues in 2000. As a result of our recapitalization, we are no longer part of
Motorola, and our current and future product sales to Motorola and its
affiliates will be on an arm's length basis. We cannot assure you that we will
be able to maintain the level of historical product sales to Motorola or that we
will be able to sell any products to Motorola or its affiliates. Notwithstanding
our broad customer base, the loss of Motorola or any other sizable customer
could harm our results of operations.

    Product sales to our ten largest customers accounted in the aggregate for
approximately 52% of our net product revenues in 2000. Many of our customers
operate in cyclical industries, and in the past we have experienced significant
fluctuations from period to period in the volume of our products ordered. We
have no agreements with any of our customers that impose minimum or continuing
obligations to purchase our products. We cannot assure you that any of our
customers will not significantly reduce orders or seek price reductions in the
future or that the loss of one or more of such customers would not have a
material adverse effect on our business or our prospects.

    Prior to our recapitalization, we and other divisions of Motorola's
Semiconductor Products Sector provided manufacturing services to each other at
cost (as calculated for financial accounting purposes). We and Motorola agreed
to continue providing manufacturing services to each other for limited periods
of time following our recapitalization at fixed prices that are intended to
approximate each party's cost of providing the services. Motorola has no
purchase obligations after 2000, and we currently anticipate that any purchases
thereafter by Motorola will be insignificant. During 2000, Motorola purchased
manufacturing services from us of approximately $62 million. We could be
adversely affected if Motorola


                                      -4-
   5
does not purchase manufacturing services from us at the level we have
anticipated, cancels these arrangements or discontinues using our manufacturing
services after these agreements expire or if we are unable to find other uses
for, or dispose of, the manufacturing facilities we currently use to provide
these services in a manner that allows us to cover our fixed costs.

    DEPENDENCE ON MOTOROLA AND OTHER CONTRACTORS FOR MANUFACTURING SERVICES --
    THE LOSS OF ONE OR MORE OF OUR SOURCES FOR MANUFACTURING SERVICES, OR
    INCREASES IN THE PRICES OF SUCH SERVICES, COULD ADVERSELY AFFECT OUR
    OPERATIONS AND PROFITABILITY.

    Prior to our recapitalization, we and other divisions of Motorola's
Semiconductor Products Sector provided manufacturing services to each other at
cost (as calculated for financial accounting purposes). In 1997, 1998 and the
period from January 1, 1999 to August 3, 1999, the costs charged by other
divisions of Motorola's Semiconductor Products Sector to us for these services
amounted to $310.5 million, $266.8 million and $125.5 million, respectively.
During the period from August 4, 1999 through December 31, 1999 and in 2000, we
paid $101.3 million and $162.3 million, respectively, for manufacturing services
to Motorola under our transition agreements. Motorola manufactures our
emitter-coupled logic products, which are high margin products that accounted
for approximately 15.5% of our net product revenues in 2000. We currently have
no other manufacturing source for these emitter-coupled logic products. We
expect emitter-coupled logic products to remain one of our single most important
product families over the next several years.

    We and Motorola agreed to continue providing manufacturing services to each
other (including Motorola's manufacturing of our emitter-coupled logic products)
for limited periods of time following our recapitalization at fixed prices that
are intended to approximate each party's cost of providing these services.
Subject to our right to cancel upon six months' written notice, we have minimum
commitments to purchase manufacturing services from Motorola of approximately
$51 million, $41 million and $40 million in fiscal years 2001, 2002 and 2003,
respectively, and have no purchase obligations thereafter. We could be adversely
affected if Motorola is unable to provide these services on a timely basis or if
we are unable to relocate these manufacturing operations to our own facilities
or to other third-party manufacturers on cost-effective terms or make other
satisfactory arrangements prior to the time when these agreements expire.

    We also use other third-party contractors for manufacturing activities,
primarily for the assembly and testing of final goods. In 2000, these contract
manufacturers, including AIT, Batam, ASE and Phenitec, accounted for
approximately 31% of our cost of sales. Our agreements with these manufacturers
typically require us to forecast product needs and commit to purchase services
consistent with these forecasts, and in some cases require longer-term
commitments in the early stages of the relationship. Our operations could be
adversely affected if these contract relationships were disrupted or terminated,
the cost of such services increased significantly, the quality of the services
provided deteriorated or our forecasts proved to be materially incorrect.

    DEPENDENCE ON SUPPLY OF RAW MATERIALS -- THE LOSS OF OUR SOURCES OF RAW
    MATERIALS, OR INCREASES IN THE PRICES OF SUCH GOODS, COULD ADVERSELY AFFECT
    OUR OPERATIONS AND PROFITABILITY.

    Our results of operations could be adversely affected if we are unable to
obtain adequate supplies of raw materials in a timely manner or if the costs of
our raw materials increase significantly or their quality deteriorates. Our
manufacturing processes rely on many raw materials, including silicon wafers,
copper lead frames, mold compound, ceramic packages and various chemicals and
gases. We have no agreements with any of our suppliers that impose minimum or
continuing supply obligations, and we obtain our raw materials and supplies from
a large number of sources on a just-in-time basis. From time to time, suppliers
may extend lead times, limit supplies or increase prices due to capacity
constraints or other factors. Although we believe that our current supplies of
raw materials are adequate, shortages could occur in various essential materials
due to interruption of supply or increased demand in the industry.

    INABILITY TO IMPLEMENT OUR BUSINESS STRATEGY -- IF WE ARE UNABLE TO
    IMPLEMENT OUR BUSINESS STRATEGY, OUR REVENUES AND PROFITABILITY MAY BE
    ADVERSELY AFFECTED.


                                      -5-
   6
    Our future financial performance and success are largely dependent on our
ability to implement successfully our business strategy. Our present business
strategy includes, without limitation, plans to: (1) continue to execute on our
long-range growth plan in broadband and power management solutions while
appropriately managing short-term demand fluctuations, (2) spend 5% to 6% of our
sales revenue on R&D in the future; and (3) accelerate our manufacturing and
other moves into lower cost regions (e.g., China and Eastern Europe). We cannot
assure you that we will successfully implement the business strategy or that
implementing our strategy will sustain or improve our results of operations. In
particular, we cannot assure you that we will be able to build our position in
markets with high growth potential, increase our sales, increase our
manufacturing efficiency, optimize our manufacturing capacity, lower our
production costs, or make strategic acquisitions, alliances and dispositions.

    Our business strategy is based on our assumptions about the future demand
for our current products and the new products and applications we are developing
and on our continuing ability to produce our products profitably. Each of these
factors depends on our ability, among other things, to finance our operating and
product development activities, maintain high quality and efficient
manufacturing operations, relocate and close manufacturing facilities as part of
our ongoing cost restructuring with minimal disruption to our operations, access
quality raw materials and contract manufacturing services in a cost-effective
and timely manner, protect our intellectual property portfolio and attract and
retain highly-skilled technical, managerial, marketing and finance personnel.
Our strategy also depends on our ability to implement our transition to a
stand-alone company, which depends to a certain extent on Motorola's ability to
provide transition services to us for limited periods of time and on our ability
to provide or procure such services thereafter. Several of these and other
factors that could affect our ability to implement our business strategy, such
as risks associated with international operations, increased competition, legal
developments and general economic conditions, are beyond our control. In
addition, circumstances beyond our control and changes in our business or
industry may require us to change our business strategy.

    FUTURE ACQUISITIONS AND STRATEGIC ALLIANCES -- WE MAY ENGAGE IN ACQUISITIONS
    AND ALLIANCES THAT MAY HARM OUR OPERATING RESULTS, CAUSE US TO INCUR DEBT OR
    ASSUME CONTINGENT LIABILITIES OR DILUTE OUR STOCKHOLDERS.

    We acquired Cherry Semiconductor Corporation in April 2000, and we may in
the future acquire and form strategic alliances relating to other businesses,
products and technologies. Successful acquisitions and alliances in the
semiconductor industry are difficult to accomplish because they require, among
other things, efficient integration and aligning of product offerings and
manufacturing operations and coordination of sales and marketing and research
and development efforts. The difficulties of integration and alignment may be
increased by the necessity of coordinating geographically separated
organizations, the complexity of the technologies being integrated and aligned
and the necessity of integrating personnel with disparate business backgrounds
and combining different corporate cultures. The integration and alignment of
operations following an acquisition or alliance requires the dedication of
management resources that may distract attention from the day-to-day business,
and may disrupt key research and development, marketing or sales efforts. In
addition, we may issue equity securities to pay for any future acquisitions or
alliances, which could be dilutive to our existing stockholders. We may also
incur debt or assume contingent liabilities in connection with acquisitions and
alliances, which could harm our operating results. We financed our acquisition
of Cherry Semiconductor with cash on hand and additional borrowings under our
senior secured bank facilities. Without strategic acquisitions and alliances we
may have difficulty meeting future customer product and service requirements.

    RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS -- OUR INTERNATIONAL
    OPERATIONS SUBJECT US TO RISKS INHERENT IN DOING BUSINESS ON AN
    INTERNATIONAL LEVEL THAT COULD ADVERSELY IMPACT OUR RESULTS OF OPERATIONS.

    Approximately 46%, 33% and 21% of our net product revenues in 2000 were
derived from sales, directly or through distributors or electronic manufacturing
service providers, to end users in the Americas, the Asia/Pacific region and
Europe (including the Middle East), respectively. We maintain significant
operations in Guadalajara, Mexico; Seremban, Malaysia; Carmona, the Philippines;
Aizu, Japan; Leshan, China; Roznov, the Czech Republic; and Piestany, the Slovak
Republic. In addition, we rely on a number of


                                      -6-
   7
contract manufacturers (primarily for assembly and testing) whose operations are
primarily located in the Asia/Pacific region.

    We cannot assure you that we will be successful in overcoming the risks that
relate to or arise from operating in international markets. Risks inherent in
doing business on an international level include, among others, the following:

    -   economic and political instability;

    -   changes in regulatory requirements, tariffs, customs, duties and other
        trade barriers;

    -   transportation delays;

    -   power supply shortages and shutdowns;

    -   difficulties in staffing and managing foreign operations and other labor
        problems;

    -   currency convertibility and repatriation;

    -   taxation of our earnings and the earnings of our personnel; and

    -   other risks relating to the administration of or changes in, or new
        interpretations of, the laws, regulations and policies of the
        jurisdictions in which we conduct our business.

    Our activities outside the United States are subject to additional risks
associated with fluctuating currency values and exchange rates, hard currency
shortages and controls on currency exchange. Motorola historically engaged in
hedging activities to reduce the risk of adverse currency rate fluctuations
affecting its overall business, but as a stand-alone company we now bear the
risks and costs associated with any such hedging activities. Additionally, while
our sales are primarily denominated in U.S. dollars, worldwide semiconductor
pricing is influenced by currency rate fluctuations.

    DEPENDENCE ON HIGHLY SKILLED PERSONNEL -- IF WE FAIL TO ATTRACT AND RETAIN
    SKILLED PERSONNEL, OUR RESULTS OF OPERATIONS AND COMPETITIVE POSITION COULD
    DETERIORATE.

    Our success depends upon our ability to attract and retain highly-skilled
technical, managerial, marketing and finance personnel. The market for personnel
with such qualifications is highly competitive. In particular, analog component
designers are difficult to attract and retain, and the failure to attract and
retain analog component designers could compromise our ability to keep pace with
our competitors in the market for analog components. We cannot assure you that
we will be able to continue to attract and retain individuals with the
qualifications necessary to operate our company most effectively.

    DEPENDENCE ON INTELLECTUAL PROPERTY -- WE USE A SIGNIFICANT AMOUNT OF
    INTELLECTUAL PROPERTY IN OUR BUSINESS. SOME OF THAT INTELLECTUAL PROPERTY IS
    CURRENTLY THE SUBJECT OF DISPUTES WITH THIRD PARTIES, AND LITIGATION COULD
    ARISE IN THE FUTURE. IF WE ARE UNABLE TO PROTECT THE INTELLECTUAL PROPERTY
    WE USE, OUR BUSINESS MAY BE ADVERSELY AFFECTED.

    We rely on patents, trade secrets, trademarks, mask works and copyrights to
protect our products and technologies. Some of our products and technologies are
not covered by any patents or pending patent applications, and we cannot assure
you that:

    -   any of the more than approximately 740 U.S. and foreign patents and
        pending patent applications that Motorola has assigned, licensed or
        sublicensed to us in connection with our recapitalization will not lapse
        or be invalidated, circumvented, challenged or licensed to others;

    -   the license rights granted by Motorola in connection with our
        recapitalization will provide


                                      -7-
   8
        competitive advantages to us; or

    -   any of our pending or future patent applications will be issued or have
        the coverage originally sought.

    Moreover, we cannot assure you that:

    -   any of the trademarks, copyrights, trade secrets, know-how or mask works
        that Motorola has assigned, licensed or sublicensed to us in connection
        with our recapitalization will not lapse or be invalidated,
        circumvented, challenged or licensed to others; or

    -   any of our pending or future trademark, copyright, or mask work
        applications will be issued or have the coverage originally sought.

    Furthermore, we cannot assure you that our competitors or others will not
develop products or technologies that are similar or superior to our products or
technologies, duplicate our products or technologies or design around our
protected technologies. In addition, effective patent, trademark, copyright and
trade secret protection may be unavailable, limited or not applied for in the
United States and in foreign countries.

    Also, we may from time to time in the future be notified of claims that we
may be infringing third-party patents or other intellectual property rights.
Motorola has agreed to indemnify us for a limited period of time with respect to
some claims that our activities infringe on the intellectual property rights of
others. If necessary or desirable, we may seek licenses under such patents or
intellectual property rights. However, we cannot assure you that we will obtain
such licenses or that the terms of any offered licenses will be acceptable to
us. The failure to obtain a license from a third party for technologies we use
could cause us to incur substantial liabilities or to suspend the manufacture or
shipment of products or our use of processes requiring the technologies.
Litigation could cause us to incur significant expense, by adversely affecting
sales of the challenged product or technologies and diverting the efforts of our
technical and management personnel, whether or not such litigation is resolved
in our favor. In the event of an adverse outcome in any such litigation, we may
be required to:

    -   pay substantial damages;

    -   cease the manufacture, use, sale or importation of infringing products;

    -   expend significant resources to develop or acquire non-infringing
        technologies;

    -   discontinue the use of processes; or

    -   obtain licenses to the infringing technologies.

We cannot assure you that we would be successful in any such development or
acquisition or that any such licenses would be available to us on reasonable
terms. Any such development, acquisition or license could require the
expenditure of substantial time and other resources.

    We will also seek to protect our proprietary technologies, including
technologies that may not be patented or patentable, in part by confidentiality
agreements and, if applicable, inventors' rights agreements with our
collaborators, advisors, employees and consultants. We cannot assure you that
these agreements will not be breached, that we will have adequate remedies for
any breach or that persons or institutions will not assert rights to
intellectual property arising out of our research.


                                      -8-
   9
    ENVIRONMENTAL LIABILITIES; OTHER GOVERNMENTAL REGULATION -- REGULATORY
    MATTERS COULD ADVERSELY AFFECT OUR ABILITY TO CONDUCT OUR BUSINESS AND COULD
    REQUIRE EXPENDITURES THAT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
    RESULTS OF OPERATIONS OR FINANCIAL CONDITION.

    Our manufacturing operations are subject to various environmental laws and
regulations relating to the management, disposal and remediation of hazardous
substances and the emission and discharge of pollutants into the air and water.
Our operations are also subject to laws and regulations relating to workplace
safety and worker health which, among other things, regulate employee exposure
to hazardous substances. Motorola has agreed to indemnify us for environmental
and health and safety liabilities related to the conduct or operations of our
business or Motorola's ownership, occupancy or use of real property occurring
prior to our recapitalization. We cannot assure you that such indemnification
arrangements will cover all material environmental costs relating to pre-closing
matters. Moreover, the nature of our operations exposes us to the continuing
risk of environmental and health and safety liabilities related to events or
activities occurring after our recapitalization.

    We believe that the future cost of compliance with existing environmental
and health and safety laws and regulations (and liability for currently known
environmental conditions) will not have a material adverse effect on our
business or prospects. However, we cannot predict:

    -   changes in environmental or health and safety laws or regulations;

    -   the manner in which environmental or health and safety laws or
        regulations will be enforced, administered or interpreted; or

    -   the cost of compliance with future environmental or health and safety
        laws or regulations or the costs associated with any future
        environmental claims, including the cost of clean-up of currently
        unknown environmental conditions.

2.       RISKS RELATED TO OUR CAPITAL STRUCTURE

    SUBSTANTIAL LEVERAGE -- OUR SUBSTANTIAL LEVERAGE COULD ADVERSELY AFFECT OUR
    ABILITY TO OPERATE OUR BUSINESS.

    We are highly leveraged and have significant debt service obligations. As of
December 31, 2000, we would had total long-term indebtedness of approximately
$1,252.7 million (excluding unused commitments), stockholders' equity of
approximately $337.7 million and annual interest expense of approximately $131.2
million. We may incur additional debt in the future. Our substantial
indebtedness could have important consequences to you, including the risks that:

    -   we will be required to use a substantial portion of our cash flow from
        operations to pay principal and interest on our indebtedness, thereby
        reducing the availability of our cash flow to fund working capital,
        capital expenditures, product development efforts and strategic
        acquisitions;

    -   our interest expense could increase if interest rates in general
        increase because a substantial portion of our debt will bear interest
        rates based on market rates;

    -   our level of indebtedness will increase our vulnerability to general
        economic downturns and adverse industry conditions;

    -   our debt service obligations could limit our flexibility in planning
        for, or reacting to, changes in our business and the semiconductor
        components industry;

    -   our indebtedness may restrict us from raising additional financing on
        satisfactory terms to fund working capital, capital expenditures,
        product development efforts and strategic acquisitions; and


                                      -9-
   10
    -   our substantial leverage could place us at a competitive disadvantage
        compared to our competitors who have less debt.

    RESTRICTIVE COVENANTS IN OUR DEBT INSTRUMENTS -- THE AGREEMENTS GOVERNING
    OUR INDEBTEDNESS MAY LIMIT OUR ABILITY TO FINANCE FUTURE OPERATIONS OR
    CAPITAL NEEDS OR ENGAGE IN OTHER BUSINESS ACTIVITIES THAT MAY BE IN OUR
    INTEREST.

    Our debt instruments contain various provisions that limit our management's
discretion in the operation of our business by restricting our ability to:

    -   incur additional indebtedness;

    -   pay dividends and make other distributions;

    -   prepay subordinated debt;

    -   make restricted payments;

    -   enter into sale and leaseback transactions;

    -   create liens;

    -   sell and otherwise dispose of assets; and

    -   enter into transactions with affiliates.

    These restrictions may adversely affect our ability to finance our future
operations or capital needs or engage in other business activities that may be
in our interest. In addition, our senior bank facilities require us to maintain
compliance with specified financial ratios. Our ability to comply with these
ratios may be affected by events beyond our control. A breach of any of the
provisions of our debt instruments could result in a default under our
indebtedness, which would allow our lenders to declare all outstanding amounts
due and payable. In such an event, our assets might not be sufficient to repay
those amounts.

3.       RISKS RELATED TO THE SECURITIES MARKETS AND OWNERSHIP OF OUR COMMON
STOCK

    STOCK PRICE FLUCTUATIONS -- OUR STOCK PRICE MAY BE VOLATILE, WHICH COULD
    RESULT IN SUBSTANTIAL LOSSES FOR INVESTORS IN OUR SECURITIES.

    The stock markets in general, and the markets for high technology stocks in
particular, have experienced extreme volatility that has often been unrelated to
the operating performance of particular companies. These broad market
fluctuations may adversely affect the trading price of our common stock.

    The market price of the common stock may also fluctuate significantly in
response to the following factors, some of which are beyond our control:

    -   variations in our quarterly operating results;

    -   changes in securities analysts' estimates of our financial performance;

    -   changes in market valuations of similar companies;

    -   announcements by us or our competitors of significant contracts,
        acquisitions, strategic partnerships, joint ventures, capital
        commitments, new products or product enhancements;


                                      -10-
   11
    -   loss of a major customer or failure to complete significant
        transactions; and

    -   additions or departures of key personnel.

    SHARES ELIGIBLE FOR FUTURE SALE -- OUR STOCK PRICE COULD BE AFFECTED BECAUSE
    A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK WILL BE AVAILABLE FOR
    SALE IN THE FUTURE.

    Sales in the public market of a substantial number of shares of common stock
or other equity or equity-related securities could depress the market price of
the common stock and could impair our ability to raise capital through the sale
of additional equity securities. A substantial number of shares of our common
stock will be available for future sale.

    CONTROLLING STOCKHOLDER -- ONE OF OUR PRINCIPAL STOCKHOLDERS CONTROLS OUR
    COMPANY, WHICH WILL LIMIT THE ABILITY OF OUR OTHER STOCKHOLDERS TO INFLUENCE
    THE OUTCOME OF DIRECTOR ELECTIONS AND OTHER MATTERS SUBMITTED FOR A VOTE OF
    OUR STOCKHOLDERS.

    An affiliate of Texas Pacific Group owns 124,999,433 shares of our common
stock, each share of which entitles its holder to one vote on stockholder
actions, representing approximately 73% of the overall voting power of our
outstanding stock, and will be able to:

    -   elect all of our directors and, as a result, control matters requiring
        board approval;

    -   control matters submitted to a stockholder vote, including mergers and
        consolidations with third parties and the sale of all or substantially
        all of our assets; and

    -   otherwise control or influence our business direction and policies.

In addition, our certificate of incorporation provides that the provisions of
Section 203 of the Delaware General Corporation Law, which relate to business
combinations with interested stockholders, do not apply to us.

    ANTI-TAKEOVER PROVISIONS -- PROVISIONS IN OUR CHARTER DOCUMENTS MAY DELAY OR
    PREVENT ACQUISITION OF OUR COMPANY, WHICH COULD DECREASE THE VALUE OF OUR
    STOCK.

    Our certificate of incorporation and bylaws contain provisions that could
make it harder for a third party to acquire us without the consent of our board
of directors. These provisions:

    -   create a board of directors with staggered terms;

    -   permit only our board of directors or the chairman on our board of
        directors to call special meetings of stockholders;

    -   establish advance notice requirements for submitting nominations for
        election to the board of directors and for proposing matters that can be
        acted upon by stockholders at a meeting;

    -   prohibit stockholder action by written consent;

    -   authorize the issuance of "blank check" preferred stock, which is
        preferred stock with voting or other rights or preferences that could
        impede a takeover attempt and that our board of directors can create and
        issue without prior stockholder approval; and

    -   require the approval by holders of at least 66 2/3% of our outstanding
        common stock to amend any of these provisions in our certificate of
        incorporation or bylaws.


                                      -11-
   12
Although we believe these provisions make a higher third-party bid more likely
by requiring potential acquirors to negotiate with our board of directors, these
provisions apply even if an initial offer may be considered beneficial by some
stockholders.



                                      -12-