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EXHIBIT 4.4
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (the "Agreement"), dated as of
September 7, 2001, by and between TPG ON Holdings LLC (the "Investor") and ON
Semiconductor Corporation (the "Company"), for the benefit of the Senior
Creditors herein described.
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Agreement (as defined below),
the Senior Creditors (as defined below) have extended credit to Semiconductor
Components Industries, LLC, a subsidiary of the Company, and, pursuant to the
terms of and subject to the conditions in the Credit Agreement Amendment (as
defined below), the Senior Creditors have amended and waived certain provisions
of the Credit Agreement; and
WHEREAS, the Credit Agreement (as so amended) provides that an
Event of Default under the Credit Agreement shall occur if the TPG Equity
Purchase (as defined in the Credit Agreement) shall not have been consummated on
or prior to September 7, 2001; and
WHEREAS, to effect the TPG Equity Purchase, the Company and
the Investor have entered into the Investment Agreement (as defined below),
providing for the purchase by the Investor of 10,000 shares of Series A
Preferred Stock from the Company; and
WHEREAS, in order for such purchase of Series A Preferred
Stock to constitute the TPG Equity Purchase for purposes of the Credit
Agreement, the Company and the Investor are required to enter into this
Agreement in order to subordinate, in the manner set forth herein, all payments
under the Series A Preferred Stock to the rights of the Senior Creditors; and
WHEREAS, it is a condition precedent to the obligations of
both the Investor and the Company to effect the purchase and sale of the Series
A Preferred Stock under the Investment Agreement that this Agreement be in full
force and effect;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
SECTION 1. Definitions. As used in this Agreement, the
following terms shall have the meanings set forth below:
"Affiliate" has the meaning set forth in Rule 12b-2 under the
Exchange Act as in effect on the date hereof. Notwithstanding the foregoing, for
all purposes hereof, neither the Company nor any of its Subsidiaries shall be
deemed a TPG Person or an "Affiliate" of any TPG Person.
"Commitments" has the meaning set forth in the Credit
Agreement.
"Credit Agreement" means the Credit Agreement, dated as of
August 4, 1999, as amended and restated as of April 3, 2000, as amended by the
Credit Agreement Amendment and
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as further amended thereafter, among the Company, Semiconductor Components
Industries, LLC, the banks and other financial institutions named therein, The
Chase Manhattan Bank, as administrative agent, collateral agent and syndication
agent and Credit Lyonnais New York Branch, DLJ Capital Funding, Inc. and Xxxxxx
Commercial Paper, Inc., as co-documentation agents, together with any Loan
Document referred to therein entered into under or in connection with the Credit
Agreement, in each case, as the same may be amended, restated, supplemented, or
otherwise modified from time to time, in whole or in part, together with any
Loan Document referred to therein.
"Credit Agreement Amendment" means the Waiver, Consent and
Amendment dated as of August 13, 2001 to the Credit Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder from time to time.
"Insolvency Proceeding" means any bankruptcy, reorganization,
arrangement, composition, insolvency, liquidation or other proceeding for relief
by or against the Company or any Affiliate of the Company under any Federal or
state bankruptcy or similar law relating to the relief of debtors or the
readjustment of indebtedness.
"Investment Agreement" means the Investment Agreement, dated
as of September 7, 2001, by and between the Company and the Investor, as
amended, supplemented or otherwise modified from time to time.
"Person" means any individual, corporation, company,
association, partnership, limited liability company, joint venture, trust,
unincorporated organization, or governmental entity.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of September 7, 2001, by and between the Company and the
Investor, as amended, supplemented or otherwise modified from time to time.
"Senior Creditor" means each Person entitled to the benefits
of any of the Senior Obligations as described in the definition of Senior
Obligations below.
"Senior Obligations" means all liabilities or obligations of
any type or nature, whether for principal, interest and fees (including, without
limitation, interest accruing after the initiation of any Insolvency Proceeding)
charges and expenses, and without limitation as to amount or terms thereof,
presently owing or hereafter created or due from the Company and/or any of its
Affiliates, and their respective successors and assigns, to the Lenders (as
defined in the Credit Agreement), and their respective successors, assigns and
participants, arising under or incidental to the Credit Agreement.
"Series A Certificate of Designations" means the certificate
of designations of Series A Cumulative Convertible Preferred Stock of the
Company.
"Series A Preferred Stock" means the Company's Series A
Cumulative Convertible Preferred Stock, par value $0.01 per share.
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"Subordinated Obligations" means the rights of any holder of
Series A Preferred Stock to receive from the Company cash payments in respect of
the Series A Preferred Stock.
"Subsidiary" means, as to any Person, any other Person of
which more than 50% of the shares of the voting stock or other voting interests
are owned or controlled, or the ability to select or elect more than 50% of the
directors or similar managers is held, directly or indirectly, by such first
Person or one or more of its Subsidiaries or by such first Person and one or
more of its Subsidiaries.
"TPG Person" means the Investor, and each Person controlled
by, controlling or under common control with the Investor, other than the
Company and its Subsidiaries.
SECTION 2. General Subordination. The Company and the Investor
acknowledge and agree that the Subordinated Obligations are and shall be
subordinate and subject in right of payment to the prior indefeasible payment in
full in cash of the Senior Obligations and the termination of the Commitments to
the extent, and in the manner, set forth herein. The Company agrees that it
shall not, and shall not cause, permit or suffer any Affiliate of the Company
to, impair in any manner the rights of the Senior Creditors to enforce or
otherwise receive the benefits of the subordination set forth in this Agreement.
SECTION 3. Payment Blockage.
(a) Unless the Senior Obligations shall have been indefeasibly
paid in full in cash and the Commitments shall have been terminated, and except
as otherwise provided in subsection (b) below, no cash dividend or redemption
payment shall be made by the Company or any Affiliate of the Company, or
received or accepted by the Investor, in respect of the Subordinated
Obligations.
(b) Notwithstanding the provisions of subsection (a) above,
and in accordance with the Series A Certificate of Designations, in the event
that there shall have occurred a Change of Control (as defined in the Series A
Certificate of Designations), the Company shall pay all amounts outstanding
under the Credit Agreement and other indebtedness specified in the Series A
Certificate of Designations to the extent necessary, but only if permitted under
the relevant document, in order to permit the payment of the Change of Control
Price (as defined in the Series A Certificate of Designations) or, if such
payment is not so permitted under any such document, the Company shall exercise
any right of defeasance it has under such document (provided that all conditions
precedent to the exercise of such right of defeasance have been satisfied, which
conditions the Company shall use its reasonable best efforts to satisfy) to the
extent necessary in order to permit the payment of the Change of Control Price;
provided, that the Company shall not be required to make such payments or
exercise such right of defeasance under the Credit Agreement or other documents
evidencing such indebtedness specified in the Series A Certificate of
Designations if the Company has received all necessary waivers and consents from
the applicable lenders or holders of notes permitting the Company to pay the
Change of Control Price pursuant to the Series A Certificate of Designations.
SECTION 4. Distributions. In the event of any distribution,
division or application, partial or complete, voluntary or involuntary, by
operation of law or otherwise, of all
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or any part of the assets or property of the Company or any Affiliate of the
Company or the proceeds thereof, to creditors of the Company or any Affiliate of
the Company, or upon any repayment of indebtedness of the Company or any
Affiliate of the Company, by reason of (a) the liquidation, dissolution or other
winding up, partial or complete, of the Company or any Affiliate of the Company
or its or their respective business, or (b) any Insolvency Proceeding, then, and
in any such event, if the Senior Obligations have not been paid in full, any
payment or distribution of any kind or character, whether in cash, securities or
other property which but for this Agreement would be payable or deliverable to
the Investor on account of the Subordinated Obligations (whether or not such
payment or distribution shall have been made in accordance with any plan
approved in an Insolvency Proceeding), shall instead be paid or delivered
directly to the Senior Creditors for application to the Senior Obligations,
whether then due or not due, until the Senior Obligations shall have been
indefeasibly paid in full in cash and the Commitments shall have been
terminated; provided that, for purposes of determining whether the Senior
Obligations have been indefeasibly paid in full in cash, the Senior Creditors
shall be required to use reasonable best efforts to sell all securities and
other property received by virtue of this provision for cash at fair market
value.
SECTION 5. Distributions to be Held in Trust. Unless and until
the Senior Obligations shall have been indefeasibly paid in full in cash and the
Commitments shall have been terminated, if any payment, distribution of security
or proceeds of any security are received by the Investor upon or in respect of
the Subordinated Obligations which are not permitted to be paid in accordance
with the provisions of this Agreement, the Investor will forthwith deliver the
same to the Senior Creditors in the form received (except for the endorsement or
assignment of the Investor where necessary), for application to the Senior
Obligations, whether then due or not due, and, until so delivered, the same
shall be held in trust by the Investor as property of the Senior Creditors. In
the event of the failure of the Investor to make any such endorsement or
assignment, the Senior Creditors or their agent, or any of its or their officers
or employees, are hereby irrevocably authorized to make the same.
SECTION 6. Assignment of Subordinated Obligations. The
Investor agrees that it will not transfer, assign, pledge or encumber the
Subordinated Obligations or any part thereof or any instrument evidencing the
same unless the respective instrument of assignment specifically provides that
the assignee takes such Subordinated Obligations (or part thereof) subject to
the provisions of this Agreement and such assignee executes and delivers to or
for the benefit of the Senior Creditors an instrument in form and substance
reasonably satisfactory to the Administrative Agent under the Credit Agreement
pursuant to which such assignee agrees to be bound by the provisions of this
Agreement as though named herein as the Investor.
SECTION 7. Continuing Subordination. The subordination
effected by this Agreement is a continuing subordination, and the Investor
hereby agrees that, at any time and from time to time and without notice to it:
(a) the time, place or manner for payment or performance by the
Company or any Affiliate of the Company of, or compliance with any of
its agreements or instruments evidencing, the Senior Obligations may be
extended or waived by the Senior Creditors;
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(b) any act permitted to be taken by the Company, any Affiliate
of the Company or any Senior Creditor under the agreements or
instruments evidencing the Senior Obligations may be so taken;
(c) any of the agreements or instruments evidencing the Senior
Obligations may be amended or modified in any manner, including for the
purpose of adding any provisions thereto, increasing the amount of, or
changing the terms of, the Senior Obligations, adding or releasing any
security or collateral therefor, or changing in any manner the
covenants or rights of the Senior Creditors or the Company or any
Affiliate of the Company or any other Person thereunder;
(d) the maturity of any of the Senior Obligations may be
accelerated;
(e) any or all collateral security for the Senior Obligations
may be exchanged, sold, surrendered, released or otherwise dealt with;
(f) the Company or any Affiliate of the Company, any
co-borrower with the Company or any Affiliate of the Company, any
guarantor or any other Person may be released of its obligations in
respect of the Senior Obligations, whether or not in connection with
any Insolvency Proceeding; and
(g) any other event which could, but for this provision, be
used as a defense to the obligations of the Investor hereunder may
occur;
all without impairing or affecting the obligations of the Investor or the rights
of the Senior Creditors hereunder. The rights and remedies of the Senior
Creditors hereunder shall be irrevocable and shall remain in full force and
effect notwithstanding (i) any lack of validity or enforceability of the Senior
Obligations, (ii) any circumstance which might constitute a defense available
to, or the discharge of, the Company in respect of the Senior Obligations, or
(iii) the occurrence of any of the circumstances described in clauses (a)
through (g) of the preceding sentence. This Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any payment in
respect of the Senior Obligations is rescinded or must otherwise be returned by
any Senior Creditor in any Insolvency Proceeding, all as though such payment had
not been made.
SECTION 8. Subrogation. No payment or distribution to the
Senior Creditors pursuant to the provisions of this Agreement shall entitle the
Investor to exercise any rights of subrogation in respect thereof (and any such
rights existing under law are hereby waived) until such time as the Senior
Obligations have been indefeasibly paid in full in cash and the Commitments
shall have been terminated. After (a) the Senior Obligations have been
indefeasibly paid in full in cash and (b) the Commitments have been terminated,
and until the Subordinated Obligations are paid in full, the Investor shall be
subrogated to the rights of the Senior Creditors to receive distributions
applicable to the Senior Obligations to the extent that distributions otherwise
payable to the Investor have been applied to the payment of Senior Obligations.
SECTION 9. Relative Rights of Creditors. The provisions of
this Agreement are intended only for the purpose of defining the relative rights
of the Senior Creditors, on the one
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hand, and the Investor, on the other hand. Nothing herein is intended to, nor
shall this Agreement, impair, as between the Company and the Investor, the
obligation of the Company to pay to the Investor the Subordinated Obligations or
any other amounts due to the Investor under the Investment Agreement as and when
the same shall become due and payable, or to affect the relative rights of the
Investor and creditors of the Company other than the Senior Creditors nor shall
the foregoing or provisions to implement the foregoing prevent the Investor from
exercising all remedies otherwise permitted by applicable law upon any breach of
the Investment Agreement, subject to the rights contemplated herein of the
Senior Creditors.
SECTION 10. Subordinated Obligations; Rights of Senior
Creditors as to Security. The Investor and the Company acknowledge and agree
that the Investment Agreement, the Series A Certificate of Designations, the
Registration Rights Agreement and the Series A Preferred Stock certificates
evidence the full and complete obligations of the Company comprising the
Subordinated Obligations, and the Company shall not issue any further instrument
or agreement (other than Common Stock upon the conversion of the Series A
Preferred Stock in accordance with the Series A Certificate of Designations) in
respect of the Subordinated Obligations. The Series A Certificate of
Designations shall expressly state that the payment obligations of the Company
thereunder are expressly subordinate in right of payment to the Senior
Obligations. The Investor and the Company shall not amend, or modify or
supplement the Series A Certificate of Designations without the written consent
of the Senior Creditors, except for such amendments, modifications or
supplements which could not reasonably be expected to have a material adverse
effect on any Senior Creditor.
SECTION 11. Undertakings in Insolvency Proceedings. In
furtherance of the subordination provided herein, the Investor, for itself, its
successors and assigns, agrees that in any Insolvency Proceeding, it shall not
vote its claim(s) or take any other-consensual actions in a manner inconsistent
with the terms of this Agreement.
SECTION 12. Further Assurances. The Investor agrees that (a)
promptly upon the written request of the Senior Creditors, it shall take such
other action as may be reasonably requested by the Senior Creditors for the
protection of the rights of the Senior Creditors under this Agreement or to
effectuate the subordination provided herein, and (b) payments under the
Subordinated Obligations shall not at any time be secured by any lien or
security interest on property of the Company or any Affiliate of the Company.
SECTION 13. Specific Enforcement; Remedies. The Senior
Creditors are hereby authorized to demand the specific performance of this
Agreement, whether or not the Company shall have complied with any provisions
hereof applicable to it, at any time when the Investor shall have failed to
comply with the terms hereof, and the Investor hereby waives any objection or
defense in any action for the specific performance hereof based upon the
adequacy of any remedy at law; but nothing herein shall limit the right of the
Senior Creditors to seek damages at law for any failure by the Investor or the
Company to perform their respective obligations hereunder. In any action or suit
for the enforcement of any right or remedy under this Agreement, the parties
acknowledge and agree that a court may assess reasonable costs, including
reasonable attorneys fees, against any party litigant in such action, having due
regard for the merits and good faith of the claims or defenses made by such
party.
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SECTION 14. Governing Law. This Agreement shall be governed
by, and interpreted in accordance with, the laws of the State of New York
applicable to contracts made and to be performed in that State without reference
to its conflict of laws rules.
SECTION 15. Judicial Proceedings. The parties hereto agree
that the appropriate and exclusive forum for any disputes arising out of this
Agreement between the parties hereto shall be the United States District Court
for the Southern District of New York, and, if such court will not hear any such
suit, the courts of the state of the Company's incorporation, and the parties
hereto irrevocably consent to the exclusive jurisdiction of such courts, and
agree to comply with all requirements necessary to give such courts
jurisdiction. The parties hereto further agree that the parties will not bring
suit with respect to any disputes arising out of this Agreement except as
expressly set forth below for the execution or enforcement of judgment, in any
jurisdiction other than the above specified courts. Each of the parties hereto
irrevocably consents to the service of process in any action or proceeding
hereunder by the mailing of copies thereof by registered or certified airmail,
postage prepaid, to the address specified in Section 18. The foregoing shall not
limit the rights of any party hereto to serve process in any other manner
permitted by the law or to obtain execution of judgment in any other
jurisdiction. The parties further agree, to the extent permitted by law, that
final and unappealable judgment against any of them in any action or proceeding
contemplated above shall be conclusive and may be enforced in any other
jurisdiction within or outside the United States by suit on the judgment, a
certified or exemplified copy of which shall be conclusive evidence of the fact
and the amount of indebtedness. The parties agree to waive any and all rights
that they may have to a jury trial with respect to disputes arising out of this
Agreement.
SECTION 16. Representations of the Investor. The Investor
represents and warrants that:
(a) the Investor is duly organized and existing in good
standing under the laws of its jurisdiction of formation, with full power and
legal right to enter into this Agreement and to perform its obligations
hereunder. The making and performance by the Investor of its obligations under
this Agreement have been duly authorized by proper corporate or partnership
action.
(b) The execution, delivery and performance of this Agreement,
and the consummation of the transactions contemplated hereby will not conflict
with or cause or constitute a breach of or default under its corporate or
partnership documents or any bond, contract, indenture, agreement or other
instrument to the Investor is a party or by which it or its property is bound.
(c) This Agreement constitutes the legal, valid and binding
obligation the Investor enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general principles of equity.
SECTION 17. Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof in such
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jurisdiction, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
SECTION 18. Notices. All notices, requests, demands,
directions and other communications provided for herein shall be in writing and
shall be personally delivered or sent (and shall be effective when received) by
certified mail, postage prepaid, or by a reputable courier service (with charges
prepaid), or by facsimile transmission, to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
If to the Company:
ON Semiconductor Corporation
0000 Xxxx XxXxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
Facsimile: 000-000-0000
If to the Investor:
TPG ON Holdings LLC
000 Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
Facsimile: 000-000-0000
If to the Senior Creditors:
The Chase Manhattan Bank, as Administrative
Agent
Loan and Agency Services Group
One Chase Xxxxxxxxx Xxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxx
Facsimile: (000) 000-0000
With a copy to:
The Chase Manhattan Bank
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx XxXxxxxx
Facsimile: (000) 000-0000
SECTION 19. Waivers, etc. The terms of this Agreement may be
waived, altered or amended only by an instrument in writing duly executed by
holders of greater than 50% of the Series A Preferred Stock and the Company and
approved in writing by or on behalf of the Senior Creditors.
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SECTION 20. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and assigns.
SECTION 21. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall constitute an original, but all of
which taken together shall constitute one and the same instrument. Delivery of a
photocopy or telecopy of an executed counterpart of a signature page to this
Agreement shall be effective as delivery of a manually executed counterpart of
this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this
Subordination Agreement to be duly executed as of the day and year first above
written.
TPG ON HOLDINGS LLC
By: /s/ Xxxxxxx X. Xxxxxxxxx
________________________________
Name: Xxxxxxx X. Xxxxxxxxx
Title: Vice President
ON SEMICONDUCTOR CORPORATION
By: /s/ Xxxxx Xxxxxxxx
________________________________
Name: Xxxxx Xxxxxxxx
Title: Sr. Vice President &
Chief Financial Officer
Acknowledged and accepted:
The Chase Manhattan Bank, as
Administrative Agent
By: /s/ Xxxxxx XxXxxxxx
________________________________
Name: Xxxxxx XxXxxxxx
Title: Vice President
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