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To: Maya who wrote (47270)	11/2/1999 12:20:00 PM
From: BillyG	Read Replies (1) \| Respond to of 50808

Semi Spin (from the 8-K): SECTION 1.5 DISPOSITION OF THE SEMICONDUCTOR BUSINESS (a) It is a condition to each party's obligation to consummate the Merger that, prior to the Effective Time, the Semiconductor Business (as defined below) either be (i) transferred to the stockholders of the Company by transferring the Semiconductor Business to a newly formed affiliate of the Company ("SEMI") and distributing the ownership of Semi to the stockholders of the Company (such transfer and distribution, the "SEMI SPIN") in a transaction that is treated as immediately taxable in full to the Company for federal income tax purposes or (ii) sold by the Company in its entirety (a "SEMI SALE" and, together with the Semi Spin, a "SEMI -6- 11 DISPOSITION") to a purchaser (the "SEMI PURCHASER"). The decision as to whether and under what terms to implement a Semi Spin or a Semi Sale will be the Company's; PROVIDED, HOWEVER, that Parent's consent shall be required in connection with any material deviation from the terms and conditions of a Semi Sale or a Semi Spin, as applicable, and the terms generally applicable, set forth on Schedule 1.5(a). In the event the parties hereto disagree as to whether or not the terms and conditions of a Semi Disposition materially deviate from the terms and conditions set forth on Schedule 1.5(a) or in the event the parties hereto disagree on the amount of cash to be reserved for the Semi Sale Taxes (as defined in Section 1.5(b)), either party shall be entitled to submit such dispute or disagreement for final and binding determination to a mutually acceptable third-party arbitrator, such determination to be made within ten (10) days of the submission to such arbitrator by either party. If the parties are unable to mutually agree upon an arbitrator within one week of a party's notification to the other party of its desire to arbitrate such a dispute, then each party shall have one week to select an arbitrator and such two arbitrators shall have one week to select a third arbitrator who shall have final authority to resolve such dispute within ten days of such arbitrator's selection based upon the terms and conditions set forth on Schedule 1.5(a). The parties shall share equally in the fees and expenses of such arbitrators, and such fees and expenses shall be paid by the parties prior to the Effective Time. (b) The "SEMICONDUCTOR BUSINESS" shall consist of the assets and liabilities set forth on Schedule 1.5(b). The "SEMI SALE CONSIDERATION" shall equal the quotient of (i) the Semi Sale Purchase Price less the sum of (A) all expenses attributable to the sale of the Semiconductor Business and (B) the Semi Sale Taxes and (ii) the sum of (a) the number of shares of Common Stock outstanding immediately prior to consummation of the Semi Sale, (b) the number of shares of Common Stock underlying options to purchase Common Stock that are vested immediately prior to consummation of the Semi Sale ("VESTED OPTIONS"), (c) the number of shares of Common Stock underlying Options not constituting Vested Options that are issued to Continuing Employees, and (d) the number of shares of Common Stock underlying the Company's 5 7/8% Convertible Subordinate Notes ("CONVERTIBLE NOTES") outstanding immediately prior to the consummation of the Semi Sale. The "SEMI SALE PURCHASE PRICE" shall equal the aggregate purchase price for the Semiconductor Business payable to the Company or any of its Subsidiaries in the Semi Sale, including any contingent consideration and any consideration subject to escrow, holdback or indemnification provisions of the Semi Sale, but excluding amounts payable with respect to, or reserved for payment with respect to, options issued to employees of the Semiconductor Business that are not vested as of the Effective Time. The "SEMI SALE TAXES" shall equal the income and other Taxes incurred and to be incurred by Parent, the Company or any affiliates thereof in connection with the Semi Sale and the distribution of the Semi Sale Consideration pursuant to the Merger. For purposes of determining the amount of the Semi Sale Taxes that are based on net income, there shall be deducted from the "amount realized" from the Semi Sale (or corresponding amount as determined for state, local or foreign income Tax purposes), without duplication, (i) the tax basis of the cash and other assets recognized as assets of the Semiconductor Business pursuant to Schedules 1.5(a) and 1.5(b) (but only to the extent such cash and other assets are transferred to the Semi Purchaser), (ii) capitalized expenses of the Company that -7- 12 both reduce the income tax liability of the Company and are attributable to the sale within the meaning of clause (i)(A) of the second sentence of this Section 1.5(b), (iii) the amount of any deductions accrued on or prior to the Closing Date attributable to the exercise of Company options after the date hereof and on or prior to the Closing Date (provided that deductions that reduce Semi Sale Taxes pursuant to this paragraph shall not also reduce other Company taxable income, and assuming for the purposes of this subsection that a "disqualifying disposition" occurs with respect to 80% of all Company options that are "incentive stock options" under Section 422 of the Code that are exercised on or prior to the Closing Date) and (iv) any other currently deductible items of the Company attributable to the sale within the meaning of clause (i)(A) of the second sentence of this Section 1.5(b). For purposes of this paragraph, expenses related to the disposition of Semi incurred or accrued by the end of the Closing Date shall not be treated as allocated to Semi's tax period beginning on the day after Closing Date under Treas. Reg. Section 1.1502-76(b)(1)(ii)(B). The Company and Parent shall mutually determine the amount of the Semi Sale Taxes prior to the Closing Date. If the Company and Parent fail to reach an agreement within one (1) week prior to the scheduled Closing Date, either party shall be entitled to submit the matter to a mutually acceptable third-party arbitrator. If the parties are unable to mutually agree upon an arbitrator within one (1) week of a party's notification to the other party of its desire to arbitrate such a dispute, then each party shall have one (1) week to select an arbitrator and such two arbitrators shall have ten (10) days to select a third arbitrator who shall have final authority to resolve such dispute within ten (10) days of such arbitrator's selection, but before the Closing Date. The parties shall share equally in the fees and expenses of such arbitrators, and such fees and expenses shall be paid by the parties prior to the Effective Time.