Exhibit 10.20
SERVICE AGREEMENT
THIS SERVICE AGREEMENT (“Agreement”) is executed by and between MagnaChip Semiconductor, Ltd., a Korean limited liability company (the “Company”), and Victoria Miller Nam, an individual (the “Officer”), effective as December 29, 2004.
WITNESSETH:
WHEREAS, the Company desires to have the benefits of the Officer’s knowledge and experience as a full-time officer, to employ the Officer in the manner hereinafter specified, and to make provision for payment of reasonable compensation to the Officer for such services, and the Officer is willing to be employed by the Company to perform the duties incident to such employment upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants, terms and conditions set forth herein, and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Officer hereby agree as follows:
| 1. | EFFECTIVENESS OF SERVICE AGREEMENT |
This Agreement shall constitute a binding obligation of the Officer and the Company as of December 29, 2004 (the “Effective Date”).
| 2. | EMPLOYMENT AND DUTIES |
(a)General. The Company shall hereby employ the Officer as Senior Vice President, Strategic Planning, and the Officer agrees upon the terms and conditions herein set forth to be employed by the Company. The Officer shall diligently perform such duties and have such responsibilities as the Board of Directors of the Company may establish from time to time, and the Officer shall report to the Executive Vice President, Strategic Operations and Chief Financial Officer of the Company.
(b)Term. Unless terminated at an earlier date in accordance with Section 4 below, the term of the Officer’s employment with the Company hereunder shall be for a term commencing on the Effective Date and ending on the third anniversary of the Effective Date (the “Initial Term”). Thereafter, unless terminated at an earlier date in accordance with Section 4 below, the Initial Term and each Additional Term shall be automatically extended for successive one-year periods (each, an “Additional Term”), in each case, commencing upon the expiration of the Initial Term or the then-current Additional Term, unless at least 90 days prior to the expiration of such term, either party gives written notice to the other party of its intention not to extend the term of the Officer’s employment.
(c)Services. The Officer shall well and faithfully serve the Company, and shall devote all of her business time and attention to the performance of the duties of such employment and the advancement of the best interests of the Company and shall not, directly or
indirectly, render services to any other person or organization for which the Officer receives compensation without the prior written approval of the Company. The Officer hereby agrees to refrain from engaging in any activity that does, shall or could reasonably be deemed to conflict with the best interests of the Company.
(d)Location of Employment. The Officer’s place of employment shall be at the Company’s facility located in Seoul, Korea, but the Officer shall travel to the extent and to the places necessary for the performance of the Officer’s duties to the Company.
| 3. | COMPENSATION AND OTHER BENEFITS |
Subject to the provisions of this Agreement, including, without limitation, the termination provisions contained in Section 4 below, the Company shall pay and provide the following compensation and other benefits to the Officer as compensation for all services rendered hereunder:
(a)Salary. The Company shall pay the Officer a base salary at the rate of US$300,000.00 per annum (the “Salary”), payable to the Officer in accordance with the standard payroll practices of the Company as are in effect from time to time, less all such deductions or withholdings required by applicable law. Annual salary increases will be determined by the compensation committee of the Board of Directors of the Company (the “Committee”) in accordance with the Committee’s policies and procedures.
(b)AnnualIncentive. The Officer shall be eligible to earn an annual cash bonus in accordance with the annual short-term incentive plan approved annually by the compensation committee of the Company (the “Annual Incentive”). The Annual Incentive shall be 50% of the Officer’s annual salary. The amount of the Annual Incentive in respect of 2004 plan year shall be pro-rated to reflect the number of days the Officer was actually employed with the Company during the 2004 plan year.
(c)Transportation. The Officer shall be entitled to use of a company car and driver for transportation to and from work, which such car and driver shall be shared in the general car pool available for all officers at the senior level during the business day.
(d)Translator. The Company shall provide a full-time translator to support the Officer at any and all times the Officer is conducting business for the Company.
(e)Expenses. The Company shall pay or reimburse the Officer for all reasonable out-of-pocket expenses incurred by the Officer in connection with her employment hereunder upon submission of appropriate documentation or receipts in accordance with the policies and procedures of the Company as are in effect from time to time.
(f)Benefits. The Officer shall be eligible to participate in or purchase as necessary and be reimbursed for medical, disability and life insurance plans and to receive other benefits applicable to senior officers of the Company generally in accordance with the terms of such plans as are in effect from time to time.
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(g)Vacation. The Officer shall be entitled to annual vacation of four weeks per year.
(h)Co-investment right. The Officer shall have the right to invest up to US$500,000 in the equity of MagnaChip Semiconductor LLC, a Delaware limited liability company (“MagnaChip LLC”), at the same price per unit as that paid by Citicorp Venture Capital Equity Partners, L.P. (“CVC”) and with respect to the same strip of equity securities acquired by CVC.
(i)Equity. The Officer is granted options immediately exercisable for 136,450 of MagnaChip LLC’s restricted Common Units (the “Options”) at a purchase price equal to $1.00 per Common Unit. The Common Units issued upon the exercise of the Options (the “Promote Units”), shall be issued pursuant to the MagnaChip Semiconductor LLC Equity Incentive Plan (the “Incentive Plan”). The Promote Units shall be subject to forfeiture or to repurchase by the Company upon the Officer’s termination of service in accordance with the terms of the Incentive Plan, but, generally, upon the Officer’s termination of service without Cause (as hereinafter defined) (A) unvested Promote Units shall be subject to repurchase by the Company at a repurchase price of $1.00 per Unit and (B) vested Promote Units shall be subject to repurchase by the Company at a repurchase price equal to fair market value, as determined by the Board of Directors of MagnaChip LLC in good faith at the time of the repurchase. Upon a termination of service for Cause, all Promote Units shall be subject to repurchase by the Company at a repurchase price of $1.00 per Unit. The Promote Units shall vest in accordance with the schedule set forth in the subscription agreement entered into by the Officer and MagnaChip LLC at the time the Promote Units are purchased, but generally 25% of the Promote Units shall be scheduled to vest on September 30, 2005, and an additional 6.25% of the Promote Units shall be scheduled to vest each calendar quarter thereafter;provided,however, that on any scheduled vesting date, unvested Promote Units shall vest only if the Officer is still employed by the Company;provided,further,however, that in the event that the Officer’s employment is terminated without Cause or the Officer resigns for Good Reason (as hereinafter defined) prior to October 1, 2005, or within the twelve month period following a Change of Control (as defined in the Incentive Plan), 25% of the unvested Promote Units shall vest on the date of termination.
| 4. | TERMINATION OF EMPLOYMENT |
Subject to the notice and other provisions of this Section 4, the Company shall have the right to terminate the Officer’s employment hereunder, at any time for any reason or for no stated reason, and the Officer shall have the right to resign, at any time for any reason or for no stated reason.
(a)Termination for Cause or Resignation.
(i) If, prior to the expiration of the Initial Term or any Additional Term, the Officer’s employment is terminated by the Company for Cause or if the Officer resigns for any reason other than Good Reason from her employment hereunder, the Officer shall be entitled to payment of (A) her Salary accrued up to and including the date of termination or resignation, and (B) any unreimbursed expenses. Except to the extent required by the terms of the benefits provided under Section 3(f) or applicable law, the Officer shall have no right under this
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Agreement or otherwise to receive any other compensation or to participate in any other plan, program or arrangement after such termination or resignation of employment with respect to the year of such termination or resignation and later years. The treatment of any outstanding options or Promote Units held by the Officer as of the date of the termination shall be governed by the agreements and equity incentive plans pursuant to which the options or Promote Units were granted.
(ii) Termination for “Cause” shall mean a termination of the Officer’s employment with the Company because of (A) a failure by the Officer to substantially perform the Officer’s customary duties with the Company in the ordinary course (other than such failure resulting from the Officer’s incapacity due to physical or mental illness or any such actual or anticipated failure after the Officer provides written notification to the Company of resignation of employment for Good Reason under this Agreement) that, if susceptible to cure, has not been cured as determined by the Company in good faith within 30 days after a written demand for substantial performance is delivered to the Officer by the Company, which demand specifically identifies the manner in which the Company believes that the Officer has not substantially performed the Officer’s duties; (B) the Officer’s gross negligence, intentional misconduct or fraud in the performance of her employment; (C) the Officer’s indictment for a felony or for a crime involving fraud or dishonesty; (D) a judicial determination that the Officer committed fraud or dishonesty against any natural person, firm, partnership, limited liability company, association, corporation, company, trust, business trust, governmental authority or other entity (each, a “Person”); or (E) the Officer’s material violation of this Agreement or of one or more of the Company’s policies applicable to the Officer’s employment as may be in effect from time to time.
(iii) Termination of the Officer’s employment for Cause shall be communicated by delivery to the Officer of a written notice from the Company stating that the Officer will be terminated for Cause, specifying the particulars thereof and the effective date of such termination. If the Company provides such written notice to the Officer, to the extent the Officer is being terminated for a failure to perform her duties, as described in Section 4(a)(ii)(A) above, the Officer shall have 30 days from the date of receipt of such notice to effect a cure and, upon cure thereof by the Officer, such failure to perform shall no longer constitute Cause for purposes of this Agreement.
(iv) The date of a resignation other than for Good Reason by the Officer shall be the date specified in a written notice of resignation from the Officer to the Company provided that the Officer shall provide at least 60 days’ advance written notice of her resignation other than for Good Reason.
(b)Involuntary Termination.
(i) If, prior to the expiration of the Initial Term or any Additional Term, the Company terminates the Officer’s employment for any reason other than Disability, death or Cause or if the Officer resigns from her employment for Good Reason (such termination or resignation being hereinafter referred to as an “Involuntary Termination”), the Officer shall be entitled to (A) payment of her Salary accrued up to and including the date of the Involuntary
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Termination, (B) payment of any unreimbursed expenses, (C) vesting of the Promote Units pursuant to Section 3(i), and (D) severance (the “Severance”), consisting of:
(1) continuation of her Salary, at the rate in effect on the date of the Involuntary Termination, for a period of six months, commencing on the date next following the date of the Involuntary Termination;
(2) six months’ Company-paid benefits continuation for the Officer and her eligible dependents; and
(3) payment of the Annual Incentive, in a prorated amount based on the number of days the Officer was actually employed during the applicable plan year and on deemed satisfactory performance by the Officer, but based on actual performance objectives satisfied by the Company, payable in a lump sum payment within 30 days after the date that the Annual Incentive is normally paid under the terms of the plans and policies of the Company (but in no event more than 12 months following the date of the Involuntary Termination).
provided, however, that the Severance payable to the Officer pursuant to this section shall be reduced to the extent that the Company makes any severance payments pursuant to the Korean Commercial Code or any other statute.
(ii) Resignation for “Good Reason” shall mean resignation by the Officer because of, unless the Officer otherwise consents in writing, one or more of the following circumstances:
(1) a reduction in the Officer’s overall pay package of more than 15% that is not applied to all officers at the Officer’s seniority level,provided that, so long as the Annual Incentive target is equal to 50% or more of the Officer’s Salary, any decrease in the amount of the Annual Incentive paid to the Officer shall not be taken into account in calculating a decrease in the overall pay package;
(2) the nature or status of the Officer’s authorities, duties or responsibilities has been materially and adversely altered;
(3) a requirement that the Officer move her principal place of employment outside of Seoul, Korea or an agreed-upon location in the United States.
(iii) Resignation for Good Reason shall be communicated by delivery to the Company of a written notice from the Officer stating that the Officer will be resigning for Good Reason, specifying the particulars thereof and the effective date of such resignation. If the Officer provides such written notice to the Company, the Company shall have 30 days from the date of receipt of such notice to effect a cure, as determined by the Officer in good faith, of the material breach described therein and, upon cure thereof by the Company, such material breach shall no longer constitute Good Reason for purposes of this Agreement.
(iv) The date of termination of employment without Cause shall be the date specified in a written notice of termination to the Officer. The date of resignation for Good Reason shall be the date specified in a written notice of resignation from the Officer to the
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Company;provided,however, that no such written notice shall be effective unless the cure period specified in Section 4(b)(iii) above has expired without the Company having corrected the event or events subject to cure.
(c)Termination Due to Disability. In the event of the Officer’s Disability, the Company shall be entitled to terminate her employment. In the case that the Company terminates the Officer’s employment due to Disability, the Officer shall be entitled to (i) payment of her Salary up to and including the date of termination, (ii) payment of any unpaid expense reimbursements, and (iii) payment of the Annual Incentive, in a prorated amount based on the number of days the Officer was actually employed during the applicable plan year, based on actual performance objectives satisfied by the Company, payable in a lump sum payment within 30 days of the date that the Annual Incentive is normally paid under the terms of the plans and policies of the Company. As used in this Section 3(d), the term “Disability” shall mean that the Company determines that due to physical or mental illness or incapacity, whether total or partial, the Officer is substantially unable to perform her duties hereunder for a period of 180 consecutive days or shorter periods aggregating 180 days during any period of 365 consecutive days. The Officer shall permit a licensed physician agreed to by the Company and the Officer (or, in the event that the Company and the Officer cannot agree, by a licensed physician agreed upon by a physician selected by the Company and a physician selected by the Officer) to examine the Officer from time to time prior to the Officer’s being determined to be Disabled, as reasonably requested by the Company, to determine whether the Officer has suffered a Disability hereunder.
(d)Death. In the event of the Officer’s death while employed by the Company, the Officer’s estate or named beneficiary shall be entitled to (i) payment of her Salary up to and including the date of termination (ii) payment of any unpaid expense reimbursements, and (iii) payment of the Annual Incentive, in a prorated amount based on the number of days the Officer was actually employed during the applicable plan year payable in a lump sum payment within 30 days of the date that the Annual Incentive is normally paid under the terms of the plans and policies of the Company.
| 5. | COVENANTS |
(a)Confidential Information. As an officer of the Company, the Officer acknowledges that she has had and will have access to confidential or proprietary information or both relating to the business of, or belonging to, the Company or any affiliates or third parties including, but not limited to, proprietary or confidential information, technical data, trade secrets, or know-how in respect of research, product plans, products, services, customer lists, customers, markets, computer software (including object code and source code), data and databases, outcomes research, documentation, instructional material, developments, inventions, processes, formulas, technology, designs, drawings, engineering, hardware, configuration information, models, manufacturing processes, sales information, cost information, business plans, business opportunities, marketing, finances or other business information disclosed to the Officer in any manner including by drawings or observations of parts or equipment, etc., all of which have substantial value to the Company (collectively, “Confidential Information”).
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(i) The Officer agrees that while employed with the Company and after the termination of the Officer’s employment for any reason, the Officer shall not: (A) use any Confidential Information except in the course of her employment by the Company; or (B) disclose any Confidential Information to any other person or entity, except to personnel of the Company utilizing it in the course of their employment by the Company or to persons identified to the Officer in writing by the Company, without the prior written consent of the Company.
(ii) While the Officer is employed with the Company and after the termination of the Officer’s employment for any reason, the Officer shall respect and adhere to any non-disclosure, confidentiality or similar agreements to which the Company or any of its affiliates are, or during the period of the Officer’s employment by the Company, become, a party or subject. Upon the request of the Officer, the Company shall disclose to the Officer any such agreements to which it is a party or is subject.
(iii) The Officer hereby confirms that all Confidential Information and “Company Materials” (as hereinafter defined) are and shall remain the exclusive property of the Company. Immediately upon the termination of the Officer’s employment for any reason, or during the Officer’s employment with the Company upon the request of the Company, the Officer shall return all Company Materials, or any reproduction of such materials, apparatus, equipment and other physical property. For purposes of this Agreement, “Company Materials” are documents or other media or tangible items that contain or embody Confidential Information or any other information concerning the business, operations or plans of the Company, whether such documents have been prepared by the Officer or others.
(b)Disclosure of Previously Acquired Information to Company. The Officer hereby agrees not to disclose to the Company, and not to induce the Company to utilize, any proprietary information or trade secrets of any other party that are in her possession, unless and to the extent that she has authority to do so.
(c)Non-Competition. While the Officer is employed by the Company and, after the Officer’s termination of employment for any reason, until the earlier of (i) the first anniversary of the date of termination and (ii) the third anniversary of the Effective Date, the Officer (and any entity or business in which the Officer or any affiliate of the Officer has any direct or indirect ownership or financial interest) shall not, except with the prior written consent of the Board of Directors, directly or indirectly, own any interest in, operate, join, control or participate as a partner, director, principal, officer, or agent of, enter into any employment of, act as a consultant to, or perform any services for any business which at any time during such period is in competition with any business in which the Company, or any of its affiliates, is planning to be engaged in the near future or is engaged on or prior to the termination of Officer’s employment by the Company, anywhere in the world. This provision shall not be construed to prohibit the ownership by the Officer of less than 2% of any class of securities of any corporation that has a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended, so long as she remains a passive investor in such entity.
(d)No Solicitation. While the Officer is employed by the Company and for a two-year period thereafter, the Officer shall not, directly or indirectly, for the Officer’s own
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account or for the account of any other Person (i) solicit, employ, retain as a consultant, interfere with or attempt to entice away from the Company or any of its affiliates, or any successor to any of the foregoing, any individual who is, has agreed to be or within one year of such solicitation, employment, retention, interference or enticement has been, employed or retained by the Company or any of its subsidiaries or any successor to any of the foregoing or (ii) solicit or attempt to solicit the trade of any Person which, at the time of such solicitation, is a customer of the Company or its affiliates, or any successor to any of the foregoing, or which the Company or its affiliates, or any successor to any of the foregoing, is undertaking reasonable steps to procure as a customer at the time of or immediately preceding the termination of Officer’s employment by the Company; provided, however, that this limitation shall only apply to any product or service which is in competition with a product or service of the Company or its affiliates.
(e)Non-Disparagement. The Officer and the Company agree that at any time during her employment with the Company or at any time thereafter, neither the Company nor the Officer shall make, or cause or assist any other person to make, any statement or other communication which impugns or attacks, or is otherwise critical of, the reputation, business or character of the other, any subsidiary or any of their respective officers, directors, employees, products or services. The foregoing restrictions shall not apply to any statements that are made truthfully in response to a subpoena or other compulsory legal process.
(f)Enforcement. The Officer hereby acknowledges that she has carefully reviewed the provisions of this Agreement and agrees that the provisions are fair and equitable. However, in light of the possibility of differing interpretations of law and change in circumstances, the parties hereto agree that if any one or more of the provisions of this Agreement is determined by a court of competent jurisdiction to be invalid, void or unenforceable under circumstances then existing, the parties hereto agree that the maximum period, scope or geographical area reasonable or enforceable under such circumstances shall be substituted for the stated period, scope or area.
| 6. | GENERAL PROVISIONS |
(a)Tax Withholding. All amounts paid to the Officer hereunder shall be subject to all applicable federal, state and local wage withholding.
(b)Notices. Any notice hereunder by either party to the other shall be given in writing by personal delivery, or certified mail, return receipt requested, or (if to the Company) by telex or facsimile, in any case delivered to the applicable address set forth below:
| (i) If to the Company: | MagnaChip Semiconductor, Ltd. 891 Daechi-dong, Kangnam-gu Seoul 135-738 Korea Fax: 82-2-3459-3647 Attn: General Counsel |
(ii) If to the Officer at the last known residential address on the personnel records of the Company; or to such other persons or other addresses as either party may specify to the other in writing.
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(c)Assignment; Assumption of Agreement. This Agreement shall not be assignable, in whole or in part, by either party without the prior written consent or the other party, except as provided herein. The Company may assign its rights and obligations under this Agreement to any corporation or other business entity (i) which is an affiliate of the Company, (ii) with which the Company may merge or consolidate, or (iii) to which the Company may sell or transfer all or substantially all of its assets or 50% or more of the voting stock entitled to elect the members of the Board of Directors of the Company, provided that in each case such successor company expressly assumes the Company’s obligations hereunder in writing. After any such assignment by the Company, the Company shall be discharged from all further liability hereunder and such assignee shall thereafter be deemed to be the “Company” for purposes of all terms and conditions of this Agreement, including this Section 6(c). For purposes of this Section 6(c), “affiliate” means any company that the Company controls, that controls the Company, or that is under common control with the Company.
(d)Amendment. No provision of this Agreement may be amended, modified, waived or discharged unless such amendment, modification, waiver or discharge is agreed to in writing and signed by the parties. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.
(e)Severability. If any term or provision hereof is determined to be invalid or unenforceable in a final court or arbitration proceeding, (i) the remaining terms and provisions hereof shall be unimpaired and (ii) the invalid or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision.
(f)Governing Law and Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, and the venue for all disputes arising out of this Agreement shall be the state or federal courts located therein.
(g)Entire Agreement. This Agreement contains the entire agreement of the Officer, the Company and any predecessors or affiliates thereof with respect to the subject matter hereof and all prior agreements and negotiations are superseded hereby as of the date of this Agreement.
(h)Counterparts. This Agreement may be executed by the parties hereto in counterparts, each of which shall be deemed an original, but both such counterparts shall together constitute one and the same document.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Company and Officer have executed this Agreement effective as of the Effective Date.
| MAGNACHIP SEMICONDUCTOR, LTD. | ||
| By: | ||
| Name: | ||
| Title: | ||
| OFFICER | ||
| Victoria Miller Nam | ||
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