Item 1.01.
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Entry into a Material Definitive Agreement.
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On March 30, 2020, MagnaChip Semiconductor Corporation (the Company) announced that certain of its wholly-owned subsidiaries (namely,
MagnaChip Semiconductor S.A., a Luxembourg société anonyme (LuxCo), and MagnaChip Semiconductor, Ltd., a Korean limited liability company (MSK)), entered into a definitive agreement for the newly announced sale
of its Foundry Services Group business and the fabrication facility located in Cheongju known as Fab 4 (the Business) to Magnus Semiconductor, LLC, a Korean limited liability company (the Buyer). The Buyer is a
special purpose company formed by Alchemist Capital Partners Korea Co., Ltd. (Alchemist) and Credian Partners, Inc. (Credian).
On
March 31, 2020 (Korea time), LuxCo and MSK entered into a definitive Business Transfer Agreement (the Business Transfer Agreement) with the Buyer. On the terms and subject to the conditions set forth in the Business Transfer
Agreement, the Buyer agreed to acquire from MSK and certain other wholly-owned direct or indirect subsidiaries of LuxCo (each a Subsidiary Transferor, and, collectively, the Subsidiary Transferors) certain assets constituting
the Business and to assume certain liabilities related to the Business (the Transaction) for a purchase price equal to the KRW equivalent of $344,700,000 (the Base Purchase Price) in cash (based on the USD to KRW
exchange rate on the third business day prior to the anticipated closing date), subject to a working capital adjustment as described in the Business Transfer Agreement. Subject to the terms of the Business Transfer Agreement, all employees of
the Business will be transferred to the Buyer as of the closing date, unless any of such employees formally objects to the transfer of his or her employment (in which case, the employment of such employee shall not be transferred to the Buyer) (all
such transferred employees, the transferred employees). The Buyer will assume all severance liabilities relating to the transferred employees. Subject to certain exceptions, the Business Transfer Agreement is governed by the Laws of
Korea.
In the Business Transfer Agreement, LuxCo (with respect to itself, MSK and the Business) and the Buyer (with respect to itself) have made certain
representations and warranties. Such representations and warranties survive the closing for a period of eighteen (18) months from the closing date, subject to certain exceptions for Luxcos representations regarding environmental matters
and taxes. Luxco, MSK and the Buyer have also made certain covenants in the Business Transfer Agreement, which survive for sixty (60) days following the closing date in the case of covenants to be performed prior to the closing and survive in
accordance with their terms in the case of covenants to be performed after the closing.
MSK and the Buyer have agreed that, from and after the closing,
they shall indemnify each other and their respective affiliates and certain other related parties (the Indemnified Parties) for losses incurred as a result of breaches of certain representations, warranties and covenants, subject to the
survival periods described above. In the case of MSKs indemnification obligations, it will indemnify the Buyers Indemnified Parties against losses (which for a single claim, must exceed $100,000, and which in the aggregate (excluding all
single claims which do not exceed $100,000) must exceed the amount equal to one percent (1%) of the Base Purchase Price) incurred as a result of (i) any inaccuracy in or breach of certain representations and warranties relating to contamination
and environmental matters and product liabilities, (ii) any failure by LuxCo or MSK to perform any of their respective covenants, and (iii) any liabilities specifically not assumed by the Buyer. LuxCos aggregate liability for
indemnified losses is limited to four percent (4%) of the Base Purchase Price. The Buyers sole and exclusive remedy (subject to limited exceptions set forth in the Business Transfer Agreement) for any losses not subject to indemnification by
MSK pursuant to the foregoing sentences will be to make a claim under a buyer-side warranty and indemnity insurance policy (the W&I Insurance Policy) to be obtained by the Buyer at the closing of the Transaction. In the case of the
Buyers indemnification obligations, it will indemnify LuxCos Indemnified Parties against losses that are incurred as a result of (i) any inaccuracy in or breach of any representation or warranty made by the Buyer, (ii) any
failure by the Buyer to perform its covenants, and (iii) the Buyers assumed liabilities.
From the date of the Business Transfer Agreement
until the earlier of the consummation of the Transaction and the termination of the Business Transfer Agreement, LuxCo will be subject to certain covenants, including, among other things, certain business conduct restrictions with respect to the
operation of the Business (to which it must also cause the Subsidiary Transferors to be subject). In addition, following the closing, for a period of eighteen (18) months, LuxCo has agreed not to (and will cause the Company and its direct and
indirect subsidiaries not to) solicit for hiring or hire any transferred employee or any person who has been a transferred employee in the 120 days immediately preceding any solicitation or hire. In addition, for the same eighteen (18)-month period
following the closing date, the Buyer has agreed not to (and will cause its direct and indirect subsidiaries and controlled affiliates not to) solicit for hiring or hire any officer or employee in Korea, China, Germany or Taiwan of LuxCo or any of
its affiliates, or any such person who was an officer or employee in Korea, China, Germany or Taiwan of LuxCo or any of its affiliates in the 120 days