Exhibit 10.42

 

CHIPPAC, INC

RETENTION AND SEVERANCE AGREEMENT

 

March 22, 2004

 

Robert Krakauer

ChipPAC, Inc.

47400 Kato Road

Fremont, CA 94538

 

Dear Bob:

 

In recognition of your committed efforts as an employee of ChipPAC, Inc. (the
“Company”), we are offering you the opportunity to receive a special retention
payment in the amount set forth below (the “Retention Payment”) and a special
severance payment in the amount set forth below (the “Severance Payment,”
together with other benefits, the “Severance Benefits”) in connection with the
closing (the “Closing”) of the transactions contemplated by the Agreement and
Plan of Merger and Reorganization among ST Assembly Test Services Ltd, Camelot
Merger, Inc. and ChipPAC, Inc. dated as of February 10, 2004. The Retention
Benefits and Severance Benefits both will be fully subject to the terms of the
ChipPAC, Inc. Employee Retention and Severance Plan (the “Plan”). Capitalized
terms used and not otherwise defined herein have the meanings set forth in the
Plan.

 

Your benefits under the Plan include the following:

 

1.    Retention Payment. You will receive a payment equal to twenty-six (26)
times your Weekly Base Pay determined on the business day immediately preceding
the Closing. Your Retention Payment will be payable on the first normal and
customary payroll date following the termination of your employment with the
Company, which will be on June 30, 2004 or until closing (“Termination Date”),
or on such earlier date as may be required by law.

 

2.    Severance Benefits.

 

(a)    Severance Payment. You will receive a payment equal to twenty-six (26)
times your Weekly Base Salary determined on the business day immediately
preceding the Closing. Your Severance Payment will be payable on the first
normal and customary payroll date following your Termination Date or on such
earlier date as may be required by law.

 

(b)    Stock Options. Each ChipPAC stock option that you hold, other than
options granted to you on or after January 1, 2004, will be fully exercisable
upon the Closing to the extent they were not previously exercisable.

 

(c)    COBRA. In addition to the COBRA health care continuation coverage as
required by law, the Company will pay you premiums associated directly with the
provision of such coverage that you elect for a period of thirteen (13) weeks.

 

(d)    Pro-rated STI to actual performance at the time of closing.

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You will receive your Retention Payment, the Severance Payment and the other
Severance Benefits subject to certain conditions set forth in the Plan,
including, without limitation, your continued full-time employment with the
Company from the Closing through and including your Termination Date and your
execution and non-revocation of a general release of claims in substantially the
form attached as Annex A to the Plan. Notwithstanding the foregoing, you will be
entitled to receive the Retention Payment, the Severance Payment and the other
Severance Benefits in the event that your employment is terminated by the
Company without Cause (as such term is defined in the Retention Plan) or by you
for Good Reason (as such term is defined in the Retention Plan) after the
Closing, but before your Termination Date.

 

Please note that this letter is not a guarantee of continuing employment or an
employment contract between you and the Company. You remain an at-will employee
of the Company. In the event that the Closing does not occur, this award letter
and the Plan shall be void.

 

By your execution and delivery of this letter, you agree to your participation
in the Plan pursuant to the terms thereof and specifically acknowledge that
participation in the Plan will be lieu of, and shall supersede any and all
provisions providing for severance, retention or change of control payments or
benefits, if any, set forth in you Offer Letter and all other prior oral or
written plans, agreements, communications, negotiations, commitments and
understandings with respect to such payments or benefits.

 

This agreement will become effective upon your execution or it in the space
provided below and its delivery to Dennis W. Daniels, Vice-President, Corporate
Administration and Human Resources.

 

CHIPPAC, INC.

By:

 

/s/    DENNIS McKENNA

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Name:

 

Dennis McKenna

Title:

 

Chief Executive Officer and President

 

I, the undersigned, hereby agree to the foregoing, and acknowledge that the
terms and conditions of the Plan, which include the terms of this agreement, are
confidential.

 

/s/ ROBERT KRAKAUER

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Employee

 

Date: April 18, 2004