Trident Microsystems (TRIDQ) 10-K/A 2009 FY Annual report (amended)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

þ ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2009

OR

o TRANSITION REPORTING PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

Commission File Number: 0-20784

TRIDENT MICROSYSTEMS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware (State or other jurisdiction of Incorporation or Organization)	77-0156584 (I.R.S. Employer Identification Number)
3408 Garrett Drive,Santa Clara, California (Address of principal executive offices)	95054-2803 (Zip Code)

(408) 764-8808
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $0.001 par value	NASDAQ Global Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o Noþ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yeso Noþ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yeso Noo

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filero Accelerated filerþ Non-accelerated filero Small Reporting Companyo

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

As of December 31, 2008, the last business day of registrant’s second fiscal quarter for fiscal year ended June 30, 2009, the aggregate market value of shares of registrant’s Common Stock held by non-affiliates of registrant was approximately $100,794,000 (based on the closing sale price of the registrant’s common stock on that date). Shares of registrant’s common stock held by the registrant’s executive officers and directors and by each entity that owns 5% or more of registrant’s outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

At September 30, 2009, the number of shares of the Registrant’s common stock outstanding was 70,514,503.

TRIDENT MICROSYSTEMS, INC.
TABLE OF CONTENTS

	Page
Explanatory Note		3
PART II
Item 8. Financial Statements and Supplementary Data		4
Item 9A. Controls and Procedures		39
PART III
Item 10. Directors, Executive Officers and Corporate Governance		41
Item 11. Executive Compensation		47
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		68
Item 13. Certain Relationships and Related Transactions, and Director Independence		72
Item 14. Principal Accounting Fees and Services		75
PART IV
Item 15. Exhibits, Financial Statement Schedules		76
Signatures		78

2

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-K/A (this “Amendment”) amends the Annual Report on Form 10-K of Trident Microsystems, Inc. (“Trident”) for the fiscal year ended June 30, 2009, originally filed with the Securities and Exchange Commission (the “SEC”) on September 11, 2009 (the “Original Filing”). We are filing this Amendment for the purpose of providing the information required by Items 10, 11, 12, 13 and 14 to Part III within the period required by General Instruction G(3) to Form 10-K. The reference on the cover of the Original Filing to the incorporation by reference of the Proxy Statement into Part III of the Original Filing is hereby deleted.

In addition, we are amending Part II, Item 8, Financial Statements and Supplementary Data, as a result of an error in classification to reduce amounts reported as of June 30, 2009 as accounts receivable by approximately $5.3 million and increase by the same amount the reported prepaid expenses and other current assets. The correction of this error was considered to be immaterial as it did not result in any changes to the income statement, earnings per share or cash flows reported for the period, nor did the correction of the error result in any changes to the total current assets as originally reported. The consolidated financial statements, including the notes thereto and the opinion of our independent registered public accounting firm thereon, are refiled herewith in their entirety, and in connection with such filing, we have included a note 18 thereto, “Transaction with NXP” to include disclosure of our recently announced agreement with NXP B.V. to acquire selected assets and liabilities of NXP’s television systems and set-top box business lines. Further, in connection with the filing of this Amendment and pursuant to the rules of the SEC, we are including certain currently dated certifications with this Amendment, a consent of our independent registered public accounting firm, and management’s report on internal control over financial reporting, which we have included in Part II, Item 9A.

Except as expressly set forth in this Amendment, we are not amending any other part of the Original Filing. This Amendment continues to speak as of the date of the Original Filing, and does not reflect events occurring after the filing of the Original Filing or modify or update any related or other disclosures unless expressly noted otherwise. Accordingly, this Amendment should be read in conjunction with the Original Filing and with our other filings made with the Securities and Exchange Commission subsequent to the filing of the Original Filing, including any amendments to those filings. The filing of this Amendment shall not be deemed an admission that the Original Filing when made included any untrue statement of a material fact or omitted to state a material fact necessary to make a statement not misleading.

3

PART II

Item 8. Financial Statements and Supplementary Data.

TRIDENT MICROSYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Years Ended June 30,
(In thousands, except per share data)	2009			2008			2007
Net revenues	$	75,761		$	257,938		$	270,795
Cost of revenues		52,433			137,912			141,688
Gross profit		23,328			120,026			129,107
Operating expenses:
Research and development		53,016			52,608			40,970
Selling, general and administrative		29,617			48,598			47,993
Goodwill impairment		1,432			—			—
In-process research and development		697			—			—
Restructuring charges		810			—			—
Total operating expenses		85,572			101,206			88,963
Income (loss) from operations		(62,244	)		18,820			40,144
Loss on sale of short-term investments		(8,940	)		—			—
Impairment loss on short-term investments		(556	)		(6,480	)		—
Interest income		2,968			6,166			4,890
Other income, net		4,053			445			1,947
Income (loss) before provision for income taxes and cumulative effect of change in accounting principle		(64,719	)		18,951			46,981
Provision for income taxes		5,513			8,799			16,673
Income (loss) before cumulative effect of change in accounting principle		(70,232	)		10,152			30,308
Cumulative effect of change in accounting principle, net of tax		—			—			(190	)
Net income (loss)	$	(70,232	)	$	10,152		$	30,118
Net income (loss) per share — Basic:
Income (loss) before change in accounting principle	$	(1.12	)	$	0.17		$	0.52
Cumulative effect of change in accounting principle		—			—			(0.00	)
Net income (loss) per share — Basic	$	(1.12	)	$	0.17		$	0.52
Net income (loss) per share — Diluted:
Income (loss) before change in accounting principle	$	(1.12	)	$	0.16		$	0.48
Cumulative effect of change in accounting principle		—			—			(0.00	)
Net income (loss) per share — Diluted	$	(1.12	)	$	0.16		$	0.48
Shares used in computing net income (loss) per share — Basic		62,535			59,367			57,637
Shares used in computing net income (loss) per share — Diluted		62,535			62,751			63,380

The accompanying notes are an integral part of these consolidated financial statements.

4

TRIDENT MICROSYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

	As of June 30,
(In thousands, except par values)	2009			2008
ASSETS
Current assets:
Cash and cash equivalents	$	187,937		$	213,296
Short-term investments		—			26,704
Accounts receivable, net of allowances for sales returns of $56 and $300 at June 30, 2009 and 2008, respectively		4,086			4,510
Accounts receivable from related party		5,289			—
Inventories		6,828			8,680
Prepaid expenses and other current assets		9,425			12,863
Total current assets		213,565			266,053
Property and equipment, net		27,587			23,425
Goodwill		7,708			1,432
Intangible assets, net		7,685			8,428
Other assets		6,767			9,977
Total assets	$	263,312		$	309,315
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	10,485		$	10,889
Accounts payable to related party		5,513			—
Accrued expenses and other current liabilities		19,546			22,910
Income taxes payable		13,107			16,309
Total current liabilities		48,651			50,108
Long-term income taxes payable		21,658			21,579
Deferred income tax liabilities		81			370
Total liabilities		70,390			72,057
Commitments and contingencies (Notes 6 and 8)
Stockholders’ equity:
Preferred stock, $0.001 par value; 500 shares authorized; none issued and outstanding		—			—
Common stock, $0.001 par value; 95,000 shares authorized; 69,920 and 61,238 shares issued and outstanding at June 30, 2009 and 2008, respectively		70			61
Additional paid-in capital		234,134			208,299
Retained earnings (accumulated deficit)		(41,282	)		28,950
Accumulated other comprehensive loss		—			(52	)
Total stockholders’ equity		192,922			237,258
Total liabilities and stockholders’ equity	$	263,312		$	309,315

The accompanying notes are an integral part of these consolidated financial statements.

5

TRIDENT MICROSYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended June 30,
(In thousands)	2009			2008			2007
Cash flows from operating activities:
Net income (loss)	$	(70,232	)	$	10,152		$	30,118
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Cumulative effect of change in accounting principle		—			—			190
Stock-based compensation expense		12,673			24,270			15,607
Excess tax benefit from stock-based compensation		(96	)		(561	)		(855	)
Depreciation and amortization		9,544			5,354			1,501
In-process research and development		697			—			—
Amortization of acquisition-related intangible assets		3,985			5,725			6,345
Loss on disposal of property and equipment		83			52			59
Impairment loss on investment in UMC		556			6,480			—
Impairment of goodwill		1,432			—			—
Impairment of intangible assets		2,689			—			—
Loss (gain) on sales of investments		8,966			(969	)		(216	)
Deferred income taxes		63			(722	)		1,179
Changes in assets and liabilities, net of effect of acquisitions:
Accounts receivable		(4,677	)		4,665			(4,883	)
Inventories		1,852			7,583			(1,622	)
Prepaid expenses and other current assets		5,885			6,088			5,742
Accounts payable		(577	)		(8,902	)		384
Accrued expenses and other liabilities		(1,796	)		(3,574	)		2,398
Income taxes payable		(2,897	)		2,273			6,145
Net cash provided by (used in) operating activities		(31,850	)		57,914			62,092
Cash flows from investing activities:
Purchases of property and equipment		(3,189	)		(6,246	)		(17,690	)
Purchases of stock of privately held companies		—			—			(500	)
Proceeds from the capital reduction of UMC investment		—			7,829			—
Proceeds from sale of available-for-sale investments		17,234			6,079			—
Proceeds from sale of investments in private companies		—			1,056			1,228
Acquisition of businesses, net of cash acquired		(2,531	)		(1,960	)		—
Other assets		(6,471	)		(5,070	)		(748	)
Proceeds from sale of property, plant and equipment		294			48			—
Net cash provided by (used in) investing activities		5,337			1,736			(17,710	)
Cash flows from financing activities:
Proceeds from issuance of common stock to employees		1,058			5,523			805
Excess tax benefit from stock-based compensation		96			561			855
Net cash settlements of stock options in connection with IRC Section 409A		—			—			(1,526	)
Net cash provided by financing activities		1,154			6,084			134
Net (decrease) increase in cash and cash equivalents		(25,359	)		65,734			44,516
Cash and cash equivalents at beginning of year		213,296			147,562			103,046
Cash and cash equivalents at end of year	$	187,937		$	213,296		$	147,562
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	1,588		$	1,219		$	2,080
Supplemental schedule of non-cash investing and financing activities:
Issuance of common stock warrants and common stock for Micronas acquisition	$	(12,087	)	$	—		$	—
Accrued expense for building	$	—		$	(208	)	$	—
Prepaid taxes in connection with intercompany profit on assets remaining within consolidated group	$	—		$	—		$	20,583

The accompanying notes are an integral part of these consolidated financial statements.

6

TRIDENT MICROSYSTEMS, INC.

CONSOLIDATED STATEMENTS STOCKHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME (LOSS)

					Additional			Retained			Accumulated
					Paid-in			Earnings			Other			Total
	Common Stock				Capital			(Accumulated			Comprehensive			Stockholders’
(In thousands)	Shares		Amount		(Common Stock)			Deficit)			Income (Loss)			Equity
Balance at June 30, 2006		57,206	$	57	$	162,801		$	(11,320	)	$	2,119		$	153,657
Income before cumulative effect of change in accounting principle		—		—		—			30,308			—			30,308
Cumulative effect of change in accounting principle, net of tax		—		—		—			(190	)		—			(190	)
Unrealized gains on investments, net of tax		—		—		—			—			1,483			1,483
Comprehensive income															31,601
Shares issued pursuant to stock awards, net		542		1		804			—			—			805
Stock-based compensation expense		—		—		15,607			—			—			15,607
Tax benefit from stock-based compensation		—		—		1,704			—			—			1,704
Net cash settlement of stock options in connection with IRC Section 409A		—		—		(1,526	)		—			—			(1,526	)
Balance at June 30, 2007		57,748		58		179,390			18,798			3,602			201,848
Net income		—		—		—			10,152			—			10,152
Unrealized losses on investments, net of tax		—		—		—			—			(3,654	)		(3,654	)
Comprehensive income															6,498
Shares issued pursuant to stock awards, net		3,490		3		5,520			—			—			5,523
Stock-based compensation expense		—		—		24,270			—			—			24,270
Net cash settlement of stock options		—		—		(1,274	)		—			—			(1,274	)
Tax benefit from stock-based compensation		—		—		393			—			—			393
Balance at June 30, 2008		61,238		61		208,299			28,950			(52	)		237,258
Net loss		—		—		—			(70,232	)		—			(70,232	)
Unrealized gain on short-term investment		—		—		—			—			52			52
Comprehensive loss															(70,180	)
Shares issued pursuant to stock awards, net		1,682		2		1,056			—			—			1,058
Shares and warrant issued in connection with the aquistion of Micronas assets		7,000		7		12,080			—			—			12,087
Stock-based compensation expense		—		—		12,673			—			—			12,673
Net cash settlement for TMT’s stock options		—		—		26			—			—			26
Balance at June 30, 2009		69,920	$	70	$	234,134		$	(41,282	)	$	—		$	192,922

The accompanying notes are an integral part of these consolidated financial statements.

7

TRIDENT MICROSYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business and Business Combination

Business

Trident Microsystems, Inc. (“Trident”) and its subsidiaries (collectively the “Company”) designs, develops and markets integrated circuits for digital media applications, such as digital television and liquid crystal display, or LCD, television.

Since June 2003, the Company has focused its business primarily in the digital television (“DTV”) market and related areas. The Company conducts this business primarily through its Cayman Islands subsidiary, Trident Microsystems (Far East) Ltd., or TMFE. Research and development services relating to existing projects and certain new projects are conducted by both Trident Microsystems, Inc. and its subsidiaries, Trident Multimedia Technologies (Shanghai) Co. Ltd., or TMT, and Trident Microsystems (Beijing) Co., Ltd., or TMBJ. Operations and field application engineering support and certain sales activities are conducted through the Company’s Taiwanese subsidiary, Trident Microelectronics Co. Ltd., or TML, and other affiliates. In fiscal year ended June 30, 2009, Trident established a new subsidiary in South Korea, Trident Microsystems (Korea) Limited, or TMK, to primarily provide sales liaison and marketing services in South Korea and a new subsidiary in Hong Kong, Trident Microsystems Hong Kong Ltd., or TMHK, to handle sales and inventory distribution activities for the entire company. Trident Multimedia Systems, Inc. (“TMS”) was inactive at June 30, 2009. Trident Technologies, Inc. (“TTI”), was 99.9% owned by Trident, was liquidated as of June 30, 2009.

The Company sells its products primarily to digital television original equipment manufacturers, or OEMs, in Japan, Europe, South Korea and Asia Pacific, either directly or through their supplier channel. The Company considers these OEMs to be its customers.

Business Combination

On May 14, 2009, the Company completed its acquisition of selected assets of the frame rate converter (“FRC”), demodulator (“DRX”) and audio decoder product lines from Micronas Semiconductor Holding AG (“Micronas”), a Swiss corporation. In connection with the acquisition, the Company issued 7.0 million shares of its common stock and warrants to acquire up to 3.0 million additional shares of its common stock, with a combined fair value of approximately $12.1 million and incurred approximately $5.2 million of acquisition-related transaction costs and liabilities, for a total purchase price of approximately $17.3 million. For details of the acquisition, please refer to Note 11, Business Combinations,” of Notes to Consolidated Financial Statements below. In connection with the acquisition, Trident established three new subsidiaries in Europe, Trident Microsystems (Europe) GmbH (“TMEU”), Trident Microsystems Nederland B.V. (“TMNM”) and Trident Microsystems Holding B.V. (“TMH”) to primarily provide sales liaison, marketing and engineering services in Europe. TMEU is located in Munich, Germany and TMNM and TMH are located in Nijmegen, The Netherlands.

Basis of Consolidation and Presentation

The accompanying Consolidated Financial Statements include the accounts and operations of the Company. The results of operations include the results of the Micronas product lines subsequent to the acquisition date on May 14, 2009. All intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Foreign Currency Remeasurement

The Company uses the U.S. dollar as the functional currency for all of its foreign subsidiaries. Sales and purchase transactions are generally denominated in U.S. dollars. The Company has not engaged in hedging transactions to reduce its foreign currency exposure to such fluctuations; however, it may take action in the future to reduce its foreign exchange risk. Gains and losses from foreign currency remeasurements are included in “Other income, net” in the Consolidated Statements of Operations. The Company recorded foreign currency remeasurement gains or (losses) of $1.8 million, $(2.4) million, and $(0.6) million for the fiscal years ended June 30, 2009, 2008, and 2007, respectively. The net foreign currency remeasurement gain of $1.8 million in the fiscal year ended June 30, 2009 included a $2.6 million foreign currency remeasurement gain related to income taxes payable in foreign jurisdictions, which resulted from the relative strengthening of the U.S. dollar against Taiwan’s currency.

8

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Cash and Cash Equivalents

Cash equivalents consist of highly liquid investments in treasury bills and certificates of deposits purchased with an original maturity of ninety days or less from the date of purchase.

Investments

At June 30, 2009 and 2008, the Company’s long-term investments were in privately-held companies and funds. These investments are included in “Other assets” in the Consolidated Balance Sheet and are primarily carried at cost. As of June 30, 2009 and 2008, the aggregate carrying value of all long-term investments was $2.1 million. The Company monitors these investments for impairment and makes appropriate reductions in carrying values if the Company determines that an impairment charge is required based primarily on the financial condition and near-term prospects of these companies.

At June 30, 2008, the Company’s investments in publicly traded equity securities were classified as available-for-sale. These investments were recorded at fair value with the unrealized gains and losses included as a separate component of accumulated other comprehensive loss, net of tax. The average method was used to determine the cost basis of publicly traded equity securities that were disposed of. The Company recognizes an impairment charge when a decline in the fair value of its investments below the cost basis is judged to be other-than-temporary. In making this determination, the Company reviewed several factors to determine whether the losses were other-than-temporary, including but not limited to: (i) the length of time the investment was in an unrealized loss position, (ii) the extent to which fair value was less than cost, (iii) the financial condition and near term prospects of the issuer and (iv) the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in fair value. During fiscal year ended June 30, 2009, the Company sold all its investments in publicly traded equity securities.

Fair Value of Financial Instruments

Currently, the Company’s financial instruments consist principally of cash and cash equivalents, accounts receivable and accounts payable. Pursuant to SFAS No. 157,Fair Value Measurements (“SFAS 157”), the fair value of its cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of all of its other financial instruments approximate their recorded values because of their nature and respective maturity dates or durations.

Concentrations of Credit Risk and Other Risk

Financial instruments that potentially subject Trident to significant concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. Cash and cash equivalents held with financial institutions may exceed the amount of insurance provided by the Federal Deposit Insurance Corporation on such deposits. For the fiscal year ended June 30, 2009, the Company has not experienced any losses on its cash and cash equivalents.

A majority of the Company’s trade receivables are derived from sales to large multinational OEMs who manufacture digital TVs, located throughout the world, with a majority located in Asia. Prior to May 14, 2009, sales to most of the Company’s customers were typically made on a prepaid or letter of credit basis while sales to some customers were made on open accounts. The Company performs ongoing credit evaluations of its newly acquired customers’ financial condition and generally requires no collateral to secure accounts receivable.

The Company’s products are manufactured primarily by two foundries including United Microelectronics Corporation, or UMC, based in Taiwan and Micronas, based in Germany. Historically, a relatively small number of customers have accounted for a significant portion of its revenues.

The Company relies upon two third-party foundries to manufacture its products in wafer form and other contract manufacturers for assembly and testing of its products. The lead time required to establish a relationship with a new foundry is long, and it takes time to adapt a product’s design to a particular manufacturer’s processes. If this supplier fails to deliver the Company’s purchases on schedule, there is no readily available alternative source of supply for any specific product. This could cause significant delays in shipping products if the Company has to change its source of supply and manufacture quickly, which may result in lost revenues and damaged customer relationships.

9

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The semiconductor industry is characterized by rapid technological change, competitive pricing pressures, and cyclical market patterns. The Company’s results of operations are affected by a wide variety of factors, including general economic conditions, both in the United States and overseas; demand for the Company’s products; the timely introduction of new products; implementation of new manufacturing technologies; the ability to safeguard patents and intellectual property in a rapidly evolving market; and the reliance on the wafer fabrication manufacturers. As a result, the Company may experience substantial period-to-period fluctuations in future operating results due to the factors mentioned above or other factors.

Inventories

Inventories are computed using the lower of cost or market, which approximates actual cost on a first-in-first-out basis. Inventory components are work-in-process and finished goods. Finished goods are reported as inventories until the point of title transfer to the customer. The Company writes down its inventory value for estimated obsolescence equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. These factors are impacted by market and economic conditions, technology changes, new product introductions and changes in strategic direction and require estimates that may include uncertain elements. Actual demand may differ from forecasted demand, and such differences may have a material effect on recorded inventory values.

Long-lived Assets

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization. Major improvements are capitalized, while repairs and maintenance are expensed as incurred. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets. Furniture and fixtures are depreciated over five years. Machinery, equipment and software are depreciated over three years. Leasehold improvements are computed using the shorter of the estimated useful lives of the assets or the lease terms. The Company’s Shanghai office building is depreciated over a twenty year life. Construction in progress is not subject to depreciation until the asset is placed in service. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are removed from the accounts. Gains or losses resulting from retirements or disposals are included in income or loss from operations. Depreciation expense was $3.5 million, $2.5 million, and $1.5 million for fiscal years 2009, 2008, and 2007, respectively.

Amortizable Intangible Assets

The Company has two types of intangible assets: acquisition-related intangible assets and purchased intangible assets from third-party vendors. Intangible assets are carried at cost, net of accumulated amortization. Acquisition-related intangible assets with finite lives acquired in the purchase of the minority interest of Trident’s subsidiary, Trident Technologies, Inc., (“TTI”), are amortized over their estimated useful lives of approximately seven to eight years using a method that reflects the pattern in which the economic benefits of the intangible asset are consumed. The Company’s other acquisition-related intangible assets and purchased intangible assets with finite lives are amortized over their estimated useful lives of approximately three years using the straight-line method.

Management evaluates the recoverability of its identifiable intangible assets and long-lived assets in accordance with SFAS No. 144,Accounting for the Impairment or Disposal of Long-lived Assets (“SFAS 144”), which requires the assessment of these assets for recoverability when events or circumstances indicate a potential impairment exists. Certain events and circumstances the Company considered in determining whether the carrying value of identifiable intangible assets and other long-lived assets may not be recoverable include, but are not limited to: significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; a significant decline in its stock price for a sustained period of time; and changes in its business strategy. In determining if an impairment exists, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of these assets. If an impairment is indicated based on a comparison of the assets’ carrying values and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. During the fiscal year ended June 30, 2009, the management decided to put additional efforts on its SoC development rather than on set-top-box products or STB, the Company recognized a $1.0 million impairment loss on acquisition-related intangible assets at TMBJ, of which $0.6 million was recorded under “Cost of revenues”, and $0.4 million was recorded under “Selling, general and administrative”. In addition, the Company wrote off $1.7 million third-party purchased IP under “Research and development” in the Consolidated Statement of Operations for the fiscal year ended June 30, 2009 due to change in business strategy associated with more focus on SoC development and a change in the use of certain assets due to the acquisition. Refer to Note 4, “Goodwill and Intangible Assets,” of Notes to Consolidated Financial Statements for detail.

10

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Goodwill

The Company accounts for goodwill in accordance with SFAS No. 142,Goodwill and Other Intangible Assets(“SFAS 142”). Goodwill is recorded when the purchase price of an acquisition exceeds the fair value of the net purchased tangible and intangible assets acquired and is carried at cost. Goodwill is not amortized, but is subject to an impairment test annually. The Company performs its annual goodwill impairment analysis in the fourth quarter of each year or more frequently if the Company believes indicators of impairment exist. Factors that the Company considers important which could trigger an impairment review include the following:

• significant underperformance relative to historical or projected future operating results;

• significant adverse change in the extent or manner in which a long-lived asset is being used or in its physical condition;

• significant negative industry or economic trends; and

• significant decline in the Company’s market capitalization.

The performance of the test involves a two-step process. The first step requires comparing the fair value of the reporting unit to its net book value, including goodwill. The fair value of the reporting unit is based on the present value of estimated future cash flows of the reporting unit. A potential impairment exists if the fair value of the reporting unit is lower than its net book value. The second step of the process is only performed if a potential impairment exists, and it involves determining the difference between the fair values of the reporting unit’s net assets, other than goodwill, and the fair value of the reporting unit, and, if the difference is less than the net book value of goodwill, an impairment charge is recorded. In the event that the Company determines that the value of goodwill has become impaired, the Company will record a charge for the amount of impairment during the fiscal quarter in which the determination is made. As of June 30, 2009, the Company had two reporting units. One reporting unit, which carries all of the Company’s goodwill balance, was created as a result of the acquisition which occurred on May 14, 2009. In accordance with the guidance prescribed in SFAS 142, the Company has determined that the annual impairment test for this reporting unit will be performed during the fourth quarter of fiscal year 2010. As a result, no annual impairment test was performed on this goodwill balance as of June 30, 2009 and no interim indicators of impairment were deemed to be present.

Revenue Recognition

The Company recognizes revenues in accordance with Staff Accounting Bulletin No. 104,Revenue Recognition (“SAB 104”),when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable and collectability is reasonably assured. The Company records estimated reductions to revenue for customer incentive offerings and sales returns allowance in the same period that the related revenue is recognized. The Company’s customer incentive offerings primarily involve volume rebates for its products in various target markets. If market conditions were to decline, the Company may take actions to increase customer incentive offerings, possibly resulting in an incremental reduction of revenue at the time the incentive is offered. A sales returns allowance is established based primarily on historical sales returns, analysis of credit memo data and other known factors at that time. Additional reductions to revenue would result if actual product returns or pricing adjustments exceed its estimates.

A significant amount of the Company’s revenue is generated through its distributors under agreements allowing for pricing protection and/or rights of return. During fiscal years ended June 30, 2009, 2008, and 2007, approximately 76%, 49% and 48%, respectively, of revenues were recognized upon sales through distributors. Sales to distributors, which may be subject to rights of return and price protection, are deferred and only recognized when these rights expire or upon sale and shipment to the end user customers.

The Company records estimated reductions to revenue for customer incentive offerings in the same period that the related revenue is recognized. The Company’s customer incentive offerings primarily involve volume rebates for its products in various target markets. The Company accounts for rebates in accordance with Emerging Issues Task Force Issue,Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products)(“EITF 01-9”) and, as such, the Company accrues for 100% of the potential rebates and does not apply a breakage factor to accrued expenses and other liabilities.

The Company also records a reduction to revenue by establishing a sales returns allowance for estimated product returns based primarily on historical sales returns, analysis of credit memo data and other known factors at that time. If product returns for a particular fiscal period exceed historical return rates, the Company may determine that additional sales returns allowances are required to properly reflect its estimated exposure for product returns.

11

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Stock-based Compensation

The Company accounts for share-based payments, including grants of stock options and awards to employees and directors, in accordance with SFAS No. 123 (revised 2004),Share-Based Payment(“SFAS 123(R)”), which requires that share-based payments be recognized in its consolidated statements of operations based on their fair values and the estimated number of shares the Company ultimately expects will vest. In addition, the Company has applied certain of the provisions of the Securities and Exchange Commission (“SEC”)’s Staff Accounting Bulletin No. 107 (Topic 14), as amended, in its accounting for Statement 123(R). The Company recognizes stock-based compensation expense on a straight-line basis over the service period of all stock options and awards other than the performance-based restricted stock award with market conditions that was granted to its Chief Executive Officer under the 2006 Plan. The fair value of the unvested portion of share-based payments granted prior to July 1, 2006 (the adoption date of Statement 123(R)) is recognized using the straight line expense attribution method, net of estimated forfeitures.

The Company records deferred tax assets for stock-based awards that result in deductions on its income tax returns based on the amount of stock-based compensation recognized and the statutory tax rate in the jurisdiction in which the Company will receive a tax deduction.

Shipping and Handling Costs

Shipping and handling costs are included as a component of cost of revenues.

Research and Development

Research and development costs are expensed as incurred. These costs primarily include employees’ compensation, consulting fees, software licensing fees and tape-out expenses.

Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109,Accounting for Income Taxes, or SFAS 109, which requires that deferred tax assets and liabilities be recognized by using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. SFAS 109 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that a portion of the deferred tax asset will not be realized.

The Company also has to assess the likelihood that it will be able to realize our deferred tax assets. If realization is not likely, the Company is required to increase our provision for taxes by recording a valuation allowance against the deferred tax assets that the Company estimates it will not ultimately realize. The Company believes that it will not ultimately realize a substantial amount of the deferred tax assets recorded on our consolidated balance sheets. However, should there be a change in our ability to realize our deferred tax assets; our tax provision would decrease in the period in which the Company determined that the realization is probable.

In addition, the Company adopted Financial Accounting Standards Board or FASB Interpretation, No. 48,Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109or FIN 48, and related guidance on July 1, 2007. Under FIN 48, the Company is required to make certain estimates and judgments in determining income tax expense for financial statement purposes. The calculation of its tax liabilities involves dealing with uncertainties in the application of complex tax regulations. As a result of the implementation of FIN 48, the Company recognizes liabilities for uncertain tax positions based on the two-step process prescribed within the interpretation. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation, if any. The second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. Because the Company is required to determine the probability of various possible outcomes, such estimates are inherently difficult and subjective. The Company reevaluates these uncertain tax positions on a quarterly basis. This re-evaluation is based on factors including, but not limited to, changes in facts or circumstances and changes in tax law. A change in recognition or measurement would result either in the recognition of a tax benefit or in an additional charge to the tax provision for the period.

12

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Net Income (loss) per Share

The Company computes net income (loss) per share in accordance with SFAS No. 128,Earnings per Share.Basic net income (loss) per share is computed by dividing net income by the weighted average number of shares of common stock outstanding for the reporting period. Diluted net income (loss) per share is computed by dividing net income by the combination of dilutive common share equivalents, comprised of shares issuable under the Company’s stock-based compensation plans and the weighted average number of shares of common stock outstanding during the reporting period. Dilutive common share equivalents include the dilutive effect of in-the-money options to purchase shares, which is calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, the exercise price of an option, the amount of compensation cost, if any, for future service that the Company has not yet recognized, and the amount of estimated tax benefits that would be recorded in paid-in capital, if any, when the option is exercised are assumed to be used to repurchase shares in the current period.

Comprehensive Income

Comprehensive income is defined as the change in the equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to owners. Unrealized gains and losses on investments are comprehensive income (loss) items applicable to the Company, and are reported as a separate component of equity as “Accumulated other comprehensive income (loss).”

Reclassifications

Certain financial statement items have been reclassified to conform to the current year’s presentation. These reclassifications had no impact on previously reported net loss.

Product Warranty

The Company’s products are generally subject to warranty, which provides for the estimated future costs of repair, replacement or customer accommodation upon revenue recognition in the accompanying statements of operations. The company warrants its products against material defects for a period of time usually between 90 days and one year.

Advertising Expense

Advertising costs are expensed when incurred.

Recent Accounting Pronouncements

In June 2009 the FASB issued SFAS No. 168,The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting(“SFAS 168”). SFAS 168 represents the last numbered standard to be issued by FASB under the old (pre-Codification) numbering system, and amends the GAAP hierarchy established under SFAS 162. On July 1, 2009 the FASB launched FASB’s new Codification entitledThe FASB Accounting Standards Codification.The Codification will supersede all existing non-SEC accounting and reporting standards. SFAS 168 is effective in the first interim and annual periods ending after September 15, 2009. This SFAS is not expected to have a material impact on the Company’s consolidated financial position, results of operations and cash flows.

In May 2009, FASB issued SFAS No. 165,Subsequent Events(“FAS 165”) which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. FAS 165 also requires the disclosure of the date through which subsequent events have been evaluated, as well as whether the date is the date the financial statements were issued or the date the financial statements were available to be issued. The disclosure requirement under this FSP is effective for its annual reporting for the fiscal year ending on June 30, 2009 and is included in Note 16, “Subsequent Events,” of Notes to Consolidated Financial Statements.

In April 2009, FASB issued FSP SFAS No. 107-1 and APB 28-1,Interim Disclosures about Fair Value of Financial Instruments. FSP SFAS No. 107-1 and APB 28-1 enhances consistency in financial reporting by increasing the frequency of fair value disclosures. The FSP relates to fair value disclosures for any financial instruments that are not currently reflected a company’s balance sheet at fair value. Prior to the effective date of this FSP, fair values for these assets and liabilities have only been disclosed once a year. The FSP will now require these disclosures on a quarterly basis, providing qualitative and quantitative information about fair value estimates for all those financial instruments not measured on the balance sheet at fair value. The disclosure requirement under this FSP is effective for its interim reporting period ending on September 30, 2009.

13

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

In April 2009, FASB issued FSP SFAS No. 157-4,Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. FSP SFAS No. 157-4 provides guidelines for making fair value measurements more consistent with the principles presented in SFAS No. 157,Fair Value Measurements. The FSP relates to determining fair values when there is no active market or where the price inputs being used represent distressed sales. It reaffirms what SFAS No. 157 states is the objective of fair value measurement—to reflect how much an asset would be sold for in an orderly transaction (as opposed to a distressed or forced transaction) at the date of the financial statements under current market conditions. Specifically, it reaffirms the need to use judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive. The FSP is effective for its annual reporting for the fiscal year ending on June 30, 2009. The implementation of FSP SFAS No. 157-4 did not have a material impact on its consolidated financial position, results of operations and cash flows.

In April 2009, FASB issued FSP SFAS No. 115-2 and SFAS No. 124-2,Recognition and Presentation of Other-Than-Temporary Impairments. FSP SFAS No. 115-2 and SFAS No. 124-2 provides additional guidance designed to create greater clarity and consistency in accounting and presenting impairment losses on securities. The FSP is intended to bring greater consistency to the timing of impairment recognition, and provide greater clarity to investors about the credit and noncredit components of impaired debt securities that are not expected to be sold. The measure of impairment in comprehensive income remains fair value. The FSP also requires increased and timelier disclosures regarding expected cash flows, credit losses, and an aging of securities with unrealized losses. The FSP is effective for its annual reporting for the fiscal year ending on June 30, 2009. The implementation of FSP SFAS No. 115-2 and SFAS No. 124-2 did not have a material impact on its consolidated financial position, results of operations or cash flows.

In April 2009, FASB issued FSP SFAS No. 141(R)-1,Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies. FSP SFAS No. 141(R)-1 will amend the provisions related to the initial recognition and measurement, subsequent measurement and disclosure of assets and liabilities arising from contingencies in a business combination under SFAS No. 141(R),Business Combinations. The FSP will carry forward the requirements in SFAS No. 141,Business Combinations, for acquired contingencies, thereby requiring that such contingencies be recognized at fair value on the acquisition date if fair value can be reasonably estimated during the allocation period. Otherwise, entities would typically account for the acquired contingencies in accordance with SFAS No. 5,Accounting for Contingencies. The FSP will have the same effective date as SFAS No. 141(R), and will therefore be effective for its business combinations for which the acquisition date is on or after July 1, 2009. The Company is currently evaluating the impact of the implementation of FSP SFAS No. 141(R)-1 on its consolidated financial position, results of operations and cash flows.

In October 2008, the FASB issued Staff Position No. 157-3,Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active(“FSP 157-3”) to clarify the application of the provisions of SFAS 157 in an inactive market and how an entity would determine fair value in an inactive market. FSP 157-3 is effective immediately, including prior periods for which financial statements have not been issued. The adoption of FSP 157-3 did not have a material impact on its consolidated financial position, results of operations or cash flows.

In August 2008 the U.S. Securities and Exchange Commission (“SEC”) announced that they will issue for comment a proposed roadmap regarding the potential use by U.S. issuers of financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”). IFRS is a comprehensive series of accounting standards published by the International Accounting Standards Board. Under the proposed roadmap, the Company could be required in fiscal year 2014 to prepare financial statements in accordance with IFRS. The SEC is expected to make a determination in 2011 regarding the mandatory adoption of IFRS. The Company is currently assessing the impact that this potential change would have on its consolidated financial statements, and the Company will continue to monitor the development of the potential implementation of IFRS.

In May 2008, the FASB issued Staff Position No. 142-3,Determination of the Useful Life of Intangible Assets(“FSP 142-3”) to amend factors a company should consider in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS 142. The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the assets under SFAS 141 and other U.S. GAAP. FSP 142-3 is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008, with early adoption prohibited. The Company will adopt FSP 142-3 in the first quarter of fiscal year 2010 and the adoption of FSP 142-3 did not have a material impact on its consolidated financial position, results of operations and cash flows.

In February 2008, FASB issued Staff Position No. 157-2,Effective Date of FASB Statement 157(“FSP 157-2”) which delays the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). FSP 157-2 partially defers the effective date of SFAS 157 to fiscal years beginning after November 15, 2008, including interim periods within that fiscal year for items within the scope of FSP 157-2. The Company is currently assessing the impact of the adoption of SFAS 157 as it relates to nonfinancial assets and nonfinancial liabilities and does not anticipate that the adoption will have a material impact on its consolidated financial position, results of operations or cash flows.

14

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

In December 2007, the FASB issued SFAS No. 141 (Revised 2007),Business Combinations. SFAS No. 141(R) retains the fundamental requirements of the original pronouncement requiring that the purchase method be used for all business combinations. SFAS No. 141(R) defines the acquirer as the entity that obtains control of one or more businesses in the business combination, establishes the acquisition date as the date that the acquirer achieves control and requires the acquirer to recognize the assets acquired, liabilities assumed and any noncontrolling interest at their fair values as of the acquisition date. In addition, SFAS No. 141(R) requires expensing of acquisition-related and restructure-related costs, remeasurement of earn-out provisions at fair value, measurement of equity securities issued for purchase at the date of close of the transaction and non-expensing of in-process research and development related intangibles. SFAS No. 141(R) is effective for its business combinations for which the acquisition date is on or after July 1, 2009, except that resolution of certain tax contingencies and adjustments to valuation allowances related to business combinations, which previously were adjusted to goodwill, will be adjusted to income tax expense for all such adjustments after July 1, 2009, regardless of the date of the original business combination. The Company is currently evaluating the impact of the implementation of SFAS No. 141(R) on its consolidated financial position, results of operations and cash flows.

In December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51. This SFAS amends Accounting Research Bulletin No. 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. It requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling interest. This SFAS establishes a single method of accounting for changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation. SFAS No. 160 is effective for its fiscal year beginning July 1, 2009. This SFAS is not expected to have a material impact on its consolidated financial position, results of operations and cash flows.

2. INVESTMENTS

The following table summarizes the Company’s available-for-sale securities as of June 30, 2009 and 2008:

			Gross		Gross
			Unrealized		Unrealized			Estimated Fair
(Dollars in thousands)	Historical cost		Gains		Losses			Value
Short-term investments:
Marketable equity securities — as of June 30, 2009	$	—	$	—	$	—		$	—
Marketable equity securities — as of June 30, 2008	$	26,756	$	—	$	(52	)	$	26,704

Short-term investments

United Microelectronics Corporation

On June 13, 2008, United Microelectronics Corporation (“UMC”) announced a cash dividend of NT$0.75 per common share and a stock dividend of NT$0.45 per common share to its shareholders of record on August 16, 2008. The Company received a $1.2 million cash dividend and 2.3 million shares of stock dividend on September 12, 2008. During the fiscal year ended June 30, 2009, the Company recorded the $1.2 million cash dividend in “Other income, net” in its Consolidated Statement of Operations. In connection with the stock dividend received, the Company reduced the historical unit cost per share of UMC stock that it owned.

As the fair value of UMC’s stock price continued to decrease during the first quarter of fiscal year ended June 30, 2009, the $0.7 million fair value of the 2.3 million shares of UMC received as a stock dividend on September 12, 2008, was lower than the adjusted historical cost. The Company reviewed its investment in UMC in accordance with SFAS No. 115, Staff Accounting Bulletin Topic 5,Miscellaneous Accounting,and FSP SFAS 115-1 and 124- 1,The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, to determine if the impairment was “temporary” or “other-than-temporary.” The Company determined that the $0.4 million difference between the fair value and the historical cost of the UMC investment represented an other-than-temporary impairment and therefore recorded the amount as an “Impairment loss on short-term investments” in its Consolidated Statement of Operations for the fiscal year ended June 30, 2009.

15

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

During the fiscal year ended June 30, 2009, the Company sold all of its 52.5 million shares of UMC common stock for net proceeds of $17.2 million and recorded a loss on sale of approximately $9.0 million under “Loss on sale of short-term investments” in its Consolidated Statement of Operations. Among the 52.5 million shares of UMC common stock sold, 2.3 million shares were related to the stock dividend received on September 12, 2008.

3. BALANCE SHEET COMPONENTS

	June 30,
(Dollars in thousands)	2009			2008
Cash and cash equivalents:
Cash	$	48,712		$	37,295
U.S. Treasuries		111,773			—
Certificates of deposit		27,452			43,582
Money market funds		—			132,419
Total cash and cash equivalents	$	187,937		$	213,296
Inventories:
Work in process	$	4,935		$	4,170
Finished goods		1,893			4,510
Total inventories	$	6,828		$	8,680
Property and equipment, net:
Building and leasehold improvements	$	19,467		$	18,738
Machinery and equipment		15,454			8,773
Software		3,925			3,319
Furniture and fixtures		2,277			1,465
Construction in progress		—			103
		41,123			32,398
Accumulated depreciation and amortization		(13,536	)		(8,973	)
Total property and equipment, net	$	27,587		$	23,425
Accrued expenses and current liabilities:
Compensation and benefits	$	4,449		$	5,927
Contingent liabilities on certain option modifications (1)		4,336			4,336
Professional fees		2,687			1,572
Royalties		796			1,014
Deferred revenues less cost of revenues		344			1,274
Others		6,934			7,400
Prior software usage (2)		—			1,387
Total accrued expenses	$	19,546		$	22,910

(1)	See Note 8, “Employee Stock Plans,” of Notes to Consolidated Financial Statements
(2)	See Note 6, “Commitments and Contingencies,” of Notes to Consolidated Financial Statements

16

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. GOODWILL AND INTANGIBLE ASSETS

Goodwill and impairment

The following table presents goodwill balances and the movements during the years ended June 30, 2009 and 2008:

(In thousands)
Balance as of June 30, 2007	$	—
Goodwill acquired		1,432
Balance as of June 30, 2008	$	1,432
Goodwill acquired		7,708
Impairment charge		(1,432	)
Balance as of June 30, 2009	$	7,708

Goodwill acquired during the fiscal year ended June 30, 2009 represents the goodwill of $7.7 million related to the acquisition of selected assets from Micronas, refer to Note 11 “Business Combination” of the Notes to Consolidated Financial Statements for detail.

During the fiscal year ended June 30, 2009, the Company evaluated the viability of its STB business in China, including STB products under development by TMBJ, and determined that continuing this business would not be consistent with the Company’s current DTV market strategy. The Company’s decision to no longer allocate resources to the Chinese STB business was made concurrently with the decision to acquire certain product lines from Micronas. It was determined that these resources would instead be utilized to further penetrate the system-on-a-chip (“SoC”) market. As a result, no future revenues were expected to be generated from the Chinese STB business being developed by TMBJ. The Company considered this change as a triggering event and performed an interim impairment test of goodwill in accordance with SFAS 142 as of March 31, 2009. Based on the results of the first step of the goodwill analysis, it was determined that TMBJ’s net book value exceeded its estimated fair value as there will be no future revenues generated from the Chinese STB business. As a result, the Company performed the second step of the impairment test to determine the implied fair value of goodwill. Under step two, the difference between the estimated fair value of TMBJ and the sum of the fair value of the identified net assets results in the residual value of goodwill. The results of step two of the goodwill analysis indicated that there would be no remaining implied value attributable to goodwill and accordingly, the Company wrote off the entire goodwill balance at TMBJ and recognized a goodwill impairment charge of $1.4 million under “Goodwill impairment” in the Consolidated Statements of Operations for the fiscal year ended June 30, ended 2009.

The company has determined its reporting units based on the guidance in SFAS 142 and Emerging Issues Task Force (“EITF”) Issue D-101, “Clarification of Reporting Unit Guidance in Paragraph 30 of FASB Statement No. 142.” The Company is still in the process of integrating the business lines acquired from Micronas; therefore, as of June 30, 2009, the Company has two reporting units. In accordance with SFAS 142, the Company is required to assign the goodwill to one or more reporting units that are expected to benefit from the synergies of the combination even though other assets or liabilities of the acquired entity may not be assigned to that reporting unit. As a result, the Company assigned the entire amount of the goodwill to the reporting unit consisting of the product lines acquired from Micronas and will perform its annual goodwill impairment test within 12 months of the date of acquisition. When the integration of this business is complete, the Company may change its reporting structure which may impact the future impairment analysis and the allocation of goodwill. As of June 30, 2009, the Company had two reporting units. One reporting unit, which carries all of the Company’s goodwill balance, was created as a result of the acquisition which occurred on May 14, 2009. In accordance with SFAS 142, the Company has determined that the annual impairment test for this reporting unit will be performed during the fourth quarter of fiscal year 2010. As a result, no annual impairment test was performed on this goodwill balance as of June 30, 2009 and no interim indicators of impairment were deemed to be present.

Intangible assets and impairment

The Company has two types of intangible assets: acquisition-related intangible assets and purchased intangible assets from third-party vendors. Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable in accordance with SFAS 144.

17

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Acquisition-related intangible assets

During fiscal year ended June 30, 2009, the Company’s financial results and outlook continued to be challenged and constrained by the evolving market for its products and by its customers’ shifting market strategies, combined with a difficult macroeconomic environment. The Company performed an impairment analysis of the acquisition-related intangible assets at TMBJ and determined that the carrying amount of those intangible assets, primarily existing core technology and tradename, exceeded fair value by $0.4 million. In addition, in order to better support its focus on SoC development, the Company redeployed its TMBJ engineering resources and canceled its Chinese STB efforts. The Company performed the impairment analysis of the acquisition-related intangible assets by using the undiscounted projected future operating cash flows and determined that the remaining acquisition-related intangible assets associated with the acquisition of TMBJ were below the assets’ carrying value and recognized a $0.6 million impairment loss on acquisition-related intangible assets.

During the fiscal year ended June 30, 2009, the Company recognized a $1.0 million impairment loss on acquisition-related intangible assets at TMBJ, of which approximately $0.7 million related to acquisition-related developed and core technology was included as “Cost of revenues” and the remaining $0.3 related to tradename was included as “Selling, general and administrative expenses” in the Consolidated Statement of Operations for the fiscal year ended June 30, 2009. The Company will continue to monitor the acquisition-related intangible assets for impairment and make appropriate reductions in carrying value when called for based on an impairment analysis.

Third-party purchased intangible assets

During the fiscal year ended June 30, 2009, the Company had two key impairment indicators, which included a change in business strategy associated with more focus on SoC development and a change in the use of assets due to the acquisition of the FRC, DRX, and audio decoder product lines from Micronas. The Company performed an impairment analysis of its intangible assets and determined that its existing IP licenses which utilized demodulator technology were obsolete due to the acquisition of the demodulator technology from Micronas. Consequently, the Company wrote off $1.2 million related to the obsolete demodulator licenses under “Research and development”. Additionally, as stated above, the Company determined that continuing the Chinese STB would not be consistent with the Company’s current DTV market strategy. The Company’s decision to no longer allocate resources to the Chinese STB business was made concurrently with the decision to acquire certain product lines from Micronas. It was determined that these resources would instead be utilized to further penetrate the SoC market, and accordingly, the Company wrote off $0.5 million of the IP related to the Chinese STB business under “Research and development”. In total, the Company wrote off $1.7 million of purchased intangible assets related to the Chinese STB and the obsolete demodulator technology as a component of “Research and development” in the Consolidated Statement of Operations for the year ended June 30, 2009.

The carrying values of the Company’s amortized acquired intangible assets as of the fiscal years ended June 30, 2009 and 2008, respectively, are as follows:

	June 30, 2009							June 30, 2008
			Accumulated							Accumulated
			Amortization and							Amortization and
(Dollars in thousands)	Gross		Write-off			Net		Gross		Write-off			Net
Core and developed technologies	$	28,646	$	(21,382	)	$	7,264	$	24,587	$	(17,129	)	$	7,458
Customer relationships		2,521		(2,247	)		274		2,521		(1,561	)		960
Backlog		166		(19	)		147		—		—			—
Tradename		14		(14	)		—		14		(4	)		10
Total	$	31,347	$	(23,662	)	$	7,685	$	27,122	$	(18,694	)	$	8,428

Amortization of core and developed technologies is recorded in net revenues, cost of revenues, and the amortization of customer relationships is included in selling, general and administrative expenses. The following summarizes the amortization expense of acquired intangible assets for the periods indicated:

(Dollars in thousands)	2009		2008		2007
Reported as:
Cost of revenues	$	4,254	$	5,138	$	5,742
Selling, general and administrative		696		587		603
Net revenues		18		—		—
Total	$	4,968	$	5,725	$	6,345

18

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

As of June 30, 2009, the Company estimates the future amortization expense of acquired intangible assets for fiscal years ended June 30, 2010, 2011, and 2012, to be as follows: $3.7 million, $2.5 million and $1.5 million, respectively.

5. GUARANTEES

The Company provides for estimated future costs of warranty obligations in accordance with FASB Interpretation No. 45,Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,which requires an entity to disclose and recognize a liability for the fair value of the obligation it assumes upon issuance of a guarantee. The Company warrants its products against material defects for a period of time usually between 90 days and one year. The Company replaces defective products that are expected to be returned by its customers under its warranty program and includes such estimated product returns in its “Allowance for sales returns” analysis. The following table reflects the changes in the Company’s accrued product warranty for expected customer claims related to known product warranty issues during fiscal years ended June 30, 2009, 2008 and 2007:

(Dollars in thousands)	2009			2008			2007
Accrued product warranty, beginning of fiscal year	$	256		$	800		$	1,082
Charged to (reversal of) cost of revenues		(256	)		(372	)		1,171
Actual product warranty expenses		—			(172	)		(1,453	)
Accrued product warranty, end of fiscal year	$	—		$	256		$	800

6. COMMITMENTS AND CONTINGENCIES

Commitments

Lease Commitments

The Company leases facilities under noncancelable operating lease agreements, which expire at various dates through 2014. At June 30, 2009, future minimum lease payments under these non-cancelable operating leases for fiscal years ended June 30, 2010, 2011, and 2012 were as follows: $1.9 million, $1.4 million and $0.8 million, respectively. Rental expense for the years ended June 30, 2009, 2008, and 2007 was $1.5 million, $1.5 million, and $2.0 million, respectively.

Purchase Commitments

At June 30, 2009, the Company had purchase commitments in the amount of $19.9 million that were not included in the consolidated balance sheet at that date. Of this amount, $12.5 million represents purchase commitments by the Company from UMC and Micronas, its principal foundries, and $7.4 million represents purchase commitments by the Company for the intellectual properties and software licensing purchase. Among the $12.5 million inventory purchase commitments, $3.7 million and $8.7 million were from UMC and Micronas, respectively, and the remaining $0.1 million was from various vendors. Purchase commitments represent the unconditional purchase order commitments with contract manufacturers and suppliers for wafers and software licensing.

Contingencies

Shareholder Derivative Litigation

Trident has been named as a nominal defendant in several purported shareholder derivative lawsuits concerning the granting of stock options. The federal court cases have been consolidated asIn re Trident Microsystems Inc. Derivative Litigation, Master File No. C-06-3440-JF. A case also has been filed in State court,Limke v. Lin et al., No. 1:07-CV-080390. Plaintiffs in all cases allege that certain of the Company’s current or former officers and directors caused it to grant options at less than fair market value, contrary to its public statements (including its financial statements); and that as a result those officers and directors are liable to the Company. No particular amount of damages has been alleged, and by the nature of the lawsuit no damages will be alleged against the Company. The Board of Directors has appointed a Special Litigation Committee (“SLC”) composed solely of independent directors to review and manage any claims that the Company may have relating to the stock option grant practices investigated by the Special Committee. The scope of the SLC’s authority includes the claims asserted in the derivative actions. In federal court, Trident has moved to stay the case pending the assessment by the SLC that was formed to consider nominal plaintiffs’ claims. In State court, Trident moved to stay the case in deference to the federal lawsuit, and the parties have agreed, with the Court’s approval, to take that motion off of the Court’s calendar to await the assessment of the SLC. The Company cannot predict whether these actions are likely to result in any material recovery by or expense to, Trident. The Company expects to continue to incur legal fees in responding to these lawsuits, including expenses for the reimbursement of legal fees of present and former officers and directors under indemnification obligations.

19

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Regulatory Actions

The Company is also subject to a formal investigation by the Securities and Exchange Commission in connection with its investigation into its stock option granting practices and related issues. Although the Department of Justice (“DOJ”) commenced an investigation relating to the same issues, the DOJ has not requested information from the Company since February 20, 2009. The Company has been cooperating with, and continues to cooperate with, inquiries from the SEC and DOJ investigations. In addition, the Company has received an inquiry from the Internal Revenue Service to which it has responded. The Company is unable to predict what consequences, if any, that any investigation by any regulatory agency may have.

Indemnification Obligations

The Company indemnifies, as permitted under Delaware law and in accordance with its Bylaws, its officers, directors and members of its senior management for certain events or occurrences, subject to certain limits, while they were serving at the Company’s request in such capacity. In this regard, the Company has received, or expects to receive, requests for indemnification by certain current and former officers, directors and employees in connection with the Company’s investigation of its historical stock option grant practices and related issues, and the related governmental inquiries and shareholder derivative litigation. The maximum amount of potential future indemnification is unknown and potentially unlimited; therefore, it cannot be estimated. The Company has directors’ and officers’ liability insurance policies that may enable it to recover a portion of such future indemnification claims paid, subject to coverage limitations of the policies, and plans to make claims for reimbursement from its insurers of any potentially covered future indemnification payments.

Prior Software Usage

During April 2008, as a result of an internal review that the Company conducted, the Company determined that its use of certain third-party software in prior periods exceeded the levels of usage authorized under license agreements in effect for such periods. During the year, the Company negotiated new license agreements with the vendors in order to obtain the rights and authorizations necessary to meet its software usage requirements. During the year ended June 30, 2009, the Company determined that contracts had been negotiated with its software vendors to cover all of its current usage requirements. The Company is current with all licenses, and it is no longer probable that the Company would be expected to pay for the past usage. As a result of this determination, during the fiscal year ended June 30, 2009, the Company recorded a credit of $1.4 million to research and development expense in the Consolidated Statement of Operations. The Company currently has no remaining accrual associated with the issue on prior software usage.

General

From time to time, the Company is involved in other legal proceedings arising in the ordinary course of its business. For example, the Company is currently defending a patent infringement lawsuit brought by Gregory Bender, an individual, in the United States District Court for the Northern District of California. The lone patent asserted by Mr. Bender has expired. The Company believes that Mr. Bender’s claim for the past infringement lacks merit and intends to vigorously defend the lawsuit. While the Company cannot be certain about the ultimate outcome of any litigation, management does not believe any pending legal proceeding will result in a judgment or settlement that will have a material adverse effect on the Company’s business, financial position, results of operation or cash flows.

20

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. STOCKHOLDERS’ EQUITY

Preferred Shares Rights

On July 24, 1998, the Company’s Board of Directors adopted a Preferred Shares Rights Agreement (the “Original Rights Agreement”). Pursuant to the Agreement, the Company’s Board of Directors authorized and declared a dividend of one preferred share purchase right (“Right”) for each outstanding share of the Company’s common stock, par value $0.001 (“Common Shares”) of the Company as of August 14, 1998. The Rights are designed to protect and maximize the value of the outstanding equity interests in Trident in the event of an unsolicited attempt by an acquirer to take over Trident, in a manner or terms not approved by the Board of Directors. Each Right becomes exercisable to purchase one-hundredth of a share of Series A Preferred Stock of Trident at an exercise price of $16.67.

On July 23, 2008, the Board approved an amendment to the Original Rights Agreement pursuant to an Amended and Restated Rights Agreement dated as of July 23, 2008 (the “Amended and Restated Rights Agreement”). The Amended and Restated Rights Agreement (i) extended the Final Expiration Date, as defined in the Original Rights Agreement, through July 23, 2018; (ii) adjusted the number of shares of Series A Preferred Stock (“Preferred Shares”) issuable upon exercise of each Right from one one-hundredth to one one-thousandth; (iii) changed the purchase price (the “Purchase Price”) of each Right to $38.00; and (iv) added a provision requiring periodic evaluation (at least every three years after July 23, 2008) of the Amended and Restated Rights Agreement by a committee of independent directors to determine if maintenance of the Amended and Restated Rights Agreement continues to be in the best interests of the Company and its stockholders.

Comprehensive Income (Loss)

Under SFAS No. 130,Reporting Comprehensive Income(“SFAS 130”), any unrealized gains or losses on investments which are classified as available-for-sale equity securities are to be reported as a separate adjustment to equity. Accumulated other comprehensive income (loss), as presented in the accompanying Consolidated Balance Sheet, consists of the unrealized gains and losses on available-for-sale investments.

8. EMPLOYEE BENEFIT PLANS

Equity Incentive Plans

The Company grants nonstatutory and incentive stock options, restricted stock awards, and restricted stock units to attract and retain officers, directors, employees and consultants. As of June 30, 2009, the Company made awards under two equity incentive plans: the 2006 Equity Incentive Plan (the “2006 Plan”), the 2002 Stock Option Plan (the “2002 Plan”). The Company has also adopted the 2001 Employee Stock Purchase Plan; however purchases under this plan have been suspended. Options to purchase Trident’s common stock remain outstanding under three incentive plans which have expired or been terminated: the 1992 Stock Option Plan, the 1994 Outside Directors Stock Option Plan and the 1996 Nonstatutory Stock Option Plan. In addition, options to purchase Trident’s common stock are outstanding as a result of the assumption by the Company of options granted to TTI’s officers, employees and consultants under the TTI 2003 Employee Option Plan (“TTI Plan”). The options granted under the TTI option Plan were assumed in connection with the acquisition of the minority interest in TTI on March 31, 2005 and converted into options to purchase Trident’s common stock. Except for the 1996 Plan, all of the Company’s equity incentive plans, as well as the assumption and conversion of options granted under the TTI Plan, have been approved by the Company’s stockholders.

In May 2006, Trident’s stockholders approved the 2006 Plan, which provides for the grant of equity incentive awards, including stock options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units, performance shares, performance units, deferred compensation awards, cash-based and other stock-based awards and nonemployee director awards of up to 4,350,000 shares. On March 31, 2008, Tridents’ Board of Directors approved an amendment to the 2006 Plan to increase the number of shares available for issuance from 4,350,000 shares to 8,350,000 shares, which was subsequently approved in a special stockholders’ meeting on May 16, 2008. For purposes of the total number of shares available for grant under the 2006 Plan, any shares that are subject to awards of stock options, stock appreciation rights, deferred compensation award or other award that requires the option holder to purchase shares for monetary consideration equal to their fair market value determined at the time of grant shall be counted against the available-for-grant limit as one share for every one share issued, and any shares issued in connection with awards other than stock options, stock appreciation rights, deferred compensation award or other award that requires the option holder to purchase shares for monetary consideration equal to their fair market value determined at the time of grant shall be counted against the available-for-grant limit as 1.38 shares for every one share issued. Stock options granted under the 2006 Plan must have an exercise price equal to the closing market price of the underlying stock on the grant date and generally expire no later than ten years from the grant date. Options generally become exercisable beginning one year after the date of grant and vest as to a percentage of shares annually over a period of three to four years following the date of grant.

21

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Stock options granted under the TTI Plan expire no later than ten years from the grant date. Options granted under the TTI Plan were generally exercisable one or two years after date of grant and vest over a requisite service period of generally two or four years following the date of grant. No further awards may be made under the TTI Plan.

In December 2002, Trident adopted the stockholder-approved 2002 Plan under which shares of common stock could be issued to officers, directors, employees and consultants. Stock options granted under the 2002 Plan must have an exercise price equal to at least 85% of the closing market price of the underlying stock on the grant date and expire no later than ten years from the grant date. Options granted under the 2002 Plan were generally exercisable in cumulative installments of one-third or one-fourth each year, commencing one year following the date of grant.

The Company accounts for share-based payments, including grants of stock options and awards to employees and directors, in accordance with SFAS No. 123 (revised 2004),Share-Based Payment(“SFAS 123(R)”), which requires that share-based payments be recognized in its consolidated statements of operations based on their fair values and the estimated number of shares the Company ultimately expects will vest. Stock-based compensation expense recognized in the Consolidated Statements of Operations for the fiscal years ended June 30, 2009, 2008, and 2007 included compensation expense for stock-based payment awards granted prior to, but not yet vested as of, June 30, 2005 based on the grant date fair value estimated in accordance with the pro forma provisions of SFAS No. 123,Accounting for Stock Based Compensation(“SFAS 123”), and compensation expense for the stock-based payment awards granted subsequent to June 30, 2005 based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R). In accordance with SFAS 123(R), the Company recognizes stock-based compensation expense on a straight-line basis over the service period of all stock options and awards other than the performance-based restricted stock award with market conditions that was granted to its Chief Executive Officer under the 2006 Plan. For purposes of expensing this single performance-based grant, the Company elected to use the accelerated method.

Valuation Assumptions

The Company values its stock-based payment awards granted using the Black-Scholes model, except for the performance-based restricted stock award with a market condition granted under the 2006 Plan during the fiscal year ended June 30, 2008, for which the Company elected to use a Monte Carlo valuation methodology to value the award.

The Black-Scholes model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The Black-Scholes model requires the input of certain assumptions. The Company’s stock options have characteristics significantly different from those of traded options, and changes in the assumptions can materially affect the fair value estimates.

For the fiscal years ended June 30, 2009, 2008, and 2007, respectively, the fair value of options granted were estimated at the date of grant using the Black-Scholes model with the following weighted average assumptions:

	Equity Incentive Plans for Years Ended
	June 30,
	2009			2008			2007
Expected terms (in years)		3.94			4.20			4.25
Volatility		62.68	%		52.25	%		61.92	%
Risk-free interest rate		2.83	%		3.97	%		4.77	%
Expected dividend rate		—			—			—
Weighted average fair value	$	1.27		$	5.04		$	10.65

The expected term of stock options represents the weighted average period the stock options are expected to remain outstanding. The expected term is based on the observed and expected time to exercise and post-vesting cancellations of option by employees. The Company uses historical volatility in deriving its expected volatility assumption as allowed under SFAS 123(R) and SAB 107 because it believes that future volatility over the expected term of the stock options is not likely to differ from the past. The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected term of options to purchase Trident common stock. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts.

22

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

As stock-based compensation expense recognized in the Consolidated Statements of Operations for the fiscal years ended June 30, 2009, 2008, and 2007 is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on historical experience. The Company adjusts stock-based compensation expense based on its actual forfeitures on an annual basis, if necessary.

Stock-Based Compensation Expense

The following table summarizes the impact of recording stock-based compensation expense under SFAS 123(R) for the fiscal years ended June 30, 2009, 2008, and 2007. The Company has not capitalized any stock-based compensation expense in inventory for the fiscal years ended June 30, 2009, 2008, and 2007 as such amounts were immaterial.

	Year Ended June 30,
(Dollars in thousands)	2009		2008		2007
Cost of revenues	$	587	$	763	$	896
Research and development		7,539		12,418		8,901
Selling, general and administrative		4,547		15,424		5,810
Total stock-based compensation expense	$	12,673	$	28,605	$	15,607

During fiscal year ended June 30, 2009, total stock-based compensation expense recognized in loss before taxes was $12.7 million and there was no recognized tax benefit. During the fiscal years ended June 30, 2008 and 2007, total stock-based compensation expense recognized in income before taxes were $28.6 million and $15.6 million, respectively, and there was no recognized tax benefit for fiscal year ended June 30, 2008, and the related recognized tax benefit was $1.7 million for the fiscal year ended June 30, 2007. Among the $15.4 million selling, general and administrative expenses for the fiscal year ended June 30, 2008, $4.3 million was related to the contingent liability under SFAS No. 5,Accounting for Contingenciesas discussed below in “Modification of Certain Options.”

23

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes the Company’s stock option activities for the fiscal years ended June 30, 2007, 2008, and 2009:

				Options Outstanding
	Shares Available for						Weighted Average
(Shares in thousands, except per share amounts)	Grant			Number of Shares			Exercise Price
Balance at June 30, 2006		5,335			9,594		$	4.49
Plan shares expired		(622	)		—			—
Restricted stock granted (1)		(380	)		—			—
Options granted		(1,553	)		1,553			20.17
Options exercised		—			(541	)		1.49
Options canceled		804			(804	)		8.34
Balance at June 30, 2007		3,584			9,802		$	6.82
Options increase under 2006 Plan		4,000
Plan shares expired		(594	)		—			—
Restricted stock granted (1)		(1,273	)		—			—
Restricted stock cancellation (1)		192			—			—
Options granted		(1,870	)		1,870			10.60
Options exercised		—			(2,778	)		2.01
Options cancelled, forfeited or expired		1,369			(1,369	)		10.58
Balance at June 30, 2008		5,408			7,525		$	8.94
Plan shares expired		(594	)		—			—
Restricted stock granted (1)		(1,512	)		—			—
Restricted stock cancellation (1)		424			—			—
Options granted		(1,859	)		1,859			2.57
Options exercised		—			(1,062	)		1.23
Options cancelled, forfeited or expired		1,454			(1,454	)		9.90
Balance at June 30, 2009		3,321			6,868		$	8.21
Vested and expected to vest at June 30, 2009					6,628		$	8.28

(1) Restricted stock is deducted from shares available for grant under the 2006 Plan at a 1 to 1.38 ratio.

At June 30, 2009, 2008, and 2007, the total number of stock options exercisable was approximately 3,412,000, 3,817,000 and 4,879,000, respectively.

24

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

During the fiscal years ended June 30, 2009, 2008, and 2007, the total pre-tax intrinsic value of stock options exercised was $2.2 million, $6.1 million, and $11.2 million, respectively. The following table summarizes information about the Company’s stock options outstanding and exercisable at June 30, 2009 (in thousands except per share data):

	Options Outstanding						Options Exercisable
			Weighted Average		Weighted
			Remaining		Average				Weighted
	Number of		Contractual Term		Exercise		Number of		Average
Range of Exercise Prices	Shares		(in Years)		Price		Shares		Exercise Price
$0.78 – $1.69		1,840		5.3	$	1.16		1,515	$	1.12
$1.70 – $5.22		1,830		8.6	$	3.18		270	$	4.55
$5.34 – $15.23		1,834		7.1	$	11.45		894	$	11.56
$15.34 – $28.15		1,364		7.5	$	20.15		733	$	20.15
Total		6,868		7.1	$	8.21		3,412	$	8.22

The aggregate intrinsic value of options outstanding at June 30, 2009 was $1.1 million. The aggregate intrinsic value represents the total pre-tax intrinsic value, which is computed based on the difference between the exercise price and the $1.74 per share closing price of Trident’s common stock on June 30, 2009, which would have been received by the option holders had all option holders exercised and sold their options on that date.

The aggregate intrinsic value and weighted average remaining contractual term of options vested and expected to vest at June 30, 2009 was $1.1 million and 7.0 years, respectively. The aggregate intrinsic value and weighted average remaining contractual term of options exercisable at June 30, 2009 was $0.9 million and 5.7 years, respectively. The aggregate intrinsic value is calculated based on the closing price of Trident’s common stock for all in-the-money options on June 30, 2009.

As of June 30, 2009, there was $14.3 million of total unrecognized compensation cost related to stock options granted under all Employee Benefit Plans. This unrecognized compensation cost is expected to be recognized over a weighted average period of 2.2 years.

Restricted Stock Awards and Restricted Stock Units

The following table summarizes the activity for Trident’s restricted stock awards, or RSAs, and restricted stock units, or RSUs, for the fiscal years ended June 30, 2007, 2008, and 2009, respectively:

				Weighted Average
				Grant-Date Fair
(Shares in thousands, except per share amounts)	Shares			Value per Share
Nonvested balance at June 30, 2006		—		$	—
Granted		275			19.98
Vested		—			—
Forfeited		—			—
Nonvested balance at June 30, 2007		275		$	19.98
Granted		923			12.20
Vested		(50	)		19.64
Forfeited		(140	)		13.92
Nonvested balance at June 30, 2008		1,008		$	13.71
Granted		1,096			3.33
Vested		(247	)		3.85
Forfeited		(307	)		10.86
Nonvested balance at June 30, 2009		1,551		$	7.02

25

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Both RSAs and RSUs typically vest over a three year period or a four year period. The fair value of the RSAs and RSUs was based on the closing market price of the Company’s common stock on the date of award. The table above includes an RSA award of 110,000 performance-based shares with vesting subject to achievement of specific market conditions granted under the 2006 Plan during fiscal year ended June 30, 2008. This RSA was issued to the Company’s Chief Executive Officer on October 23, 2007 as part of her initial new hire award. The award will vest in four equal tranches, with the vesting of each tranche requiring that Trident’s common stock price target, established by the Compensation Committee, be achieved on or after one of the first four anniversaries of her employment start date. In addition, the CEO needs to be employed with the Company as of each anniversary date in order for vesting to occur.

The fair value of the restricted performance shares with market and service conditions was estimated at the grant date using a Monte Carlo valuation methodology with the following weighted-average assumptions: volatility of Trident’s common stock of 62%; internal rate of return of 25%; and risk-free interest rate of 4.41%. The weighted-average grant-date fair value of the restricted performance shares was $9.32. During each of the fiscal years ended June 30, 2009 and 2008, stock-based compensation expense of $0.4 million and $0.3 million, respectively, was recorded for these restricted performance shares because of service conditions being met. As of June 30, 2009, none of these performance-based RSAs were vested.

As of June 30, 2009, there was $10.4 million of total unrecognized compensation cost related to RSAs granted under the Employee Stock Plans. This unrecognized compensation cost is expected to be recognized over a weighted average period of 2.0 years.

Employee 401(k) Plan

The Company sponsors the Trident Microsystems, Inc. 401(k) Retirement Plan (the “Retirement Plan”) - - a defined contribution plan that is available to substantially all of its employees in the United States. Under Section 401(k) of the Internal Revenue Code, the Retirement Plan allows for tax-deferred salary contributions by eligible employees.

Participants can contribute from 1% to 25% of their annual compensation to the Plan on a pretax and after-tax basis. Employee contributions are limited to a maximum annual amount as set periodically by the Internal Revenue Code. The Company matches eligible participant contributions at 25% of the first 5% of eligible base compensation (for those employees with one or more years of service with the Company). The Retirement Plan allows employees who meet the age requirements and reach the Plan contribution limits to make a catch-up contribution not exceed the lesser of 50% of their eligible compensation or the limit set forth in the Internal Revenue Code. The catch-up contributions are not eligible for matching contributions. All matching contributions vest immediately. The Company’s matching contributions to the Plan totaled $0.1 million for each of the fiscal years ended June 30, 2009, 2008 and 2007.

Employee Stock Purchase Plan

In December 2001, the Company’s stockholders approved the 2001 Employee Stock Purchase Plan (the “ESPP Plan”), under which 750,000 shares of the Company’s common stock can be issued to all Trident employees. The ESPP Plan replaced the 1998 Employee Stock Purchase Plan. The participants’ purchase price for Trident’s common stock under the ESPP Plan is the lower of 85% of the closing market price on the first trading day of each six-month period in the fiscal year or the last trading day of the same six-month period. As of April 30, 2005, an aggregate of 299,000 shares have been issued under the ESPP Plan. Beginning on May 2, 2005, the ESPP Plan was suspended. If the Company resumes the ESPP Plan in the future, approximately 902,000 shares will be available for issuance under the ESPP Plan.

Modification of Certain Options

Extended Exercise

Effective at the close of trading on September 25, 2006, the Company temporarily suspended the ability of optionees to exercise vested options to purchase shares of the Company’s common stock until the Company became current in the filing of its periodic reports with the SEC and filed a Registration Statement on Form S-8 for the shares issuable under the 2006 Plan (“2006 Plan S-8”). This suspension continued in effect through August 22, 2007, the date of the filing of the registration statement on Form S-8 covering issuances under the 2006 Plan, which followed the Company’s filing, on August 21, 2007, of its Quarterly Reports on Form 10-Q for the periods ended September 30, 2006, December 31, 2006, and March 31, 2007. As a result, the Company extended the exercise period of approximately 550,000 fully vested options held by 10 employees, who were terminated during the suspension period, giving them either 30 days or 90 days after the Company became current in the filings of its periodic reports with the SEC and filed the 2006 Plan S-8 in order to exercise their vested options. During the three months ended September 30, 2007, eight of these ten former employees stated above exercised all of their vested options. However, on September 21, 2007, the Special Litigation Committee of the Board of Directors (“SLC”) decided that it was in the best interests of the Company’s stockholders not to allow the remaining two former employees, as well as the Company’s former CEO and two former non-employee directors, to exercise their vested options during the pendency of the SLC’s proceedings, and extended, until March 31, 2008, the period during which these five former employees could exercise approximately 428,000 of their fully vested options. Moreover, the SLC allowed one former employee to exercise all of his fully vested stock options and another former employee agreed to cancel all of such individual’s fully vested stock options during the second quarter of fiscal year ended June 30, 2008. On January 31, 2008, the SLC extended, until August 31, 2008, the period during which the two former non-employee directors could exercise their unexpired vested options. For the fiscal year ended June 30, 2008, the Company recorded aggregate incremental stock-based compensation expense totaling approximately $5.4 million related to the modifications of option exercise rights of the five former employees as described above, and the related expenses were included in “Selling, General and Administrative Expenses” in the Consolidated Statement of Operations as of that date.

26

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Contingent Liabilities

As stated in the “Extended Exercise” section above, on September 21, 2007, the SLC decided not to allow the Company’s former CEO and two former non-employee directors to exercise their vested options until March 31, 2008. Moreover, on January 30, 2008, the SLC extended, until August 1, 2008, the period during which the two former non-employee directors could exercise their vested options. On March 31, 2008, the SLC entered into an agreement with the Company’s former CEO allowing him to exercise all of his fully vested stock options. Under this agreement, he agreed that any shares obtained through these exercises or net proceeds obtained through the sale of such shares would be placed in an identified securities brokerage account and not withdrawn, transferred or otherwise removed without either (i) a court order granting him permission to do so or (ii) the written permission of the Company. On May 29, 2008, the SLC permitted one of the Company’s former non-employee directors to exercise his fully vested stock options without seeking the authorization of the SLC and entered into an agreement with the other former non-employee director on terms similar to the agreement entered into with the Company’s former CEO, allowing him to exercise all of his fully vested stock options without seeking the authorization from the SLC. Because Trident’s stock price as of June 30, 2009 was lower than the prices at which the Company’s former CEO and each of the two former directors had desired to exercise their options, as indicated in previous written notices to the SLC, the Company recorded a contingent liability in accordance with SFAS 5, totaling $4.3 million, which was included in “Accrued expenses and other current liabilities” in the Consolidated Balance Sheets as of June 30, 2009 and 2008 and the related expenses were included in “Selling, General and Administrative Expenses” in the Consolidated Statement of Operations for the year ended June 30, 2008.

Changing Employment Status from Employee to Consultant

On February 28, 2008, the Company entered into a Resignation and Consulting Agreement and General Release of Claims (the “Consulting Agreement”) with Dr. Jung-Herng Chang, its former President, who resigned effective February 26, 2008 (the “Resignation Date”). Pursuant to the terms of the Consulting Agreement, during the period from the Resignation Date through February 28, 2009 (the “Consulting Period”), Dr. Chang agreed to make himself available upon request of the Company’s Chief Executive Officer to provide consulting services to the Company, and in return, the Company agreed to pay Dr. Chang a consulting fee of $25,000 per month, and continue his group health insurance coverage under COBRA. In addition, the period of exercisability of certain vested stock options held by Dr. Chang was extended through the last day of the Consulting Period, although no additional vesting was granted. In addition, the Company paid Dr. Chang an additional sum of $8,333 per month for each month during the Consulting Period during which Dr. Chang did not provide any work, services, or assistance to any person or entity that is in any way involved in the manufacture, sale, distribution, or development of any products, technologies, or services that are (a) substantially similar to any products, technologies, or services that are manufactured, sold, distributed or under development by the Company, or (b) reasonably understood in the marketplace to compete with any products, technologies, or services that are manufactured, sold, distributed or under development by the Company. The incremental stock-based compensation expense related to the extension of the period during which Dr. Chang was able to exercise his vested options was immaterial for the fiscal year ended June 30, 2008. Dr. Chang did not provide any consulting services to the Company after February 28, 2009.

27

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. INCOME TAXES

The Company adopted the provisions of FIN 48 on July 1, 2007. The Company did not recognize any material additional liability as a result of the implementation of FIN 48. The Company’s unrecognized tax benefits at June 30, 2009 relate to various domestic and foreign jurisdictions. A reconciliation of the amount of unrecognized tax benefits from July 1, 2008 through June 30, 2009 and from July 1, 2007 to June 30, 2008 is as follows:

	Years Ended June 30,
(Dollars in thousands)	2009			2008
Balance at beginning of year	$	42,987		$	40,708
Increases related to current year tax positions		4,486			3,093
(Decreases) increases related to prior year tax positions		(4,767	)		1,515
Expiration of the statute of limitations for the assessment of taxes		(340	)		(2,329	)
Balance at end of year	$	42,366		$	42,987

Included in the unrecognized tax benefits of $42.4 million at June 30, 2009 was $22.4 million of tax benefits that, if recognized, would reduce the Company’s annual effective tax rate. In addition, the amounts associated with the interest and penalties for fiscal years ended June 30, 2008 and 2009 are immaterial.

The Company has substantially concluded all U.S. federal and material state income tax matters for years through fiscal year ended June 30, 1998 and fiscal year ended June 30, 2000, respectively. Substantially all material foreign income tax matters have been concluded through calendar year 2002. Over the next twelve months, the Company does not anticipate any material change to the balance of gross unrecognized tax benefits.

On September 3, 2009, one of the foreign jurisdictions in which the Company operates, published a new legislation that would change the computation of income attributable to that jurisdiction. This may reduce the Company’s unrecognized tax benefits under FIN 48. The Company is currently evaluating the impact of this new legislation on its consolidated financial position, results of operations and cash flows.

Income before provision for income taxes and cumulative effect of change in accounting principle is as follows:

	Year Ended June 30,
(Dollars in thousands)	2009			2008			2007
United States	$	(20,374	)	$	(34,419	)	$	(20,358	)
Foreign		(44,345	)		53,370			67,339
	$	(64,719	)	$	18,951		$	46,981

The provision (benefit) for income taxes is comprised of the following:

	Year Ended June 30,
(Dollars in thousands)	2009		2008			2007
Current:
Federal	$	181	$	311		$	180
State		1		1			2
Foreign		5,268		9,209			15,312
	$	5,450	$	9,521		$	15,494
Deferred:
Federal		—		—			—
State		—		—			—
Foreign		63		(722	)		1,179
		63		(722	)		1,179
	$	5,513	$	8,799		$	16,673

28

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The deferred income tax assets (liabilities) are comprised of the following:

	June 30,
(Dollars in thousands)	2009			2008
Deferred income tax assets:
Research and development credits	$	13,557		$	12,709
Net operating loss carryforwards		5,665			2,743
Capital loss		9,424			—
Reserves and accruals		733			2,945
Other		5,091			5,435
Deferred income tax assets		34,470			23,832
Valuation allowance		(30,010	)		(20,820	)
Deferred income tax assets, net		4,460			3,012
Total deferred income tax liabilities:
Amortization		—			(198	)
Unremitted earnings of foreign subsidiaries		(3,981	)		(2,220	)
Total deferred income tax liabilities		(3,981	)		(2,418	)
Net deferred income tax assets	$	479		$	594

As of June 30, 2009, the Company’s federal and state net operating loss carryforwards for income tax purposes were approximately $157 million and $137 million, respectively. Federal and state net operating losses will begin to expire in fiscal year ending 2015 and 2013, respectively. Federal and state tax credit carryforwards were $12 million and $10 million, respectively. Federal tax credits will begin to expire in fiscal year ending 2017. SFAS 109 requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be realized. The valuation allowance relates to research and development credits, net operating loss carryforwards, reserves and accruals and other for which the Company believes realization is uncertain.

In fiscal 2006, the Company chose to derecognize both the gross deferred income tax assets and the offsetting valuation allowance pertaining to net operating loss and tax credit carryforwards that represent excess tax benefits from stock-based awards due to a change in presentation as a result of the adoption of SFAS No. 123(R). In prior years, such excess tax benefits, with an offsetting valuation allowance, were recorded in the Company’s consolidated balance sheet. As the excess tax benefits were realized, the valuation allowance was released and additional paid-in capital was increased. SFAS No. 123(R) prohibits recognition of a deferred tax asset for excess tax benefits due to stock-based compensation deductions that have not yet been realized through a reduction in income taxes payable. As of June 30, 2009, the Company’s non-recognized deferred tax asset and the offsetting valuation allowance relating to excess tax benefits for stock-based compensation deductions was $33 million. Such unrecognized deferred tax benefits will be accounted for as a credit to additional paid-in capital, if and when realized through a reduction in income taxes payable.

The reconciliation of the income tax provisions computed at the United States federal statutory rate to the effective tax rate for the recorded provision for income taxes is as follows:

	Year Ended June 30,
	2009			2008			2007
Federal statutory rate		35.0	%		35.0	%		35.0	%
State taxes, net of federal tax benefit		7.0			11.7			5.8
Research and development credit		1.2			(3.5	)		1.4
Foreign rate differential		(32.2	)		(53.8	)		(15.1	)
Valuation allowance		(28.7	)		19.7			8.0
Permanent differences		7.4			35.7			0.2
Other		1.8			1.6			0.2
Effective income tax rate		(8.5	)%		46.4	%		35.5	%

29

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company has provided for U.S. federal income and foreign withholding taxes on non-U.S. subsidiaries’ undistributed earnings of approximately $34 million as of June 30, 2009. No material provision has been made for taxes that might be payable upon remittance of the Company’s non-U.S. subsidiaries’ undistributed earnings of approximately $140 million as of June 30, 2009, which are indefinitely reinvested in foreign operations.

10. NET INCOME (LOSS) PER SHARE

The following table sets forth the computation of net basic and diluted net income per share:

	Year Ended June 30,
(Dollars in thousands, except per share data)	2009			2008		2007
Net income (loss)	$	(70,232	)	$	10,152	$	30,118
Shares used in computing basic per share amounts		62,535			59,367		57,637
Dilutive potential common shares		—			3,384		5,743
Shares used in computing diluted per share amounts		62,535			62,751		63,380
Net income (loss) per share:
Basic	$	(1.12	)	$	0.17	$	0.52
Diluted	$	(1.12	)	$	0.16	$	0.48
Potentially dilutive securities (1)		6,868			4,916		751

(1) Dilutive potential common shares consist of stock options, restricted stock awards and restricted stock units. The potentially dilutive common shares are excluded from the computation of diluted net income (loss) per share for the above periods because their effect would have been anti-dilutive.

11. BUSINESS COMBINATIONS

Frame Rate Converter, Demodulator and Audio Decoder product lines of the Consumer Division of Micronas Semiconductor Holding AG

On May 14, 2009, the Company completed its acquisition of the selected assets of the FRC, DRX, and audio product lines of Micronas (the “Micronas Assets”). In connection with the acquisition, the Company issued 7.0 million shares of its common stock, representing approximately 10% of its outstanding common stock, and warrants to acquire up to 3.0 million additional shares of its common stock, with a fair value of approximately $12.1 million and incurred approximately $5.2 million of acquisition-related costs and liabilities, for a total purchase price of approximately $17.3 million. The acquisition was accounted for using the purchase method of accounting in accordance with SFAS 141. Under the purchase method of accounting, the total estimated purchase price, discussed below, is allocated to the net tangible and identifiable intangible assets of the Micronas Assets acquired in connection with the acquisition based on their estimated fair value as of the closing of the acquisition. The total estimated purchase price for the acquisition is as follows (in thousands):

Fair value of common stock	$	10,668
Estimated acquisition-related costs		4,136
Fair value of common stock warrants		1,419
In-process research and development		697
Value added taxes		336
Cash paid in exchange for outstanding shares of Micronas Netherlands B.V.		10
Total estimated purchase price	$	17,266

30

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The fair value of common stock issued in the acquisition was valued at $1.524 per share using an average of Trident’s closing share prices beginning two trading days before and ending two trading days after the acquisition was announced, which was March 31, 2009. The warrants were valued using the Black-Scholes option pricing model with the following inputs: volatility factor 68%, expected life of 5 years, risk-free interest rate of 1.98%, and a market value for Trident stock of $1.43 per share at the acquisition date, May 14, 2009.

Preliminary Estimated Purchase Price Allocation

The preliminary allocation of the purchase price of the tangible and identifiable intangible assets acquired and liabilities assumed in the acquisition was based on their estimated fair values. The valuation of these tangible and identifiable intangible assets and liabilities is subject to further management review and may change from the preliminary valuation. The excess of the purchase price over the tangible and identifiable intangible assets acquired and liabilities assumed has been allocated to goodwill. Under the purchase method of accounting, the total purchase price was allocated to net tangible and identifiable intangible assets acquired based on their estimated fair values as of the date of the completion of the acquisition as follows (in thousands):

Tangible assets acquired:
Cash and cash equivalents		$	142
Accounts receivable			259
Other current assets			97
Property and equipment, net			4,818
Deferred tax assets			175
Liabilities assumed:
Accounts payable			(133	)
Accrued liabilities			(366	)
Above market lease liability			(356	)
Net tangible assets acquired			4,636
Amortizable intangible assets acquired:	Estimated useful life
Core technology	3 years		4,059
Backlog	13 months		166
Goodwill	Indefinite		7,708
In-process research and development			697
Total estimated purchase price allocation		$	17,266

Assets acquired and liabilities assumed in the acquisition as of May 14, 2009 were reviewed and adjusted, if required, to their estimated fair value. Existing technology consists of products that have reached technological feasibility. The Company valued the core technology utilizing a discounted cash flow (“DCF”) model, which uses forecasts of future revenues and expenses related to the products that use the technology. Backlog valued at $0.2 million represents the value of the standing orders for the products acquired in the acquisition as of the close of the acquisition. Backlog was valued using a DCF model. Of the total purchase price, $0.7 million has been allocated to in-process research and development (“IPR&D”) and was expensed during the fiscal year ended June 30, 2009. IPR&D relates to expense spent on masks and tools, which has no alternative future use, and was completed after the announcement date but prior to the closing date.

Of the total purchase price, $7.7 million has been allocated to goodwill. Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and identifiable intangible assets acquired and is not deductible for tax purposes. The technology acquired in the acquisition will provide a greater diversity of products and enhanced research and development capabilities, which will allow the Company to pursue expanded market opportunities. These opportunities, along with the ability to leverage the existing workforce acquired in the acquisition, were the significant contributing factors to the establishment of the purchase price, resulting in the recognition of a significant amount of goodwill. In accordance with SFAS 142, goodwill is not amortized but will be reviewed at least annually for impairment or more frequently if certain triggering events occur. In the event that management determines the value of goodwill has become impaired, the Company will incur an expense in the amount of the impairment during the fiscal quarter in which the determination is made. See Note 4, “Goodwill and Intangible Assets,” of Notes to the Consolidated Financial Statements for additional details.

31

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Goodwill and amortization of intangibles are not tax deductible. The estimated future amortization expense of the Company’s purchased finite-lived intangible assets acquired is as follows (amounts in thousands):

Years Ended June 30,	Amount
2010	$	1,501
2011		1,353
2012		1,184

Unaudited Pro Forma Financial Information

The following table summarizes unaudited pro forma financial information for fiscal years ended June 30, 2009 and 2008 assuming the business combination had been consummated at the beginning of the periods presented. This pro forma financial information is for informational purposes only and does not reflect any operating efficiencies or inefficiencies which may result from the business combination and therefore is not necessarily indicative of results that would have been achieved had the businesses been combined during the periods presented (amounts in thousands, except per share date):

	Year Ended June 30,
	2009			2008
Pro forma net revnues	$	197,604		$	430,998
Pro forma net income (loss)		(91,928	)		(12,402	)
Pro forma net income (loss) per share
- basic		(1.32	)		(0.19	)
- diluted		(1.32	)		(0.19	)

Beijing Tiside Electronics Design Co., Ltd.,

On March 4, 2008, the Company acquired a 100% ownership interest in Tiside, which had been a privately held software company located in Beijing, China, for $1.9 million in cash. Following the acquisition, Tiside was renamed as Trident Microsystems (Beijing) Co. Ltd. (“TMBJ”). Total acquisition-related costs incurred were approximately $0.1 million. TMBJ designs cross-platform software that allows multimedia applications to run on devices in the digital living room such as set top boxes or DTV sets. Pro forma results of operations have not been presented because the acquisition was not material to the prior period consolidated financial statements. Of the total purchase price, approximately $1.4 million was allocated to goodwill, and approximately $1.3 million and $(0.7) million were allocated to identifiable intangible assets and net liabilities, respectively. The valuation method used by the Company was the income approach which established the fair value of the assets based on the value of the cash flows that the assets can be expected to generate in the future using the discounted cash flow method. The purchase price of the acquisition was allocated to the acquired assets and liabilities based on their estimated fair values as of the date of acquisition, including identifiable intangible assets, with the remaining amount being classified as goodwill.

All of the Company’s identifiable intangible assets from the acquisition, including backlog, the core and developed technology acquired and the customer relationships are subject to amortization and have approximate original estimated weighted average useful lives of one to eight years. The weighted average useful lives of acquired intangibles are approximately 5-6 years for core technology, 7-8 years for customer relationships, and approximately 1.0 year for backlog. See Note 4, “Goodwill and Intangible Assets,” of Notes to the Consolidated Financial Statements for additional details.

32

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. FAIR VALUE REMEASUREMENTS

Effective July 1, 2008, the Company adopted the provisions of SFAS 157, as amended. The adoption of this standard was limited to financial assets and liabilities and did not have a material effect on the Company’s financial condition or results of operations.

SFAS 157 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact business and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.

SFAS 157 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. SFAS 157 establishes three levels of inputs that may be used to measure fair value:

Level 1— Quoted prices in active markets for identical assets or liabilities.

Level 2— Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3— Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

Assets Measured at Fair Value on a Recurring Basis

The following table presents the Company’s financial assets and liabilities that are measured at fair value on a recurring basis which were comprised of the following types of instruments as of June 30, 2009 and 2008:

(Dollars in thousands)	Total		Level 1		Level 2		Level 3
U.S. Treasury (1)	$	111,773	$	111,773		—		—
Certificates of deposit (1)		27,452		27,452		—		—
Total cash equivalents as of June 30, 2009	$	139,225	$	139,225	$	—	$	—

(1) Included in Cash and cash equivalents on the Company’s Consolidated Balance Sheet.

(Dollars in thousands)	Total		Level 1		Level 2		Level 3
Money market funds (1)	$	132,419		132,419		—		—
Certificates of deposit (1)		43,582		43,582		—		—
Total cash equivalents as of June 30, 2008	$	176,001	$	176,001	$	—	$	—

(1) Included in Cash and cash equivalents on the Company’s Consolidated Balance Sheet.

13. RESTRUCTURING

On October 27, 2008, the Company announced a restructuring plan designed to improve operational efficiency and financial results. These restructuring activities have resulted in charges primarily related to employee severance and benefit arrangements. Under the restructuring plan, the Company incurred restructuring charges of approximately $0.8 million, which were recorded under “Restructuring charges” in its Consolidated Statement of Operations for fiscal year ended June 30, 2009, and all of which were cash expenditures. Under the restructuring plan, all restructuring activities were fully completed and associated restructuring costs have been paid as of June 30, 2009.

33

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. SEGMENT AND GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS

Segment and Geographic Information

The Company operates in one reportable segment called digital media solutions. The digital media business segment designs, develops and markets integrated circuits for digital media applications, such as digital television and liquid crystal display, or LCD, television.

Revenues by region are classified based on the locations of the customer’s principal offices even though customers’ revenues are attributable to end customers that are located in a different location. The following is a summary of the Company’s net revenues by geographic operations:

	Years Ended June 30,
(Dollars in thousands)	2009		2008		2007
Revenues:
Japan	$	41,615	$	91,306	$	91,721
Europe		13,841		53,801		17,421
Asia Pacific		14,061		32,618		45,725
South Korea		5,819		79,608		115,513
Americas		425		605		415
Total revenues	$	75,761	$	257,938	$	270,795

The Company’s long-lived assets are located in the following countries:

	June 30,
(Dollars in thousands)	2009		2008
Long-lived assets:
China	$	21,733	$	21,265
Europe		3,881		—
Americas		1,399		1,749
Taiwan		519		411
Asia Pacific		55		—
Total	$	27,587	$	23,425

Major Customers

The following table shows the percentage of the Company’s revenues during the years ended June 30, 2009, 2008, and 2007 that was derived from customers who individually accounted for more than 10% of revenues in that year:

	2009			2008			2007
Revenue:
Midoriya		38	%		28	%		25	%
Sharp		11	%		*			*
Philips		10	%		19	%	��	*
Samsung		*			29	%		41	%

* Less than 10% of net revenues.

As of June 30, 2009, the Company had a high concentration of accounts receivable with one customer, Samsung, which accounted for 13% of the gross accounts receivable.

34

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

15. RELATED PARTY TRANSACTIONS

As discussed in Note 11, “Business Combination” of Item 8 above, due to the acquisition of the Micronas Assets, the Company issued 7.0 million shares of common stock and warrants to purchase up to an additional 3.0 million shares of common stock to Micronas, and Micronas became the owner of approximately 10% of the outstanding common stock of the Company. In connection with the acquisition of the Micronas Assets, the Company entered into the following related agreements with Micronas on or after May 14, 2009.

• On May 14, 2009, the Company entered into a Service Level Agreement or (“SLA”) with Micronas. Under the SLA, Micronas agreed to provide to the Company specified transition services and support, including intellectual property transitional services for a limited period of time to assist the Company in achieving a smooth transition of the acquired products and product lines. The transition services include certain manufacturing design, maintenance and support services, sales of inventory and newly-manufactured products and certain finance and administration, IT, infrastructure, warehousing and similar services, to be provided pursuant to specified service level agreements. Moreover, on May 14, 2009, the Company entered into an exclusive Distributor Agreement with Micronas. Under the Distributor Agreement, Micronas served as the exclusive supplier and OEM to the Company on the FRC, DRX, and Audio Decoder product lines from May 15, 2009 to June 15, 2009. As of June 30, 2009, the outstanding accounts payable to Micronas was $5.5 million, and the outstanding accounts receivable from Micronas was $5.3 million.

• On May 14, 2009, the Company entered into a Cross License Agreement (the “Cross License”) with Micronas, pursuant to which Micronas has granted to the Company a royalty-free, perpetual, irrevocable, fully assignable and transferable worldwide license, including the right to sublicense, to patents that are relevant to, but not exclusive to, the FRC line of frame rate converters, the DRX line of demodulators and all of the audio processing product lines acquired in the acquisition. Ownership of these patents remains with Micronas following completion of the acquisition. The license is exclusive for the first three years, subject to certain exceptions, and is non-exclusive thereafter. The Company has granted to Micronas a royalty-free, perpetual, irrevocable, non-exclusive, fully assignable and transferable worldwide license, including the right to sublicense, to patents exclusively relevant to the FRC line of frame rate converters, the DRX line of demodulators and all of the audio processing product lines acquired in the acquisition. During the first three years, the license granted by the Company to Micronas is limited to use for products that are not a DRX, Audio or FRC Product. Following this three year period, Micronas may use the licensed rights on any product.

• On May 14, 2009, the Company entered into a Stockholder Agreement (the “Stockholder Agreement”) with Micronas, setting forth specified registration rights associated with the shares, including demand and piggyback registration rights, restrictions on transfer of the Shares and provides Micronas certain pre-emptive rights to acquire additional shares of its Common Stock. Under the Stockholders Agreement, Micronas has agreed to vote the Shares in support of acquisition proposals approved by the disinterested members of its Board of Directors, and together with the recommendation of the disinterested members of the Board of Directors on other stockholder proposals, and Micronas ability to engage in certain solicitations and activities encouraging support for or against proposals inconsistent with its voting agreements is restricted.

• On May 14, 2009, the Company and Micronas entered into a lease agreement. Micronas agreed to sublease 17,000 square footage of the office spaces located in Munich, Germany to the Company. The Company is currently using the office spaces for general and administration, research and engineering services. The lease expires on May 31, 2012. For detail, please refer to Item 2 Properties of this Annual Report on Form 10-K.

16. REVISION TO PREVIOUSLY REPORTED FINANCIAL STATEMENTS

The Consolidated Balance Sheet previously reported as of June 30, 2009 has been revised to reduce accounts receivable by approximately $5.3 million and increase prepaid expenses and other current assets by the same amount.

17. SUBSEQUENT EVENTS

On July 27, 2009, the Company announced its plans to eliminate approximately 70 employees or approximately 10 percent of its worldwide workforce, which followed its announcement in October 2008 of a global workforce reduction of approximately 15%. The Company is undertaking a number of cost reduction activities, including workforce reductions and termination of lease agreement, in an effort to lower its quarterly operating expense run rate in response to the current demand environment. The Company expects to incur pre-tax restructuring charges of approximately $1.5 million, primarily for employee-related costs.

On September 3, 2009, one of the foreign jurisdictions in which the Company operates, published a new legislation that would change the computation of income attributable to that jurisdiction. This may reduce the Company’s unrecognized tax benefits under FIN 48. The Company is currently evaluating the impact of this new legislation on its consolidated financial position, results of operations and cash flows.

18. TRANSACTION WITH NXP (UNAUDITED)

On October 4, 2009, Trident and its wholly-owned subsidiary Trident Microsystems (Far East), Ltd., (“TMFE”), a corporation organized under the laws of the Cayman Islands entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with NXP B.V., a Dutch besloten vennootschap (“NXP”), providing for the acquisition of selected assets and liabilities of NXP’s television systems and set-top box business lines (the “Purchase”), through a pre-closing restructuring by NXP and subsequent transactions at closing. NXP will enter into an agreement not to compete with Trident with respect to the business lines comprising the Purchase acquired by Trident for a period of three years following the Closing Date. Under the terms of the Share Exchange Agreement, NXP will receive newly issued shares of Trident common stock equal to 60% of the total outstanding shares of Trident Common Stock (the “Shares”) on the date of closing (the “Closing Date”) in exchange for the contribution of selected assets and liabilities of the Business and cash proceeds in the amount of $30 million (the “Cash Payment”). The Shares issued in exchange for the Cash Payment will be issued to NXP at a price of $4.50 per share. In addition, the Company shall issue to NXP four shares of a newly created Series B Preferred Stock (the “Preferred Shares”). The Preferred Shares will be issued pursuant to a Certificate of Designation of Series B Preferred Stock (the “Certificate of Designation”) to be filed immediately prior to the Closing Date. The Share Exchange Agreement and the transactions contemplated therein have been unanimously approved by the Board of Directors of the Company and TMFE and by the Supervisory Board of NXP.

The consummation of the Purchase is subject to customary closing conditions, including (i) approval by the Company’s stockholders of the principal terms of the Share Exchange Agreement and the transactions contemplated thereunder, including (a) the issuance of the Shares in the Purchase, (b) approval of a new equity compensation plan pursuant to which stock options, shares of restricted stock, restricted stock units, performance shares or other equity interests in the Company may be granted to employees of Trident, including employees who join the Company as a result of the Purchase, and (c) approval of an amendment to the Company’s certificate of incorporation as amended or restated, to increase the number of authorized shares of common stock issuable by the Company; (ii) the absence of any injunction, legal restraint or prohibition preventing the consummation of the Purchase, (iii) expiration or termination of the applicable waiting period under applicable antitrust or merger control regulations, (iv) the completion of certain procedural requirements by NXP in compliance with Dutch, German and United Kingdom works council obligations prior to the Closing, (v) subject to certain exceptions, the accuracy of each party’s representations and warranties, (vi) each party’s compliance with its obligations under the Share Exchange Agreement, and (vii) receipt of authorization from the NASDAQ Stock Market for listing of the Shares to be issued in connection with the Purchase.

The Company evaluated subsequent events through September 11, 2009, the date this Annual Report on Form 10-K was originally filed and through October 27, 2009, the date these financial statements were reissued and this current report on Form 10-K/A was filed with the SEC.

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TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

19. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of the Company’s quarterly consolidated results of operations (unaudited) for the fiscal years ended June 30, 2009 and 2008.

	Fiscal 2009
	First			Second			Third			Fourth
(Dollars in thousands, except per share amounts)	Quarter			Quarter			Quarter			Quarter			Total
		(1)						(2)			(3)
Net revenues	$	34,782		$	19,215		$	6,852		$	14,912		$	75,761
Gross profit	$	12,075		$	6,170		$	461		$	4,622		$	23,328
Net loss	$	(17,969	)	$	(14,584	)	$	(16,604	)	$	(21,075	)	$	(70,232	)
Net loss per share — Basic:	$	(0.29	)	$	(0.24	)	$	(0.27	)	$	(0.32	)	$	(1.12	)
Net loss per share — Diluted:	$	(0.29	)	$	(0.24	)	$	(0.27	)	$	(0.32	)	$	(1.12	)
Shares used in computing net loss per share — Basic		61,152			61,612			61,829			65,565			62,535
Shares used in computing net loss per share — Diluted		61,152			61,612			61,829			65,565			62,535

(1)	Includes $9.0 million loss on sale of UMC investment that was recorded in the quarter ended September 30, 2008. See “United Microelectronics Corporation” under Note 2, “Investments,” of Notes to Consolidated Financial Statements.
(2)	Includes $1.4 million goodwill impairment that was recorded in the quarter ended March 31, 2009. See “Goodwill and impairment” under Note 4, “Goodwill and Intangible Assets,” of Notes to Consolidated Financial Statements.
(3)	Includes $1.7 million third-party purchased intangible assets that were recorded in the quarter ended June 30, 2009. See “Third-party purchased intangible assets” under Note 4, “Goodwill and Intangible Assets,” of Notes to Consolidated Financial Statements.

36

TRIDENT MICROSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

	Fiscal 2008
	First		Second		Third			Fourth
(Dollars in thousands, except per share amounts)	Quarter		Quarter		Quarter			Quarter			Total
	(1)		(2)					(3)
Net revenues	$	88,174	$	74,984	$	55,284		$	39,496		$	257,938
Gross profit	$	42,166	$	35,788	$	25,312		$	16,760		$	120,026
Net income (loss)	$	10,059	$	7,250	$	(227	)	$	(6,930	)	$	10,152
Net income (loss) per share — Basic:	$	0.17	$	0.12	$	(0.00	)	$	(0.11	)	$	0.17
Net income (loss) per share — Diluted:	$	0.16	$	0.12	$	(0.00	)	$	(0.11	)	$	0.16
Shares used in computing net income (loss) per share — Basic		58,851		59,269		59,369			60,390			59,367
Shares used in computing net income (loss) per share — Diluted		63,605		62,747		59,369			60,390			62,751

(1)	Includes $4.9 million of stock-based compensation expense recorded in the quarter ended September 30, 2007 related to certain stock option modifications. See “Modification of Certain Options” under Note 8, “Employee Benefit Plans,” of Notes to Consolidated Financial Statements.
(2)	Includes $3.7 million of stock-based compensation expense recorded in the quarter ended December 31, 2007 related to the decision of the Company’s Special Litigation Committee not to allow the Company’s former CEO and two former non-employee directors to exercise their vested options until March 31, 2008. See “Modification of Certain Options” under Note 8, “Employee Benefit Plans,” of Notes to Consolidated Financial Statements.
(3)	Includes a $6.5 million impairment charge for loss on UMC investment that was recorded in the quarter ended June 30, 2008. See “United Microelectronics Corporation” under Note 2, “Investments and Related Party Transactions,” of Notes to Consolidated Financial Statements.

37

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Trident Microsystems, Inc.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, cash flows and stockholders’ equity and comprehensive income present fairly, in all material respects, the financial position of Trident Microsystems, Inc. and its subsidiaries at June 30, 2009 and June 30, 2008, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2009 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2), presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2009, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Note 9 to the consolidated financial statements, the Company changed the manner in which it accounts for uncertain tax positions in fiscal 2008.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded the Frame Rate Converter, Demodulator and Audio product lines of Micronas Semiconductor Holding AG, Zürich/Switzerland (the “Micronas Assets”) from its assessment of internal control over financial reporting as of June 30, 2009 because it was acquired by the Company in a purchase business combination during the year ended June 30, 2009. We have also excluded the Micronas Assets from our audit of internal control over financial reporting. The total assets and total revenues of the Micronas Assets represent approximately 3% and 6%, respectively, of the related consolidated financial statement amounts as of and for the year ended June 30, 2009.

/s/ PricewaterhouseCoopers LLP
San Jose, California
September 11, 2009, except as to Note 16 which is as of October 27, 2009

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Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Annual Report on Form 10-K, as amended, we carried out an evaluation under the supervision and with the participation of our Disclosure Committee and our management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e). Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this Annual Report on Form 10-K, as amended, is recorded, processed, summarized and reported within the time periods specified by the U.S. Securities and Exchange Commission. Disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2009, the end of the period covered by this Annual Report on Form 10-K, as amended.

The internal control over financial reporting at the Frame Rate Converter, Demodulator and Audio product lines of Micronas Semiconductor Holding AG, Zürich/Switzerland (the “Micronas Assets”) was excluded from the evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2009 because it was acquired in a purchase business combination consummated during May 2009. The total assets and total revenues acquired in the acquisition of the Micronas Assets represent approximately 3% and 6%, respectively, of the related consolidated financial statement amounts as of and for the fiscal year ended June 30, 2009.

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Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2009 based on the guidelines established inInternal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Our internal control over financial reporting includes policies and procedures that provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. Based on the results of our evaluation, our management concluded that our internal control over financial reporting was effective as of June 30, 2009.

Our evaluation of the effectiveness of internal control over financial reporting as of June 30, 2009 did not include an evaluation of the internal control over financial reporting of the Micronas Assets. We excluded the Micronas Assets from our assessment of internal control over financial reporting as of June 30, 2009 because it was acquired in a purchase business combination consummated during May 2009. The total assets and total revenues acquired in the acquisition of the Micronas Assets represent approximately 3% and 6%, respectively, of the related consolidated financial statement amounts as of and for the fiscal year ended June 30, 2009.

The effectiveness of our internal control over financial reporting as of June 30, 2009 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included in Part II, Item 8 of this Annual Report on Form 10-K, as amended.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Executive Officers

Information concerning our current executive officers is as follows:

Name	Position(s) with Trident	Age
Sylvia Summers Couder	Chief Executive Officer and President	56
Pete J. Mangan	Senior Vice President and Chief Financial Officer	50
Dr. Hungwen Li	Senior Vice President and Chief Marketing Officer	58
David L. Teichmann	Senior Vice President, General Counsel and Corporate Secretary	53
Christophe Chene	Senior Vice President of Worldwide Sales	43
Dr. Donna M. Hamlin	Vice President, Human Resources and Administration	55
Uri Kreisman	Vice President of Worldwide Operations	43
Richard H. Janney	Vice President and Corporate Controller	51

Sylvia Summers Couderhas served as Chief Executive Officer and a member of the Board of Directors since October 2007. She was also appointed as President in February 2008. She held several positions with Spansion, Inc. between 2003 and 2007, most recently as Executive Vice President of the Consumer Smart Card and Industrial Division. Prior to joining Spansion, Ms. Summers served as Vice President and General Manager of the embedded business unit for Advanced Micro Devices’ Memory Products business. She has also served as President and Chief Executive Officer of Silvan Networks, Group Vice President and General Manager for the Public Access Management Network Services Group at Cisco Systems, Vice President and General Manager of the Multi-Platform Group at Storage Technology Corporation and in various senior-level management positions at Group Bull, Thomson CSF-RCM Division, and Matra Datasystems. She holds a B.S. degree in Electrical Engineering from Ecole Polytecnique Feminine in France and a M.S. degree in Electrical Engineering from the University of California, Berkeley.

Pete J. Manganjoined Trident in January 2008. Previously, he was at Spansion from July 2005 to January 2008 and served in various financial positions including Director of Finance. From December 2004 to May 2005, he served as Vice President of Finance and Administration for Compxs. From December 2002 to December 2004 he served in various financial positions including Director of Finance for Asyst Technologies, Inc. Previous to Asyst, Mr. Mangan held senior executive financial positions at Advanced Micro Devices, FormFactor, Trident Microsystems, Real Chip Communications and Genesis Microchip. He holds a B.A. degree in Business/Economics from the University of California at Santa Barbara.

Dr. Hungwen Lijoined Trident in January 2007. Previously, he was the Chief Marketing Officer of Huahong International, a Shanghai-based IDM semiconductor company, from October 2005 to December 2006. Dr. Li served as General Manager, Vice President and CTO positions in Agilent’s semiconductor business from December 2002 to October 2005. From April 2000 to December 2002, Dr. Li was President and CEO of RedSwicth, a company he started and was acquired by Agilent. From 1991 to 2000, he was with HAL Computer Systems as General Manager and Vice President. He was with IBM Thomas J. Watson Research Center and Almaden Research Center from 1983 to 1991. He holds a B.S degree in Electrical Engineering from National Taiwan University, and a M.S. degree in Electrical Engineering and Ph.D. degree from the University of Pittsburgh.

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David L. Teichmannjoined Trident in April 2007. Previously, he was the Senior Vice President, General Counsel and Secretary of GoRemote Internet Communications, Inc., a secure managed global remote access solutions provider, from July 1998 until its acquisition by iPass, Inc. in February 2006. From 1993 to July 1998, he served in various positions at Sybase, Inc., an enterprise software company, including Vice President, International Law as well as Director of European Legal Affairs based in The Netherlands. From 1989 to 1993, Mr. Teichmann was Assistant General Counsel for Tandem Computers Corporation, a fault tolerant computer company, handling legal matters in Asia-Pacific, Japan, Canada and Latin America. He began his legal career as an attorney with the Silicon Valley-based Fenwick & West LLP. Mr. Teichmann holds a B.A. degree in Political Science from Trinity College, an M.A.L.D. degree in Law & Diplomacy from the Fletcher School of Law & Diplomacy and a J.D. degree from the University Of Hawaii School Of Law. He was also a Rotary Foundation Scholar at the Universidad Central de Venezuela, where he did post-graduate work in Latin American Economics and Law.

Christophe Chenejoined Trident in January 2009. Mr. Chene was at Xilinx, serving most recently as its Vice President, Global Business Development during 2008. From 2005 to 2008, he served first as Senior Director, Marketing and Applications in the General Products Division at Xilinx, and from 2007 to 2008 as Vice President and General Manager, Micro Scale Products Division at Xilinx. From 2002 to 2005, Mr. Chene served as Senior Director, Integrated Circuits Marketing at Sharp Microelectronics of the Americas. Prior to that, he was with Texas Instruments, Inc., serving as Director, Digital Control Systems Business Unit, DSP Group, from 2000 to 2002, and in a variety of marketing manager, product marketing engineer or application engineer positions at Texas Instruments from 1990 to 2000. Mr. Chene holds a Bachelor of Science degree in Automatic Control Electronics and Electronic Engineering from the Institut National Des Sciences Appliqués in Toulouse, France.

Dr. Donna M. Hamlinjoined Trident in January 2008. Dr. Hamlin most recently served as Vice President, Human Resources and Organizational Development at Asyst Technologies, Inc., where she was employed from August 2004 to December 2007. She held a consulting position with Trimble Navigation between 2002 and 2004, working on corporate strategy. Prior to consulting for Trimble Navigation, Dr. Hamlin has served in numerous executive positions at companies such as SiteROCK Corporation, Associates First Capital Corporation, Texaco and General Electric, and headed a private consulting practice serving multinational clients for 14 years. She holds a B.A. degree in Humanities from Siena College and a M.S. degree in Communication and a Ph.D. degree in Organizational Communication from Rensselaer Polytechnic Institute.

Uri Kreismanjoined Trident in November 2008. Mr. Kreisman had a long career at Zoran Microelectronics, Ltd., serving most recently as its Senior Director of Operations from 2001 to October 2008. From 1996 to 2001, he served in a variety of engineering capacities at Zoran, including as a Product and Test Engineering Manager. From 1994 to 1996, Mr. Kreisman served as a Product Engineer for Tower Semiconductor, Ltd. in Israel. Mr. Kreisman holds a Bachelors of Science degree in Electrical Engineering and a Business Administration Diploma from the Israel Institute of Technology and a Bachelors of Science degree in Electrical Engineering from The Transport Institute, Leningrad, Russia.

Richard H. Janneyjoined Trident in July 2009. Mr. Janney has served as an independent financial consultant since June 2008, and has consulted for the Company since December 2008. From February 2007 to May 2008, he served as Vice President of Finance at Asyst Technologies, Inc., and from September 2006 to January 2007, he served as its Acting Chief Financial Officer. From August 2002 to March 2007, Mr. Janney served in a variety of positions at Jefferson Wells, most recently as Engagement Manager. He served in a variety of senior financial positions at ZeBU, Inc., G. Gund III and Cholestech Corporation and began his career as an Audit Manager at Price Waterhouse. Mr. Janney holds a Bachelor of Science degree in Accounting and Finance from California Polytechnic State University, San Luis Obispo.

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Directors

Information concerning our current directors is as follows:

				Director
Name	Position with Trident	Age		Since
Glen M. Antle	Director		71		1992
Brian R. Bachman	Director		64		2007
David H. Courtney	Chairman of the Board*		50		2008
Hans Geyer	Director		58		2007
Dr. J. Carl Hsu	Director		67		2008
Raymond K. Ostby	Director		62		2006
Sylvia Summers Couder	Director, President and Chief Executive Officer		56		2007

* Effective as of October 20, 2009, Mr. Antle stepped down as Chairman of the Board and Mr. Courtney was elected to serve as his successor.

Glen M. Antlehas served as a director of the Company since July 1992 and as its Chairman from November 2006 to October 2009. He also served as its Acting Chief Executive Officer between November 2006 and October 2007. From July 1996 to August 1997, Mr. Antle was a director of Compass Design Automation, a company providing EDA tools and libraries. From February 1991 to June 1993, he served as Chairman of the Board of Directors of PiE Design Systems, an electronic design automation company, and from August 1992 to June 1993 as its Chief Executive Officer. In June 1993, PiE merged into Quickturn Design Systems, Inc., also an electronic design automation company, and Mr. Antle served as Chairman of the Board of Directors of Quickturn from June 1993 to June 1999. Mr. Antle was a co-founder of ECAD, Inc., now Cadence Design Systems, Inc., and served as Co-Chairman of the Board of Directors from May 1988 to June 1989 and as its Chairman of the Board of Directors and Chief Executive Officer from August 1982 to May 1988. Mr. Antle is also a director of Semtech, a semiconductor corporation.

Brian R. Bachmanhas served as a member of the Board of Directors since May 2007. Mr. Bachman is a private investor and the Managing Partner of River Farm LLC. From 2000 to 2002, Mr. Bachman served as Chief Executive Officer and Vice Chairman of Axcelis Technologies, which produces equipment used in the fabrication of semiconductors. Mr. Bachman also serves as a director of Kulicke & Soffa Industries, Keithley Instruments and Ultra Clean Technology. Mr. Bachman holds a B.S. degree in engineering from the University of Illinois and an M.B.A. degree from the University of Chicago.

David H. Courtneyhas served as a member of the Board of Directors since January 2008. Mr. Courtney became chief executive officer of JiWire, Inc. effective September 29, 2009. From September 2008 to September 2009, Mr. Courtney was an Executive in Residence at Venrock. Previously, he served as President, Chief Operating Officer and Chief Financial Officer of Adify, Inc. from September 2007 to August 2008. Prior to joining Adify, Mr. Courtney served in senior management positions at TiVo, Inc. from 1999 to 2006, most recently as Group Executive, Corporate Products & Services, Chief Financial Officer and a member of the Board of Directors from 2005-2006, Executive Vice President Worldwide Operations and Administration, Chief Financial Officer and a member of the Board of Directors from 2001-2005, Senior Vice President, Finance and Administration and Chief Financial Officer from 2000-2001, and Vice President and Chief Financial Officer from 1999 to 2000. Prior to his tenure at TiVo, Mr. Courtney was a Managing Director, Investment Banking at J.P. Morgan & Co., and before that, a Vice President, Investment Banking High Technology Group at Goldman Sachs & Co. Mr. Courtney holds an A.B. degree in Economics from Dartmouth College and an M.B.A. from Stanford University.

Hans Geyerhas served as a member of the Board of Directors since May 2007. Mr. Geyer served as Corporate Vice President and General Manager of Intel Corporation’s Storage Group from 2005 to his retirement in December 2006, and as General Manager, Networking and Storage Group from 2004 to 2005. Mr. Geyer joined Intel in 1980, and since held various positions, including general manager of European Operations, general manager of the 386/486 microprocessor division, general manager of the FLASH memory group, and general manager of the cellular and application processor group. Prior to joining Intel, Mr. Geyer was involved in hardware and software development for intelligent and point-of-sales terminals at Siemens AG, Germany. Mr. Geyer studied computer science and mathematics at the Technical University of Munich and holds a masters degree (Diplom-Informatiker) in computer science.

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Dr. J. Carl Hsuhas served as a member for the Board of Directors since April 2008. Dr. Hsu has served since October 2001 as Professor, School of Electrical Engineering and Computer Science, at Peking University. From 1972 until his retirement in December 2003, he served in a variety of senior positions at Bell Laboratories (including AT&T and Lucent), most recently as President and CEO, Bell Laboratories Asia Pacific and China, headquartered in Beijing. His positions during this period also included service as President and CEO of Lucent`s Communications Software Group and as Executive Vice President, Advanced Technologies of Bell Laboratories. He is currently a member of the Board of Directors of Taiwan Mobile Co., Ltd. and Rogers Corporation. Dr. Hsu holds a B.S. degree in Electrical Engineering from the National Taiwan University and M.S. and Ph.D. degrees in Computer Science from the University of California at Los Angeles.

Raymond K. Ostbyhas served as a member of the Board of Directors since July 2006. Mr. Ostby has served as Vice President of Finance and Administration and Chief Financial Officer of ASSIA, Inc., a private emerging telecommunications infrastructure company, since January 2009. Mr. Ostby served as Vice President and Chief Financial Officer of NextG Networks, Inc., a private emerging wireless infrastructure company, from January 2005 to May 2008 and as its Vice President, Administration from May 2008 to October 2008. From July 2003 until January 2005, Mr. Ostby was Vice President, Finance & Administration and Chief Financial Officer at Arraycomm, Inc., a provider of multi-antenna signal processing solutions, and since June 1999, he has been Vice President, Finance & Administration, Chief Financial Officer and Secretary at KBC Pharma, a privately held company. From September 1993 until May 1999, Mr. Ostby was employed as Vice President, Finance and Administration, Chief Financial Officer and Secretary at Quickturn Design Systems, Inc., a provider of system-level verification solutions. From September 1991 to September 1993, he served as Vice President, Finance and Administration, Chief Financial Officer and Secretary at Force Computers, Inc., a computer products company. From June 1985 to September 1991, he served as Vice President, Finance and Administration, Chief Financial Officer and Secretary of Atmel Corporation, a manufacturer of semiconductor products. Mr. Ostby has been a Certified Public Accountant and holds a B.A. degree and an M.B.A. degree from the University of Montana, and completed Ph.D. coursework in Quantitative Analysis at the University of California at Berkeley.

Sylvia Summers Couderhas served as Chief Executive Officer and a member of the Board of Directors since October 2007. She was also appointed as President in February 2008. She held several positions with Spansion, Inc. between 2003 and 2007, most recently as Executive Vice President of the Consumer Smart Card and Industrial Division. Prior to joining Spansion, Ms. Summers served as Vice President and General Manager of the embedded business unit for Advanced Micro Devices’ Memory Products business. She has also served as President and Chief Executive Officer of Silvan Networks, Group Vice President and General Manager for the Public Access Management Network Services Group at Cisco Systems, Vice President and General Manager of the Multi-Platform Group at Storage Technology Corporation and in various senior-level management positions at Group Bull, Thomson CSF-RCM Division, and Matra Datasystems. She holds a B.S. degree in Electrical Engineering from Ecole Polytecnique Feminine in France and a M.S. degree in Electrical Engineering from the University of California, Berkeley.

Audit Committee, Audit Committee Financial Expert

The Audit Committee consisted of three independent, non-employee directors during fiscal year 2009: Raymond K. Ostby, Hans Geyer and David H. Courtney. The Board of Directors has determined that each of Mr. Ostby and Mr. Courtney is an “audit committee financial expert” as defined in Item 401(h) of Regulation S-K. The Board of Directors annually reviews the NASDAQ listing standards definition of independence for Audit Committee members and has determined that all members of our Audit Committee are independent (as required by Rule 5605(c) of the NASDAQ Listing Rules and as independence is defined in Rule 5604(a)(2).

The Audit Committee of the Board of Directors oversees our corporate accounting and financial reporting processes and the audits of our financial statements. For this purpose, the Audit Committee performs several functions:

• Maintains responsibility for the appointment, compensation, retention and oversight of our independent registered public accounting firm;

• Approves in advance the engagement of the independent registered public accounting firm for all audit and non-audit services, and approves the fees and other terms of the engagement;

• Reviews, with our independent registered public accounting firm, any significant difficulties, disagreements, or restrictions encountered during the course of the audit, and reviews any management letters issued by the independent registered public accounting firm;

• Reviews the critical accounting policies and all alternative treatments of financial information discussed by the independent registered public accounting firm with management, and reviews with management significant judgments made in the preparation of financial statements;

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• Reviews, with our independent registered public accounting firm, management and the Board of Directors, our financial reporting processes and internal control over financial reporting;

• Reviews the annual audited financial statements and recommends to the Board of Directors their inclusion in our annual report;

• Reviews the quarterly financial statements and earnings press releases;

• Reviews with management its assessment of the effectiveness and adequacy of our internal controls and procedures for financial reporting, and any significant deficiencies in the design or operation of our internal controls, and reviews with the independent registered public accounting firm their attestation to and report on our internal controls;

• Reviews and approves any related party transactions;

• Establishes and oversees procedures for the receipt, retention and treatment of complaints received regarding accounting, internal controls or auditing matters; reviews changes in, or waivers of, our Code of Conduct, and as requested by the Board, reviews and investigates any conduct alleged to be in violation of the Code of Conduct; and

• Periodically reviews and discusses with the independent registered public accounting firm the matters required to be discussed by Statement on Accounting Standards 61 (Codification of Statements on Auditory Standards No. 380) and any formal written statements received from the registered independent public accounting firm.

Director Nominations

In fulfilling its responsibilities, the Nominating and Corporate Governance Committee considers the following factors in reviewing possible candidates for nomination as director:

• The appropriate size of our Board of Directors and its Committees;

• The perceived needs of the Board of Directors for particular skills, background and business experience;

• The skills, background, reputation, and business experience of nominees compared to the skills, background, reputation, and business experience already possessed by other members of the Board of Directors;

• Nominees’ independence from management;

• Applicable regulatory and listing requirements, including independence requirements and legal considerations, such as antitrust compliance;

• The benefits of a constructive working relationship among directors; and

• The desire to balance the considerable benefit of continuity with the periodic injection of the fresh perspective provided by new members.

The Nominating and Corporate Governance Committee believes that candidates for director should have certain minimum qualifications, and the highest personal integrity and ethics. The Nominating and Corporate Governance Committee also intends to consider such factors as possessing relevant expertise upon which to be able to offer advice and guidance to management, having sufficient time to devote to our affairs, having the ability to exercise sound business judgment and having the commitment to represent the long-term interests of our stockholders. However, the Nominating and Corporate Governance Committee retains the right to modify these qualifications from time to time. Candidates for director nominees are reviewed in the context of the current composition of the Board of Directors, the operating requirements of Trident and the long-term interests of stockholders. In conducting this assessment, the Nominating and Corporate Governance Committee considers diversity, age, skills, and such other factors as it deems appropriate given the current needs of the Board of Directors and Trident, to maintain a balance of knowledge, experience and capability. In the case of incumbent directors whose terms of office are set to expire, the Nominating and Corporate Governance Committee reviews such directors’ overall service to Trident during their term, including the number of meetings attended, level of participation, quality of performance, and any other relationships and transactions that might impair such directors’ independence. In the case of new director candidates, the Nominating and Corporate Governance Committee also determines whether the nominee must be independent for NASDAQ purposes, which determination is based upon applicable NASDAQ listing standards, applicable SEC rules and regulations and the advice of counsel, if necessary. The Nominating and Corporate Governance Committee conducts any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of the Board of Directors. The Nominating and Corporate Governance Committee meets to discuss and consider such candidates’ qualifications and then selects a nominee for recommendation to the Board of Directors by majority vote.

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The Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders. In June 2009 we received from Spencer Capital Management LLC, a notice of intention to nominate two candidates for election to our Board of Directors at the 2009 annual meeting of our stockholders. Our Nominating and Corporate Governance Committee reviewed the candidates nominated by Spencer Capital Management LLC at the time it reviewed the two directors up for re-election at our 2009 annual meeting. In connection with this review, the Nominating and Corporate Governance Committee confirmed that it did not intend to alter the manner in which it evaluates candidates, including the minimum criteria set forth above, based on whether or not the candidate was recommended by a stockholder. In October 2009, following the announcement of our proposed acquisition of selected assets and liabilities of the television systems and set-top box business lines of NXP B.V., Spencer Capital Management LLC announced that it was withdrawing its intent to nominate its previously announced slate of nominees to our Board of Directors.

Stockholders who wish to recommend individuals for consideration to become nominees for election to the Board of Directors may do so by delivering a written recommendation to the Nominating and Corporate Governance Committee at: 3408 Garrett Drive, Santa Clara, California 95054, attention: Nominating and Corporate Governance Committee, at least 120 days prior to the anniversary date of the mailing of the proxy statement for the last Annual Meeting of stockholders. Submissions must include the full name of the proposed nominee, a description of the proposed nominee’s business experience for the previous five years, biographical information, a description of the proposed nominee’s qualifications as a director and a representation that the nominating stockholder is a beneficial or record owner of our stock. Any such submission must be accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as a director if elected.

Effective March 5, 2009, the Board of Directors adopted amendments to our Amended and Restated Bylaws to clarify the requirements and procedures for the calling of a special meeting by stockholders, including without limitation to provide (i) for the form and content of a notice of stockholders requesting a special meeting, (ii) that upon the request of certain requisite stockholders, the Board shall fix a record date applicable for both determining stockholders entitled to participate in calling a special meeting and for the special meeting, (iii) that the Board shall fix the date, time and place of the special meeting, (iv) that the Board may submit its own proposals for consideration at such a special meeting, and (v) that stockholders shall not be permitted to propose business to be brought before a special meeting other than as set forth in the Amended and Restated Bylaws. The Bylaws were also revised to clarify the requirements and procedures for the notice of business, including additional information required to be provided by requesting stockholders concerning beneficial ownership of derivative and other instruments, concerning any persons acting in concert in connection with then notice and to clarify the procedures for and the information required concerning the nomination of director candidates by stockholders.

Code of Ethics

We have adopted a Code of Business Conduct and Ethics, referred to in this Amendment as the Code of Conduct, which applies to all of our employees, officers and directors, including our principal executive officer, principal financial officer, principal accounting officer and other senior financial officers. The Code of Conduct, as applied to our principal executive officer, principal financial officer and principal accounting officer, constitutes our “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act and is our “code of conduct” within the meaning of the listing standards of NASDAQ. You may view our Code of Conduct on our website at http://www.tridentmicro.com/investors. A printed copy may also be obtained by any stockholder upon request. We intend to disclose any future amendments to certain provisions of our Code of Conduct, and any waivers of provisions of the Code of Conduct required to be disclosed under the rules of the Securities and Exchange Commission or listing standards of NASDAQ, at the same location on our website.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and certain officers, and persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the SEC. The SEC requires officers, directors and greater than ten percent beneficial owners to furnish us with copies of all Forms 3, 4 and 5 they file.

We believe that all of our officers, directors and greater than ten percent beneficial owners complied with all their applicable filing requirements during the fiscal year ended June 30, 2009. This is based on our review of copies of Forms 3, 4 and 5.

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Item 11. Executive Compensation.

Compensation Discussion and Analysis

Compensation Philosophy and Objectives

This discussion discusses Trident’s compensation program for the named executive officers, namely, our Chief Executive Officer, our Chief Financial Officer, and the three most highly compensated executive officers (other than the Chief Executive Officer and the Chief Financial Officer) in fiscal year 2009.

We are engaged in a very competitive industry, and our success depends upon our ability to attract and retain qualified executives. Accordingly, our compensation arrangements must be competitive. The Compensation Committee’s intent is to target salaries, annual incentives, long-term incentive grant values and total direct compensation at median levels of our peers, based on the best-available market data. Benefits and other perquisites offered to executives are intended to be competitive with programs offered by other companies against whom we compete for personnel. The Compensation Committee administers the compensation programs for our executive officers, considering this competitive environment, but also believes that the compensation paid to our executive officers should be dependent upon our financial performance and the value that we create for our stockholders. For this reason, the Compensation Committee structures our compensation programs to link executive officer compensation with achievement of our performance goals, while still providing meaningful incentives for the attainment of our short-term and long-term strategic objectives and rewarding those executive officers who make substantial contributions to the attainment of those objectives. For fiscal year 2009, the Committee also considered the challenges we faced in hiring and retaining key executives and other personnel, our plans for key organizational changes and acquisition activities in fiscal year 2009, as well as the interaction of our compensation philosophy and practices in light of the evolving global macroeconomic environment and our turnaround status.

The Compensation Committee’s objectives are to:

• Attract, retain, and motivate talented executives responsible for the success of the organization;

• Provide compensation to executives that is externally competitive, internally equitable and performance-based;

• Provide affordable levels of compensation for each executive in exchange for expected levels of performance and results; and

• Ensure that total compensation levels are reflective of company performance and provide executives with the opportunity to receive above market total compensation for exceptional business performance.

In order to meet these objectives, we target a majority of executive officer compensation as performance-based and, therefore, at risk.

The Compensation Process

Operation of the Compensation Committee; Role of Its Advisers

The Compensation Committee has responsibility for, among other things, discharging the Board’s responsibilities relating to compensation and benefits of our executive officers, including responsibility for evaluating and reporting to the Board on matters concerning management performance, officer compensation and benefits plans and programs. In carrying out these responsibilities, the Compensation Committee reviews all components of executive officer compensation for consistency with our compensation philosophy. The Compensation Committee oversees and provides strategic direction to management regarding Trident’s compensation programs. It also determines the compensation of our Chief Executive Officer and all other executive officers.

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The Committee employs an independent compensation consultant, Radford Surveys + Consulting, an independent compensation consulting firm and a business unit of Aon, first retained in fiscal year 2007 to perform a study on behalf of the Compensation Committee (“Radford Consulting”). The compensation consultant provides analyses and recommendations for the Compensation Committee to review in making its decisions regarding executive and employee compensation programs, but it does not decide or approve any compensation actions. Radford Consulting developed criteria used to identify peer companies for executive compensation and performance comparisons; compiled and evaluated market data; advised on total target compensation and it elements, design changes to the short- and long-term incentive compensation plans; and reviewed various proposals presented to the Committee by management.

The Chairman of the Compensation Committee communicates directly with representatives of Radford Consulting, and a representative of Radford Consulting attends meetings of the Compensation Committee on an as-needed basis as requested. In addition, Radford Consulting periodically provides advice related to award levels in connection with our grant of equity awards to executive officers as well as other non-officer employees. In fiscal year 2009, Radford Consulting was paid approximately $70,000.00 for its services to us.

In addition, beginning with fiscal year 2010, management has retained Compensia, Inc., an independent compensation consultant (“Compensia”) to provide analyses and recommendations to solely to management, and in particular, to our Chief Executive Officer, in order to assist her in developing recommendations concerning the compensation of officers and employees reporting to her. Compensia has compiled and evaluated market data and advised our Chief Executive Officer on executive officer compensation, including base compensation, and short and long-term cash and equity compensation programs. The data, analyses and advice supporting the recommendations of our Chief Executive Officer are reviewed with Radford Consulting and with the Compensation Committee when explaining the basis for the recommendations; however, the Compensation Committee relies on the independent advice of Radford Consulting when reaching final agreement on executive compensation packages.

Role of Management and the Chief Executive Officer in Setting Executive Compensation

Our Chief Executive Officer, Ms. Sylvia D. Summers, our Vice President, Human Resources and Administration, Dr. Donna Hamlin, and our Senior Vice President, General Counsel and Corporate Secretary, Mr. David L. Teichmann, attend most meetings of the Compensation Committee, in part, and provide recommendations to the Compensation Committee regarding the design and implementation of our compensation programs, including our bonus programs and other long-term equity compensation programs, and recommend financial and other performance targets to be achieved under those programs. Ms. Summers also provides input into the compensation of our executive officers, based upon data and analyses provided by Compensia.

Peer Group Selection and Benchmarking

In July 2008, in order to determine the base salary and total compensation for our executive officers for fiscal year 2009, Radford Consulting again provided to the Compensation Committee data concerning compensation payable to similarly-situated executives, as well as burn rates and overhang data, in comparable companies in our industry. Radford Consulting gathered competitive market data from its Executive High-Technology Survey and from our peer companies, blending its survey data equally with proxy data to form an overall market composite, where possible, with market data gathered at the 25th, 50th and 75th percentiles, updated to September 1, 2008 by a 4.1% annual update factor to reflect a common effective date. Radford Consulting assessed our target compensation and equity ownership against the market on base salary, short-term incentives, target total cash compensation, annual long-term incentives and calculated total direct compensation, and conducted a competitive review of our individual executive positions.

From the results of that assessment, as well as insight into the competitive practices of companies in our industry with a comparable maturity of business, Radford Consulting proposed a compensation plan for fiscal year 2009 for all executive officers. Radford Consulting presented this report and analysis to the Compensation Committee. The Compensation Committee reviewed and considered the Radford Consulting report when determining the level of compensation for each named executive officer for fiscal year 2009, including certain base salary changes, bonus targets, other cash incentives and equity awards. In the course of determining whether to make adjustments to each individual executive’s existing compensation, the Compensation Committee evaluated the experience of each individual executive, the scope of the individual executive’s position and the executive’s tenure and performance in his or her role.

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The Compensation Committee utilized the Radford High Technology Executive Compensation Survey for as a comparative framework to define specific peer companies and data sources to be used in the assessment of executive compensation. Public peer data gathered by Radford Consulting was supplemented by appropriate survey sources. For executives, the peer companies were chosen by the Compensation Committee based on industry and size (revenue, market capitalization and number of employees), as the primary source, and secondarily based on the broader technology marketplace based on revenues. For the Compensation Committee’s deliberations of fiscal year 2009 executive compensation, the Compensation Committee reviewed survey data from a customized benchmark group comprised of the following companies:

• Actel Corp.

• AMIS Holdings Inc.

• Atheros Communications

• Cirrus Logic Inc.

• DSP Group Inc.

• Genesis Mircochip Inc.

• Hittite Microwave Corp.

• Ikanos Communications Inc.

• Integrated Device Tech Inc.

• Integrated Silicon Solution

• Intersil Corp.

• Microsemi Corp.

• Mindspeed Technologies Inc.

• PMC-Sierra Inc.

• RF Micro Devices Inc.

• Semtech Corp.

• Silicon Image Inc.

• Silicon Laboratories Inc.

• SIRF Technology Holdings Inc.

• Smart Modular Technologies (WWH), Inc.

• Standard Microsystems Corp.

• Zoran Corp.

The peer group is generally reviewed annually and was last updated for fiscal year 2009 compensation decisions in July 2008. The peer group was originally established for fiscal year 2007 compensation decisions, and has been used for compensation decisions since that time for compensation decisions thereafter and for year-end compensation benchmarking. The addition of Atheros Communications was the only change to the peer group established for determining fiscal year 2008 compensation. It is expected that the composition of this benchmark group may fluctuate from year to year.

For competitive benchmarking purposes, the positions of our named executive officers were compared to their counterpart positions in the peer group, and the compensation levels for comparable positions in the peer group were examined for guidance in determining base salaries, annual cash incentives, total cash compensation, long-term incentive grant values and total compensation.

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Elements of Compensation and How Each Element is Chosen

The Compensation Committee on average seeks to set the base salary of our executive officers close to the 50^th percentile, with target total cash compensation and target equity compensation combined between the 50^th and 75^th percentile, depending on the specific position, of the compensation of similarly-situated executives in comparable companies in our industry with whom Trident directly competes in our hiring and retention of executives. Compensation positioning is reviewed in order to assess the pay levels and pay mix of the executive compensation program, while actual executive compensation may be above or below the stated philosophy based upon experience, scope of position and individual performance. Compensation is considered competitive if base salary is within 85% to 115% of the target pay position, total target cash is within 80% to 120% of the target pay position, and target equity grant values are within 70% to 130% of the target position.

In addition, business results and individual contribution and performance from the most recently completed fiscal years factor heavily in setting executive compensation, and in July 2008, the Compensation Committee conducted a thorough review of our current compensation practices, reviewed a summary of our annual performance review process and evaluated management’s proposals for fiscal year 2009 compensation, including merit increases, promotions, bonuses, stock grants and the proposed fiscal year 2009 incentive compensation formulae, prior to approving fiscal year 2009 executive compensation. The Compensation Committee also reviewed the data provided by Radford Consulting concerning compensation payable to our other key senior employees, and noted that Trident is in a period of turning its business around and significantly transitioning its operations and organizational structure. The Compensation Committee reviewed information provided by Radford Consulting that indicates that in such a situation, total cash compensation may be targeted above the median, with an emphasis on annual incentive opportunities, and equity compensation may be set above the market medians. The Compensation Committee believed that this temporary shift in emphasis would allow Trident to retain and attract the key executives necessary to improve operating results.

Each executive officer’s compensation generally consists of three elements: (i) base salary, (ii) cash bonus based upon participation in a bonus pool tied to our attainment of pre-established objectives, and (iii) long-term stock-based incentive awards, in the form of stock options and shares of restricted stock designed to align the interests between our executive officers and our stockholders. The main compensation elements for our executive officers (salary, annual incentive, long-term incentive, and other benefits and perquisites) are described in more detail below.

Base Salaries

Base salaries of the executive officers are targeted at a competitive market median on a job-by-job basis with individual variations explained by differences in experience, skills and sustained performance. The Compensation Committee generally reviews the executive officers’ salaries on an annual basis or at the time of promotion or a substantial change in responsibilities, and conducted such a review in July 2008 for fiscal year 2009. Adjustment of annual salaries is expected to occur after the annual focal review conducted by us and the processes followed by management in determining salary, bonus and equity proposals. The Compensation Committee continues to target base salaries for fiscal year 2009 at the 50^th percentile, and total cash compensation for fiscal year 2009 between the 50^th and 75^th percentile of the market data provided by Radford Consulting.

For officers newly hired during fiscal year 2009, the Compensation Committee reviewed the peer and industry data provided by Radford Consulting, considered the experience, compensation history and current equity position of the newly-hired executive officer, and endeavored to set salary and equity compensation levels within our previously established guidelines.

Annual Incentive Compensation

The Compensation Committee targets total cash compensation based upon performance at the 50^th to 75^th percentile, depending on the specific position, of the compensation of similarly-situated executives in comparable companies in our industry with whom Trident directly competes in our hiring and retention of executives. As part of the total cash compensation, executive officers are eligible for incentive compensation annually under our non-stockholder-approved Executive Incentive Bonus Plan (the “Bonus Plan”). Within this Bonus Plan, the Compensation Committee establishes annual incentive compensation that is based upon target awards expressed as a percentage of each executive’s base salary. Achievement of results against the targets approved by the Compensation Committee under our incentive compensation plan generally determines payouts under that plan for the fiscal year just ended. The new year targets tend to be based on the operating plan for such fiscal year that is approved by our Board of Directors, taking into account our strategic goals for the fiscal year. We generally do not consider the effect of past changes in stock price, or expected payouts or earnings under other plans, in setting future awards of executive officer compensation. In addition, incentive compensation decisions generally are made without regard to length of service or prior awards.

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The Compensation Committee believes that the more senior the officer, the greater responsibility for overall company performance and therefore the greater the ability to impact company performance, and accordingly, an increasingly higher proportion of total cash compensation should be at risk and payable only upon achievement of company performance. As a result, the annual incentive award targets ranged from 20% to 100% of base salary, depending on the officer’s position and the perceived ability of each officer to impact our financial results and drive shareholder value. Under the 2009 Bonus Plan, approved by the Compensation Committee in July 2008, the performance metrics were tied to company performance only, without individual performance requirements, given the need for the executive officers to work together in order to achieve increased company growth and to forge a new team, given the extent of the management changes implemented over the prior two fiscal years and that most of the management team had been with us for less than two full fiscal years.

The Compensation Committee adjusted the target bonus under the 2009 Bonus Plan to correspond to the 75^th percentile of the market survey data provided by Radford Consulting in order to reflect that Trident is in a period of turning its business around and significantly transitioning its operations and organizational structure. The Compensation Committee revised the 2009 Bonus Plan to provide for the payment of cash bonuses based upon achievement of revenue, new product revenue and operating margin objectives. Achievement of the revenue and operating margin targets each represented 30% of the total potential bonus, and achievement of the new product revenue targets represented 40% of the total potential bonus. A minimum threshold revenue level had to be achieved before any payment was earned for achievement of the revenue target, and each dollar of actual fiscal year 2009 total revenue achieved in excess of the threshold and target revenue resulted in an increase in the total potential payment for achievement of this target, up to a maximum of one hundred fifty percent (150%) achievement of the total revenue target. In the event that actual fiscal year 2009 operating margin dollars were less than a threshold amount established under the 2009 Bonus Plan, no bonus was payable. The total bonus payable to each individual ranged from zero to a maximum of 125% of the target bonus (assuming maximum achievement of the total revenue target).

The Compensation Committee established a target bonus amount for each individual, which varied depending on such officer’s position and responsibilities with Trident, and was based upon a percentage of base salary. The individual bonus percentage is the percentage of a respective officer’s base salary that is targeted as a bonus payment under the 2009 Bonus Plan assuming exactly one hundred percent achievement of each of the total revenue target, new product revenue target and operating margin dollars target. The individual target bonuses (expressed as a percentage of base salary) for each of our named executive officers under the 2009 Bonus Plan were as follows:

Name	Individual Bonus Percentage
Sylvia Summers	100%
Hungwen Li	60%
Pete J. Mangan	60%
David L. Teichmann	75%
Donna Hamlin	50%

The targets were deliberately set aggressively and required achievement of significant financial performance beyond what was anticipated in our 2009 operating plan. Based upon our performance during fiscal year 2009, we did not achieve the minimum target revenue or operating margin, accordingly no bonuses were payable to our executive officers under the 2009 Bonus Plan. Although the Compensation Committee considered payment of discretionary bonuses to reward officers for the substantial amount of work spent turning the company around, and in particular for positioning the company to be able to complete the acquisition of selected assets of the FRC line of frame rate converters, the DRX line of demodulators and all of the audio processing product lines from Micronas Semiconductor Holding AG in May 2009, the Committee ultimately determined to continue its objective of rewarding pay for performance, and therefore no discretionary bonuses were paid for fiscal year 2009.

Following the completion of the fiscal year, however, Trident announced the acquisition of selected assets and liabilities of the television systems and set-top box business lines of NXP B.V. (the “NXP Acquisition”). Although the acquisition of assets from Micronas was important, the Compensation Committee considers the NXP Acquisition to be a considerably more significant and transformational acquisition that results in dramatic changes to our business; accordingly, in connection with the NXP Acquisition, the Compensation Committee approved the payment of a one-time cash bonus to each of Pete J. Mangan, Senior Vice President and Chief Financial Officer and David L. Teichmann , Senior Vice President, General Counsel and Corporate Secretary, of $150,000, payable upon and subject to completion of the NXP Acquisition, for their significant efforts in connection with this acquisition. The Compensation Committee also approved a grant of 67,000 shares of restricted stock to Sylvia Summers Couder, vesting on the second anniversary of the completion of the NXP acquisition, with vesting subject to achievement of specified financial metrics, for her role in positioning us to be able to reach an agreement with NXP and as an additional incentive to achieve the financial objectives expected as a result of the NXP Acquisition.

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In addition, in its approval of the final terms of the 2010 Bonus Plan, the Compensation Committee determined that any financial metrics established for purposes of determining bonus achievement under the 2010 Bonus Plan would have to be reset following completion of the NXP Acquisition, which is expected mid-way through the fiscal year. Accordingly, the Compensation Committee determined that the 2010 Bonus Plan should be a half year plan only, with payment of cash bonuses based upon achievement of revenue and operating margin objectives for the first half of the fiscal year. In addition, because the operating plan indicated that the Company would continue to operate at a loss for the first half of fiscal 2010, the total bonus payable was reduced by 50%. Achievement of the revenue target will represent 60% of the potential bonus and achievement of the operating margin target will represent 40% of the total potential bonus. A minimum threshold revenue level and operating margin dollars must be achieved before any bonus will be earned under the Bonus Plan. The total bonus payable to each individual ranged from zero to a maximum of 125% of the target bonus (assuming maximum achievement of the total revenue target). The individual target bonuses for each executive officer remain unchanged from fiscal year 2009 as a percentage of base salary, provided that the total bonus payable for the fiscal year was reduced by 50% compared to fiscal year 2009, and the half year bonus only pays one-half of the bonus payable for the full fiscal year.

Equity Compensation Awards

Equity compensation has traditionally been an important element of our executive compensation program, aligning the interests of our executives with those of our stockholders. Because the value of the equity awards will increase only when Trident performs and increases stockholder value, the grant of such equity awards provides long-term incentives to our executive officers. These awards not only serve to align the executives’ interests with those of the stockholders over an extended period of time, but additionally they are generally subject to vesting in connection with continued service to us over a specified period of time, and therefore serve as an additional retention mechanism. The Compensation Committee believes that both of these elements are important factors in executive compensation. In addition, we operate in a challenging marketplace in which our success depends to a great extent on our ability to attract and retain employees of the highest caliber. One of the tools our Board of Directors regards as essential in addressing these human resource challenges is a competitive equity incentive program. Attracting and retaining talented people, particularly in the Far East, is critical to our ability to continue to succeed in the digital media business. The Board of Directors, and the Compensation Committee, both believe it is important that our employee stock incentive program provide us with a range of incentive tools and sufficient flexibility to permit us to award equity incentives in ways that will make the most effective use of the shares our stockholders authorize for incentive purposes.

The Compensation Committee has determined that new hire grants and merit awards made to executive officers will be comprised of both stock option grants and awards of restricted stock. The Compensation Committee believes that the grant of restricted stock may have a retention value greater than merit-based stock option grants, as there is value in the restricted stock grant even if the price of our common stock does not increase. Merit based annual stock option grants or restricted stock awards made to executive officers generally have historically vested annually over the four years following the date of grant in equal installments on the anniversary of the date of grant, subject to the officer’s continued employment with us. For fiscal year 2009, however, the Compensation Committee determined that restricted stock awards made to executive officers would generally vest over three years. In addition, the Compensation Committee approved grants of stock options to executive officers that vest over three years in order to compensate for the fact that most options held by employees are currently significantly under water, but indicated that it anticipated that future stock option grants would otherwise generally continue to vest over four years.

New Hire Grants

Generally, we grant equity awards to our new employees, including our newly-hired executive officers, in connection with the start of their employment. During fiscal year 2009, equity compensation payable to our newly-hired executive officers was negotiated between such officer and our Chief Executive Officer, after consultation with and approval of the Compensation Committee. Such compensation was determined based upon the executive’s experience and performance, value of equity that was going to be forfeited as a result of joining Trident, and upon available information concerning the competitive packages offered to executives in similar jobs at companies with which we are competitive for personnel, including the survey data provided by Radford Consulting described above.

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Annual Merit Grants

We have typically granted each executive officer an additional annual equity grant, with the goal of providing continued incentives to retain strong executives and improve corporate performance. The Compensation Committee annually grants long-term, equity-based incentive awards to executive officers after the close of the prior fiscal year and the review and evaluation of each executive officer’s performance, generally concurrently with our rank-and-file employees at the time of our annual merit-based stock option grant considerations. The Compensation Committee’s policy is to grant equity awards only during open trading windows. In considering equity grants, the Compensation Committee also considers the equity usage burn rate of all grants made by us during the fiscal year, with an objective that total equity granted to employees, including executive officers, during the fiscal year be within a range that is in accordance with industry guidelines.

The Compensation Committee has adopted a Black-Scholes formula for valuing stock option grants that takes into account the volatility of our common stock value over a reasonable length of time, based on the following assumptions: (1) the 180 day trailing average price of our common stock; (2) the 180 day trailing average interest rate for the expected life of the stock option; (3) volatility will be measured over the expected life of the stock option (i.e., the trailing 3.8 years); and (4) the Black-Scholes value will be calculated as of a date ten (10) days prior to the date that stock option recommendations are submitted by management to the Compensation Committee. The Compensation Committee also reviews the matrices established to set the recommended equity grants for newly hired employees if our common stock price increases or decreases by twenty percent (20%) or more since the date of the last modification of the matrices.

For fiscal year 2009, the Compensation Committee again targeted the equity compensation for each executive officer between the 50^th and 75^th percentile, depending on the specific position, of the compensation of similarly-situated executives in comparable companies in our industry with whom we competes in our hiring and retention of executives, based upon the benchmark survey data provided by Radford Consulting. The Compensation Committee considered each individual’s experience, the scope of such individual’s responsibilities, his or her performance in the applicable role, and his or her expected future contribution to Trident’s goals and stockholder value, together with the value of the total direct compensation for each executive officer, in deciding grants for fiscal year 2009.

Annual merit grants were made to each of our current executive officers following the conclusion of each of fiscal years 2008 and 2009, as part of the annual performance review cycle. These annual awards consisted of a combination of stock options and shares of restricted stock, with each stock option award vesting over four years in equal annual installments and each restricted stock award vesting over three years in equal annual installments. The Compensation Committee reviewed information provided by Radford Consulting in each fiscal year. In addition, for grants made following fiscal year 2009, our Chief Executive Officer reviewed data from Compensia to support the recommendations she made to the Committee for her direct reports, and the Committee reviewed such data, together with data from Radford Consulting, which provides its advice and counsel, to allocate awards based approximately on a 50/50 split in value between awards of restricted stock and stock options. In addition, in order to encourage long-term retention, in July 2008 following the completion of fiscal year 2008, our Chief Executive Officer and Chief Financial Officer were also awarded options to purchase 277,024 shares and 133,895 shares of our common stock, respectively. Each of these long-term retention awards vests 100% in a single cliff vest after four years.

Internal Pay Equity.In determining the size of equity awards made to our Chief Executive Officer and our other executive officers, the Compensation Committee is mindful of internal pay equity considerations. Since the equity component represents such a substantial portion of each executive officer’s total direct compensation, the Compensation Committee expects to continue to grant future equity awards to executive officers with internal equity in mind so that a fair and equitable ratio is maintained between the total direct compensation of our Chief Executive Officer and that of each of our other executive officers.

Stock Ownership Guidelines.At present, we do not have any equity or security ownership requirements for our executive officers, other than our Chief Executive Officer. During her employment, Ms. Summers agrees to a guideline of maintaining beneficial ownership of no less than the number of shares of Trident common stock that has a value equal to four times her annual base salary, to be achieved by no later than the fourth anniversary of her employment start date. The Board of Directors has also adopted stock ownership guidelines applicable to our non-employee members of the Board of Directors, described above under “Compensation of Directors — Stock Ownership Guidelines” above.

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Change in Control and Severance Agreements

The named executive officers are employed at-will. However, we have adopted a change in control plan applicable to our executive officers that provides that executive officers and key employees designated by the Compensation Committee are entitled to specified compensation and benefits if, within a “Change in Control Period,” the participant’s employment is terminated without “Cause” or the participant resigns for “Good Reason.” All such agreements with the named executive officers, including the newly-adopted change in control plan, are described under “Potential Payments upon Termination or Change in Control”elsewhere in this proxy statement, and the potential payments that each of the named executive officers would have received if a change in control or termination of employment would have occurred on July 1, 2009 are set forth under such section below.

The Compensation Committee adopted this plan in order to be competitive in the hiring and retention of employees, including executive officers, in comparison with comparable companies with which we compete for talent. In addition, these benefits are intended to retain our officers during the pendency of a proposed change in control transaction and align the interests of our officers with our stockholders in the event of a change in control. We believe that proposed or actual change in control transactions can adversely impact the morale of officers and create uncertainty regarding their continued employment. Without these benefits, officers may be tempted to leave our employ prior to the closing of the change in control, especially if they do not wish to remain with the entity after the transaction closes, and any such departures could jeopardize the consummation of the transaction or our interests if the transaction does not close and we remain independent. The Compensation Committee believes that these benefits therefore serve to enhance stockholder value in the transaction, and align the officers’ interest with those of our stockholders in change in control transactions.

Other Benefits

We provide other customary benefits that are comprehensive and apply uniformly to all of our employees, including our executive officers. The purpose of this element of compensation is to provide assurance of financial support in the event of illness or injury, encourage retirement savings and encourage additional equity ownership by our employees. Our employee benefits program includes medical, dental, prescription drug, Medical Flexible Spending contribution, vision care, disability insurance, life insurance benefits, business travel insurance, 401(k) savings plan with employer match, educational assistance, employee assistance program and holidays, and a vacation allowance. We do not provide a defined benefit retirement pension plan, or the use of company vehicles to our executive officers, although we currently provide to some of our executive officers a phone and car allowance of up to $10,000.00 per year and supplemental life insurance that pays executive officers up to $3,000,000. We believe that these benefits are standard for executive officers at comparable companies with whom we compete for personnel.

Tax Considerations

The Compensation Committee has considered the provisions of Section 162(m) of the Internal Revenue Code and related Treasury Department regulations, which restrict deductibility of executive compensation paid to our Chief Executive Officer and each of our three other most highly compensated executive officers (other than the Chief Financial Officer) holding office at the end of any year to the extent such compensation exceeds $1,000,000 for any of such officers in any year and does not qualify for an exception under the statute or regulations. Income from options granted under our stockholder-approved stock option plan would generally qualify for an exemption from these restrictions so long as the options are granted by a committee whose members are “outside directors” (as defined by Section 162(m)) and have an exercise price no less than the fair market value of the shares on the date of grant. We expect that the Compensation Committee will continue to be comprised solely of outside directors, and that any options granted to our executive officers will be approved by the Compensation Committee. The Compensation Committee does not believe that in general other components of our compensation will be likely to exceed $1,000,000 for any executive officer in the foreseeable future, and therefore concluded that no further action with respect to qualifying such compensation for deductibility was necessary at this time. In the future, the Compensation Committee will continue to evaluate the advisability of qualifying its executive compensation for deductibility of such compensation. The Committee’s policy is to qualify its executive compensation for deductibility under applicable tax laws as practicable.

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Award Granting Procedures

All equity awards granted to our executive officers are made by the Compensation Committee at a meeting of the Compensation Committee. Grants of initial stock options and other equity awards to newly-hired employees who are not executive officers are made by a Stock Option Committee, at duly held meetings the last Friday of each month, in accordance with pre-approved grant guidelines from the Compensation Committee. The members of the Stock Option Committee are the Chief Financial Officer and the General Counsel. The grant date is the date of Stock Option Committee approval and the grant is priced based on the market price on the grant date. The exercise price of all options granted to employees, including executive officers, is the closing market price of our common stock on the date which is two full trading days after the issuance of our quarterly financial earnings press release. In addition, the grant date is the date that the exercise price has been determined. For stock option awards granted by our Stock Option Committee, the exercise price is determined as the closing sales price of our common stock as reported on the NASDAQ Stock Market on the date of the Stock Option Committee’s monthly meeting.

In addition, we monitor the number of shares that we are utilizing for all of our equity compensation programs, including new hire grants, promotional grants and annual merit grants, in order to prudently manage stock option expense and potential dilution of stockholder ownership.

Report of the Compensation Committee

We, the Compensation Committee of the Board of Directors of Trident Microsystems, Inc., have reviewed and discussed the Compensation Discussion and Analysis contained in this Amendment with management. Based on such review and discussion, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Amendment.

THE COMPENSATION COMMITTEE

Brian R. Bachman (Chairman)
J. Carl Hsu
Raymond K. Ostby

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Summary Compensation Information

The following table sets forth information concerning the compensation earned during the fiscal years ended June 30, 2009, June 30, 2008, and June 30, 2007 by our Chief Executive Officer, our Chief Financial Officer, and our three other highest paid executive officers:

SUMMARY COMPENSATION TABLE

												Non-Equity
												Incentive
												Plan		All Other
								Stock		Option		Compensa-		Compensa-
			Salary		Bonus			Awards		Awards		tion		tion			Total
Name and Principal Position	Year		($) (1)		($) (2)			($) (3)		($) (4)		($) (2)(5)		($)			($)
Sylvia Summers Couder (6)		2009		495,000		—			524,334		389,588		—		23,625	(7)		1,432,547
President and Chief Executive Officer		2008		348,906		—			414,262		146,054	$	185,031		18,895	(8)		1,113,148
Pete J. Mangan (9)		2009		255,718		—			27,694		107,020		—		22,670	(7)		413,102
Senior Vice President and Chief Financial Officer		2008		101,891		62,000	(10)		—		21,043		22,086		9,591	(8)		216,611
David L. Teichmann (11)		2009		285,000		—			195,158		649,257		—		37,220	(7)		1,166,635
Senior Vice President, General Counsel and Corporate Secretary		2008		283,904		—			156,019		555,979		114,143		38,024	(8)		1,148,069
		2007		71,250		50,000	(12)		21,740		75,859		60,000		4,000	(13)		282,849
Dr. Hungwen Li (14)		2009		278,333		—			363,875		378,136		—		20,398	(7)		1,040,742
Senior Vice President, Strategic Marketing		2008		220,000		—			334,208		350,779		58,740		21,538	(8)		985,265
Donna Hamlin (15)		2009		227,000		—			40,734		52,265		—		24,057	(7)		344,056
Vice President, Human Resources and Administration		2008		103,583		5,000	(10)		11,283		16,176		27,608		10,923	(8)		174,573

(1)	Includes amounts (if any) deferred at the named executive officer’s option under Trident’s 401(k) plan.
(2)	Performance-based bonuses are generally paid under our Executive Bonus Plan and reported as Non-Equity Incentive Plan Compensation. Except as otherwise noted, amounts reported as Bonus represent discretionary bonuses awarded by the Compensation Committee in addition to the amount (if any) earned under the Executive Bonus Plan.
(3)	The amounts shown are the compensation costs recognized in our financial statements for fiscal year 2007, fiscal year 2008 and fiscal year 2009 related to shares of restricted stock awarded to the executive officer, to the extent we recognized compensation cost in fiscal year 2007, fiscal year 2008 or fiscal year 2009 for such awards in accordance with the provisions of SFAS 123R, excluding the impact of estimated forfeitures related to service-based vesting conditions. The fair values of the shares of restricted stock awarded were calculated based on the fair market value of our common stock on the respective grant dates.
(4)	The amounts shown are the compensation costs recognized in our financial statements for fiscal year 2007, fiscal year 2008 and fiscal year 2009 related to grants of stock options to each named executive officer in fiscal year 2007, fiscal year 2008 and fiscal year 2009 and prior years, to the extent we recognized compensation cost in fiscal year 2007, fiscal year 2008 and fiscal year 2009 for such awards in accordance with the provisions of SFAS 123R, excluding the impact of estimated forfeitures related to service-based vesting conditions. For a discussion of valuation assumptions used in the SFAS 123R calculations, see Note 1 of Notes to Consolidated Financial Statements, “Description of Business and Summary of Significant Accounting Policies—Stock-Based Compensation” and Note 9, “Employee Benefit Plans—Equity Incentive Plans,” included in Part IV, Item 15 of our Annual Report on Form 10-K for the year ended June 30, 2009.
(5)	We award bonuses pursuant to an annual Executive Bonus Plan, which provides for the award of annual cash bonuses based upon threshold, target and maximum payout amounts set by the Board of Directors at the beginning of each fiscal year. See “Compensation Discussion and Analysis — Elements of Compensation and How Each Element is Chosen, Annual Incentive Compensation.” The actual amount paid to each named executive officer for the fiscal years ended June 30, 2007, and June 30, 2008 is set forth in the Summary Compensation Table under the heading, “Non-Equity Incentive Plan Compensation.” No amounts were paid to our named executive officers for the fiscal year ended June 30, 2009. A description of the terms of the Executive Bonus Plan is set forth below under “Grants of Plan-Based Awards” and in the Compensation Discussion and Analysis, above.

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(6)	Ms. Summers joined as Chief Executive Officer and President on October 17, 2007.
(7)	Includes matching contributions to the Trident Microsystems, Inc, 401(K) plan, premiums paid for term life insurance, and car allowance, as follows:

	401(K) Match		Insurance Premiums		Car Allowance
Sylvia Summers Couder		—	$	23,625		—
Dr. Hungwen Li	$	2,875	$	17,523		—
Pete J. Mangan	$	2,875	$	19,795		—
David L. Teichmann	$	2,875	$	24,345	$	10,000
Dr. Donna Hamlin	$	2,875	$	21,182		—

(8) Includes matching contributions to the Trident Microsystems, Inc, 401(K) plan, premiums paid for term life insurance, and car allowance, as follows:

	401(K) Match		Insurance Premiums		Car Allowance
Sylvia Summers Couder		—	$	18,895		—
Dr. Hungwen Li	$	2,813	$	18,725		—
Pete J. Mangan		—	$	9,591		—
David L. Teichmann	$	2,813	$	25,211	$	10,000
Dr. Donna Hamlin	$	1,295	$	9,628		—

(9)	Mr. Mangan joined as Vice President, Finance and Interim Chief Financial Officer on January 11, 2008 and was appointed Senior Vice President, Chief Financial Officer on July 22, 2008.
(10)	Represents sign on bonus in the amount of $42,000 paid upon Mr. Mangan’s initial hire and $20,000 discretionary bonus paid in addition to the bonus earned under the 2008 Bonus Plan.
(11)	Mr. Teichmann joined as General Counsel, Vice President of Human Resources and Corporate Secretary on April 2, 2007, and became Senior Vice President, General Counsel and Corporate Secretary in January 2008, upon the hiring of Dr. Donna Hamlin as Vice President, Human Resources.
(12)	Represents a sign-on bonus of $50,000 paid to Mr. Teichmann upon his joining Trident as General Counsel, Vice President of Human Resources and Corporate Secretary.
(13)	Consists of $2,500 for car allowance and $1,500 of matching contributions to the Trident Microsystems, Inc. 401(k) Plan.
(14)	Dr. Li was appointed Senior Vice President of Strategic Marketing effective January 2007, and as Chief Marketing Officer effective August 28, 2008.
(15)	Dr. Hamlin joined as Vice President, Human Resources and Administration on January 11, 2009.

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Grant of Plan-Based Awards

The following table sets forth certain information with respect to stock and option awards granted during the fiscal year ended June 30, 2009 to our named executive officers:

2009 GRANTS OF PLAN-BASED AWARDS

											All Other
									All Other		Option
									Stock		Awards:		Exercise		Grant Date
									Awards:		Number of		or Base		Fair Value
			Estimated Future Payouts Under Non-						Number of		Securities		Price of		of Stock
			Equity Incentive Plan Awards (1)(2)						Shares of		Underlying		Option		and Option
	Grant		Threshold		Target		Maximum		Stock or		Options		Awards		Awards
Name	Date		($)		($)		($)		Units (#) (3)		(#)(4)		($)		($)(5)
Sylvia Summers Couder		07/25/08								36,937
		07/30/08										461,307	$	2.90	$	658,206.78
		07/25/08		309,375	$	495,000	$	618,750
Dr. Hungwen Li		07/25/08								20,000
		07/30/08										58,000	$	2.90	$	82,070.00
		10/21/08								9,852
		11/05/08										24,630	$	1.48	$	17,763.16
		07/25/08		112,500	$	180,000	$	225,000
Pete J. Mangan		07/25/08								21,279
		07/30/08										157,929	$	2.90	$	226,107.27
		07/25/08		101,562	$	162,000	$	203,125
David L. Teichmann		07/25/08								30,400
		07/30/08										85,000	$	2.90	$	120,275.00
		07/25/08		133,594	$	213,750	$	267,187
Dr. Donna Hamlin		07/25/08								10,550
		07/30/08										24,000	$	2.90	$	33,960.00
		07/25/08		70,938	$	113,500	$	141,875

(1)	We award bonuses pursuant to an annual Executive Bonus Plan, which provides for the award of annual cash bonuses based upon threshold, target and maximum payout amounts set by the Board of Directors at the beginning of each fiscal year. See “Compensation Discussion and Analysis — Elements of Compensation and How Each Element is Chosen, Annual Incentive Compensation.” No bonuses were paid to our named executive officer for the fiscal year ended June 30, 2009.
(2)	The threshold amounts included in the table above reflect the minimum payment level under the 2009 Bonus Plan; the 2009 Bonus Plan required the attainment of a minimum threshold target revenue that had to be reached before payments are triggered. The target and maximum amounts are reflected on an annualized basis.
(3)	Amounts shown represent shares of restricted stock awarded under our 2006 Equity Incentive Plan that vest in four successive annual installments upon the executive’s completion of each year of service over a four-year service period, measured from the grant date.
(4)	Except as provided below, amounts shown represent options issued under our 2006 Equity Incentive Plan that vest and become exercisable in four successive annual installments upon the executive’s completion of each year of service over a four-year service period, measured from the grant date. The exercise price for the options equals the closing price of our common stock on the date of grant. Each option has a maximum term of ten years.
	Options to purchase 277,024 shares granted to Ms. Summers and 133,895 shares granted to Mr. Mangan vest over four years in a single cliff vest at the end of four years, with a vesting commencement date of July 25, 2008.
	The options granted to all of our named executive officers will vest on an accelerated basis upon the executive’s termination of employment under certain prescribed circumstances. Additional information regarding the vesting acceleration provisions applicable to equity awards granted to our named executive officers is included in this Amendment under the heading “Potential Payments Upon Termination or Change in Control.”
(5)	The dollar value of the options shown represents the grant date fair value estimated using the Black-Scholes option pricing model to determine grant date fair value, in accordance with the provisions of SFAS 123R, excluding the impact of estimated forfeitures related to service-based vesting conditions. For a discussion of valuation assumptions used in the SFAS 123R calculations, see Note 1 of Notes to Consolidated Financial Statements,“Description of Business and Summary of Significant Accounting Policies—Stock-Based Compensation”and Note 8, “Employee Benefit Plans—Equity Incentive Plans,”included in Part IV, Item 15 of our Annual Report on Form 10-K for the year ended June 30, 2009. The actual value, if any, that an executive may realize on each option will depend on the excess of the stock price over the exercise price on the date the option is exercised and the shares underlying such option are sold. There is no assurance that the actual value realized by an executive will be at or near the value estimated by the Black-Scholes model.
	The dollar value of restricted stock shown represents the grant date fair value calculated based on the fair market value of our common stock on the respective grant dates. The actual value that an executive will realize on each share of restricted stock award will depend on the price per share of our common stock at the time the shares of restricted stock are sold. There can be no assurance that the actual value realized by an executive will be at or near the grant date fair value of the restricted stock awarded.

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Outstanding Equity Awards at Fiscal Year-End

The following table sets forth certain information with respect to the value of all unexercised options previously awarded to our named executive officers as of June 30, 2009, our last completed fiscal year:

OUTSTANDING EQUITY AWARDS AT JUNE 30, 2009

	OPTION AWARDS (1)									STOCK AWARDS (2)
	Number of		Number of
	Securities		Securities
	Underlying		Underlying							Number of Shares			Market Value of
	Unexercised		Unexercised			Option		Option		or Units of Stock			Shares or Units of Stock
	Options (#)		Options (#)			Exercise		Expiration		That Have Not			That Have Not
Name	Exercisable		Unexercisable			Price ($)		Date		Vested (#)			Vested ($)(3)
Sylvia Summers Couder		—		—			—		—		169,437	(5)	$	294,820
		0		277,024	(4)	$	2.90		7/30/2018		—			—
		0		184,283		$	2.90		7/30/2018		—			—
		55,000		165,000		$	7.42		10/29/2017		—			—
Dr. Hungwen Li		—		—			—		—		62,352		$	108,492
		0		24,630		$	1.48		11/5/2018		—			—
		0		58,000		$	2.90		7/30/2018		—			—
		65,000		65,000		$	20.37		1/26/2017		—			—
Pete J. Mangan		—		—			—		—		21,279		$	37,025
		0		133,895	(4)	$	2.90		7/30/2018		—			—
		0		24,034		$	2.90		7/30/2018		—			—
		18,750		56,250		$	5.34		2/4/2018		—			—
David L. Teichmann		—		—			—		—		45,400	(6)	$	78,996
		0		85,000		$	2.90		7/30/2018		—			—
		34,222		53,778	(7)	$	4.34		4/30/2018		—			—
		108,334		91,666	(8)	$	20.22		5/10/2017		—			—
Dr. Donna Hamlin		—		—			—		—		25,550		$	44,457
		0		24,000		$	2.90		7/30/2018		—			—
		15,000		45,000		$	5.34		2/4/2018		—			—

(1)

Except as provided below, amounts shown represent options issued under our 2006 Equity Incentive Plan that vest and become exercisable in four successive annual installments upon the executive’s completion of each year of service over a four-year service period, measured from the grant date. The exercise price for the options equals the closing price of our common stock on the date of grant. Each option has a maximum term of ten years.

The options granted to all of our named executive officers will vest on an accelerated basis upon the executive’s termination of employment under certain prescribed circumstances. Additional information regarding the vesting acceleration provisions applicable to equity awards granted to our named executive officers is included in this Amendment under the heading “Potential Payments Upon Termination or Change in Control.”

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(2)	Restricted stock awards vest over a four-year period at the rate of 25% upon each of the first four anniversaries of the date of grant, and are subject to automatic forfeiture if the recipient’s performance of services with the Company terminates prior to the date on which the shares vest.
	The restricted stock awarded to all of our named executive officers will vest on an accelerated basis upon the executive’s termination of employment under certain prescribed circumstances. Additional information regarding the vesting acceleration provisions applicable to equity awards granted to our named executive officers is included in this Amendment under the heading “Potential Payments Upon Termination or Change in Control.”
(3)	Represents the fair market value per share of our common stock on June 30, 2009 ($1.74) multiplied by the number of shares that had not vested as of June 30, 2009.
(4)	Options to purchase 277,024 shares granted to Ms. Summers and 133,895 shares granted to Mr. Mangan vest over four years in a single cliff vest at the end of four years, with a vesting commencement date of July 25, 2008.
(5)	Includes a performance-based restricted stock award consisting of 110,000 shares of Trident common stock. This award will vest, if at all, in four components, with the vesting of each component requiring that a Trident common stock price target, established by the Compensation Committee, be achieved on or after one of the first four anniversaries of her employment start date. This target stock price must be achieved prior to the tenth anniversary of Ms. Summers’ employment start date. An amount equal to 25% of the shares subject to this restricted stock award will vest on the date that the applicable price target is achieved on or after the specified anniversary of her employment start date, provided that her service with Trident has not terminated.
(6)	Includes 15,000 shares of restricted stock vesting in two equal installments upon the third and fourth anniversary of commencement of employment.
(7)	These options vest at the rate of 1/36 th per month over the thirty-six months following the first anniversary of his employment start date.
(8)	These options vest at the rate of 1/48th each month over the thirty-six month period following the first anniversary of his employment start date.

Option Exercises and Stock Vested

The following table sets forth certain information concerning option exercises by our named executive officers and vesting of Trident Microsystems common stock held by them during the fiscal year ended June 30, 2009:

OPTION EXERCISES AND STOCK VESTED

	Option Awards				Stock Awards
	Number of				Number of
	Shares				Shares
	Acquired		Value Realized		Acquired		Value Realized
	on Exercise		on Exercise		on Vesting		on Vesting
Name	(#)		($) (1)		(#)		($) (2)
Sylvia Summers Couder		—		—		7,500	$	14,475
Dr. Hungwen Li		—		—		16,250	$	30,713
Pete J. Mangan		—		—		0	$	0
David L. Teichmann		—		—		15,000	$	23,850
Dr. Donna Hamlin		—		—		5,000	$	10,550

(1)	Based on the difference between the market price of Trident’s common stock on the date of exercise and the exercise price.
(2)	Based on the market price of Trident’s common stock on the vesting date.

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee is or has been an officer or employee of Trident. During fiscal year 2009, no member of the Compensation Committee had any relationship with Trident requiring disclosure under Item 404 of Regulation S-K, and, none of our executive officers served on the compensation committee (or its equivalent) or board of directors of another entity any of whose executive officers served on our Compensation Committee or Board of Directors.

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Potential Payments Upon Termination or Change in Control

Pursuant to the following agreements, certain benefits will be payable to the named executive officers upon a termination of employment or change in our control:

Terms of Equity Awards

Our 1992 Stock Option Plan and each option granted under our 2002 Stock Option Plan (collectively, the “Option Plans”) provide that in the event of a merger of Trident with or into another corporation, unless the successor corporation assumes or substitutes equivalent options for options granted under the Option Plans, options under the Option Plans will become fully exercisable prior to the merger. Options which are neither assumed or substituted for by the successor corporation, nor exercised prior to the expiration of a 15-day notice period, will terminate upon the expiration of such period.

Under the terms of our 2006 Equity Incentive Plan (the “2006 Plan”), a “Change in Control” occurs upon (a) a person or entity (with certain exceptions described in the 2006 Plan) becoming the direct or indirect beneficial owner of more than 50% of Trident’s voting stock, or (b) the occurrence of any of the following events upon which the stockholders of Trident Microsystems immediately before the event do not retain immediately after the event direct or indirect beneficial ownership of more than 50% of the voting securities of Trident, its successor or the entity to which the assets of the company were transferred: (i) a sale or exchange by the stockholders in a single transaction or series of related transactions of more than 50% of Trident’s voting stock; (ii) a merger or consolidation in which Trident is a party; or (iii) the sale, exchange or transfer of all or substantially all of the assets of Trident (other than a sale, exchange or transfer to one or more subsidiaries of Trident).

If a Change in Control occurs, the surviving, continuing, successor or purchasing entity or its parent may, without the consent of any participant, either assume or continue outstanding awards or substitute substantially equivalent awards for its stock. Stock-based awards will be deemed assumed if, for each share subject to the award prior to the Change in Control, its holder is given the right to receive the same amount of consideration that a stockholder would receive as a result of the Change in Control. Any awards which are not assumed or continued in connection with a Change in Control or exercised or settled prior to the Change in Control will terminate effective as of the time of the Change in Control. Subject to the restrictions of Section 409A of the Code, the Compensation Committee may provide for the acceleration of vesting or settlement of any or all outstanding awards upon such terms and to such extent as it determines. The 2006 Plan also authorizes the Committee, in its discretion and without the consent of any participant, to cancel each or any award denominated in shares of stock upon a Change in Control in exchange for a payment to the participant with respect each vested share (and each unvested share if so determined by the Committee) subject to the cancelled award of an amount equal to the excess of the consideration to be paid per share of common stock in the Change in Control transaction over the exercise price per share, if any, under the award. The vesting of all non-employee director awards will be accelerated in full upon a Change in Control.

All shares subject to options granted under our 1994 Outside Directors Stock Option Plan (the “Directors Plan”) will become fully vested and exercisable as of the date 15 days prior to a change in our control, as defined in the Directors Plan, unless the surviving or successor corporation either assumes or substitutes its options for options outstanding under the Directors Plan. Any such options which are neither assumed or substituted for by the successor corporation, nor exercised, will terminate as of the date of the change in control. In addition, all options granted to our non-employee directors under the 2006 Equity Incentive Plan will become fully vested and exercisable as of the date 15 days prior to a change in our control.

Change in Control Severance Plan

During fiscal year 2008, the Compensation Committee of the Board of Directors approved a change in control severance plan that will provide executive officers and key employees designated by the Compensation Committee with the specified compensation and benefits if, within a “Change in Control Period,” the participant’s employment is terminated without “Cause” or the participant resigns for “Good Reason.” The Change in Control Period is the period beginning upon a change in control and ending 18 months following the change in control. Upon termination within the Change in Control Period, the chief executive officer would be entitled to a lump sum payment of 24 months of base salary, with other executive officers being entitled to payment of 12 months of base salary. Base salary for this purpose is determined as the greater of (i) the monthly rate in effect immediately prior to termination of employment or (ii) the monthly rate in effect immediately prior to the change in control. In addition, the chief executive officer would be entitled to payment of 200% of his or her annual bonus, with other executive officers entitled to 100% of their respective annual bonus, determined for this purpose as the aggregate of all annual incentive bonuses that would be earned by the participant for the fiscal year of termination of employment, determined as if 100% of all applicable performance goals were achieved. Medical and dental and life insurance coverage would be continued for the employee and covered dependents for the same benefit periods as the base salary is paid, at the same premium cost to the participant and at the same coverage levels as in effect prior to termination of employment, except to the extent of any change in premium costs or coverage levels applicable to all employees holding positions comparable to the participant’s position immediately prior to the change in control.

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If, as a result of the change in control, the buyer agrees to assume or continue our outstanding service-based vesting equity awards (converting them into awards for the buyer’s stock or other acquisition consideration) or to issue replacement awards for the buyer’s stock, vesting would not accelerate at the time of the change in control. Any service-based vesting equity awards that the buyer will not agree to assume, continue or replace in connection with the change in control will vest in full immediately prior to the change in control so that they may be exercised or settled upon the change in control. The vesting of any service-based vesting equity award that is assumed, continued or replaced by the buyer will be accelerated in full if the participant is terminated other than for “Cause” or resigns for “Good Reason” within the Change in Control Period. The vesting of all our equity awards of any kind under which vesting is based upon the achievement of performance goals (such as attainment of a target stock price or achievement of a company financial goal) will be accelerated in full (assuming the 100% of the target level of performance has been achieved) immediately prior to the change in control, so that they may be exercised or settled upon the change in control.

Payment of severance benefits under the plan will be subject to the participant’s execution of a general release of claims against us.

The following definitions are utilized in the executive change in control severance plan:

Definition of “Change in Control.”

• Any person or group (other than an employee benefit plan) becomes the beneficial owner, directly or indirectly, of more than 50% of the total combined voting power of its outstanding securities.

• Merger or consolidation in which the stockholders before the transaction fail to retain direct or indirect beneficial ownership of more than 50% of the total combined voting power of the voting securities of the company or the surviving entity.

• Sale of all or substantially all of the assets of the company (other than to a subsidiary).

• Change in the composition of the Board within any 12-month period as a result of which less than a majority of the directors are “Incumbent Directors.” Incumbent Directors are those who either were directors on the effective date of the plan or were elected or nominated by at least a majority of the Incumbent Directors (except any such election or nomination in connection with an actual or threatened proxy contest).

Definition of Termination for “Cause.”

• Theft, dishonesty, misconduct, breach of fiduciary duty for personal profit, or falsification of any documents or records.

• Material failure to abide by the code of conduct or other policies (including policies relating to confidentiality and reasonable workplace conduct).

• Misconduct leading to a restatement of earnings.

• Unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or corporate opportunity (including improper use or disclosure of confidential or proprietary information).

• Intentional act which has a material detrimental effect on reputation or business of the company.

• Repeated failure or inability to perform any reasonable assigned duties after written notice and a reasonable opportunity to cure such failure or inability.

• Material breach of any employment, non-disclosure, non-competition, non-solicitation or other similar agreement.

• Conviction (including any plea of guilty or nolo contender) of any criminal act involving fraud, dishonesty, misappropriation or moral turpitude, or which impairs the participant’s ability to perform his or her duties.

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Definition of “Good Reason.”

• Material, adverse change in the participant’s authority, duties or responsibilities as measured against the participant’s authority, duties or responsibilities immediately prior to the change in control.

• Material, adverse change in the authority, duties or responsibilities of the officer to whom the participant is required to report, including a requirement that the participant report to a corporate officer or employee instead of reporting directly to the board of directors of a corporation.

• Material decrease in annual base salary or target bonus amount (subject to applicable performance requirements with respect to the actual amount of bonus compensation earned).

• Material decrease in the budget over which the participant has authority.

• Relocation of work place to a location that increases the participant’s regular commute distance between the participant’s residence and work place by more than 30 miles (one-way).

• Material breach of the plan by the company or its successor.

The participant must give written notice within 90 days of the initial occurrence of the claimed “Good Reason” condition. If not cured within 30 days following such written notice, the claim is presumed correct unless the Board of Directors determines in good faith by a vote of not less than two-thirds of its membership that Good Reason does not exist. The participant must resign within 6 months following the initial occurrence of the condition.

In addition to the benefits under the agreements described above, the following two named executive officers are entitled to benefits under the terms of their offer letters with us:

Sylvia Summers Couder

Pursuant to the letter agreement between us and Sylvia Summers Couder as our Chief Executive Officer, should we terminate Ms. Summers’ employment without Cause, or should she terminate her employment at any time for Good Reason, provided that she has executed a general release of claims, we will pay to Ms. Summers an amount equal to the sum of twelve months’ of her base salary and her annual target bonus, and reimbursement of insurance premiums for up to twelve months of COBRA insurance coverage. In addition, vesting of any unvested options and restricted stock granted to her during her employment shall be automatically accelerated such that an additional twelve months of vesting will occur.

If we or our successor elects to terminate Ms. Summers’ employment without Cause or she voluntarily terminates for “Good Reason” in connection with or within two years of the effective date of a Change in Control of Trident, we will pay to Ms. Summers an amount equal to the sum of twenty-four months’ of her base salary and two times her annual target bonus, and reimbursement of insurance premiums for up to eighteen months of COBRA insurance coverage. In addition, vesting of any unvested options and restricted stock granted to her during her employment shall be automatically accelerated in full. Only employment that is involuntarily terminated without Cause or voluntarily terminated with Good Reason within two years of the date of a Change in Control will be deemed to constitute termination due to such Change in Control.

The following definition of Good Reason is applicable to the agreement between Trident and Ms. Summers:

“Good Reason” means the occurrence of any of the following conditions without employee’s express written consent, which condition(s) remain(s) in effect thirty days after her written notice to the Board of Directors of Trident or its successor of such conditions:

(a) a material, adverse change in her authority, duties or responsibilities which is not effected for disability or for Cause;

(b) a material diminution of the budget over which she has authority (including, without limitation, as a result of a reduction of the lines of business, operating divisions or functional departments reporting to her), which is not effected for disability or for Cause;

(c) a material diminution in her base salary and/or target bonus as in effect immediately prior to such reduction;

(d) her relocation to a facility or a location more than 50 miles from our principal headquarters at the time she commences employment; or

(e) a material breach by Trident or any successor to Trident of any of the material provisions of her employment offer letter.

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David L. Teichmann

Pursuant to the letter agreement between us and Mr. Teichmann as our General Counsel, should we terminate Mr. Teichmann’s employment without Cause, or should he terminate his employment at any time for Good Reason, we will pay to Mr. Teichmann an amount equal to the sum of six months’ of his salary, including base and target incentive bonus, and reimbursement of insurance premiums for up to six months of COBRA insurance coverage.

If we terminate Mr. Teichmann’s employment for Cause, we will provide Mr. Teichmann with a lump-sum severance payment equivalent to three months’ salary, including base salary and target incentive bonus, and reimbursement of insurance premiums for up to three months of COBRA insurance coverage, unless the cause for termination relates to violation by Mr. Teichmann of state or federal law.

If we or our successor elects to terminate Mr. Teichmann’s employment without Cause or he voluntarily terminates for “Good Reason” in connection with or within twelve months of the effective date of an acquisition or merger of Trident involving a Change in Control (a “Qualifying Event”), vesting of any options and restricted stock granted to Mr. Teichmann during his employment with Trident will be automatically accelerated effective on the date of the Qualifying Event. In such event, the period within which he may exercise any vested options (including options as to which vesting has been accelerated), will be extended to one year following the Qualifying Event. In addition, Mr. Teichmann will receive severance benefits in an amount equal to the sum of six months’ of his salary, including base and target incentive bonus, and reimbursement of insurance premiums for up to six months of COBRA insurance coverage. Only employment that is involuntarily terminated without Cause or voluntarily terminated with Good Reason within one year of the date of a Change in Control will be deemed to constitute termination due to such Change in Control.

The following definitions are utilized in the severance arrangements with each of Messrs. Summers and Teichmann:

A “Change in Control” means:

(a) any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 who, by the acquisition or aggregation of securities, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Trident representing 50% or more of the combined voting power of our then outstanding securities ordinarily (and apart from rights accruing under special circumstances) having the right to vote on elections of directors (the “Base Capital Stock”); except that any change in the relative beneficial ownership of our securities by any person resulting solely from a reduction in the aggregate number of outstanding shares of Base Capital Stock, and any decrease thereafter in such person’s ownership of securities, shall be disregarded until such person increases in any manner, directly or indirectly, such person’s beneficial ownership of any securities of Trident; or

(b) the consummation of a merger or consolidation of Trident with or into another entity or any other corporate reorganization, if persons who were not stockholders of Trident immediately prior to such merger, consolidation or other reorganization own immediately after such merger, consolidation or other reorganization 50% or more of the voting power of the outstanding securities of each of (i) the continuing or surviving entity and (ii) any direct or indirect parent corporation of such continuing or surviving entity; or

(c) a change in the composition of the Board, as a result of which the individuals who immediately prior to such change constitute the Board (the “Incumbent Board”) cease to constitute a majority of the Board; provided, however, that any individual becoming a director whose election, or nomination for election by our stockholders, was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board shall be considered as though such an individual were a member of the Incumbent Board; or

(d) the sale, transfer or other disposition of all or substantially all of our assets.

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“Cause” means misconduct, including but not limited to: (a) conviction of a felony or any crime under the laws of the United States or any state thereof involving moral turpitude or dishonesty; (b) participation in a fraud or act of dishonesty against Trident; (c) willful conduct by the employee, which, based upon a reasonable determination by Trident, demonstrates gross unfitness to serve (other than as a result of total or partial incapacity due to physical or mental illness); or (d) intentional, material violation by the employee of any contract between the employee and Trident or any statutory duty of the employee to Trident that is not corrected within thirty (30) days after written notice to the employee.

The following definition of Good Reason is applicable to the agreement between Trident and Mr. Teichmann:

“Good Reason” means resignation by the employee of his or her employment, other than for Cause or disability, due to: (i) Trident, without his or her express written consent, assigning duties to employee or significantly reducing his or her duties, in a manner that is inconsistent with such employee’s position with Trident and responsibilities in effect immediately prior to such assignment or reduction, or Trident removing employee from such position and responsibilities (including without limitation a reduction of the lines of business, operating divisions or functional departments reporting to employee), which is not effected for disability or for Cause; (ii) a reduction in employee’s base salary and/or target bonus as in effect immediately prior to such reduction; (iii) employee’s relocation to a facility or a location more than 15 miles from our principal headquarters at the time employee commences employment without employee’s express written consent; (iv) failure or refusal of a successor to Trident to assume Trident’s obligations under his or her employment offer letter; or (v) material breach by Trident or any successor to Trident of any of the material provisions of his or her employment offer letter.

Calculation of Potential Payments Upon Termination or Change in Control

The following table presents our estimate of the dollar value of the benefits payable to our named executive officers upon a termination of employment with or without cause, or a change in our control, assuming such terminating event occurred on June 30, 2009. These benefits are in addition to accrued compensation, including paid time off, otherwise required by law to be paid through the date of termination of employment. Our annual vacation accrual policy provides that paid time off is accrued based on years of service, ranging from three weeks of paid time off through three years of service, up to a maximum of six weeks of paid time off from ten years of service and beyond. We limit the total maximum amount that can be accrued however, from 320 hours for up to three years of service, increasing to a maximum of up to 440 hours for ten years of service and beyond.

This table assumes that the termination occurred as of June 30, 2009, and, in connection with a termination that occurred as a result of a change of control, that outstanding unvested equity awards were neither assumed by the successor corporation nor replaced with a cash retention program. While we believe that the amounts shown below and the assumptions upon which they are based provide reasonable estimates of the amounts that would have been due to the named executive officers in the event that any of the circumstances described above had occurred on June 30, 2009, the actual amounts due to the named executive officers upon a triggering event will depend upon the actual circumstances and the then applicable provisions of the Executive Bonus Plan, the letter agreements and the executive officer change in control plan.

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										Value of
								Value of		Restricted
						Continuation		Option		Stock
						of Benefits		Acceleration		Acceleration		Total Value
Name	Trigger	Salary		Bonus		(1)		(2)		(2)		(3)
Sylvia Summers Couder	Change in Control	$	990,000	$	990,000	$	24,295.95		—	$	294,820.38	$	2,299,116.33
	Termination without Cause or for Good Reason	$	495,000	$	495,000	$	24,295.95		—	$	294,820.38	$	1,309,116.33
Dr. Hungwen Li	Change in Control	$	300,000	$	180,000	$	14,400.19	$	6,403.80	$	108,492.48	$	609,296.47
Pete J. Mangan	Change in Control	$	270,000	$	162,000	$	20,465.95		—	$	37,025.46	$	489,491.41
David L. Teichmann	Change in Control	$	285,000	$	213,750	$	25,015.95		—	$	78,996.00	$	602,761.95
	Termination without Cause or for Good Reason	$	142,500	$	106,875	$	25,015.95		—	$	78,996.00	$	353,386.95
	Termination for Cause	$	71,250	$	53,437		—		—		—	$	124,687.00
Dr. Donna Hamlin	Change in Control	$	227,000	$	113,500	$	20,690.95		—	$	44,457.00	$	405,647.95

(1)	Represents the aggregate value of reimbursement of COBRA benefits after the date of termination. For the purposes of this calculation, expected costs have not been adjusted for any actuarial assumptions related to mortality, likelihood that the executives will find other employment, or discount rates for determining present value.
(2)	Represents the aggregate value of the accelerated vesting of the executive officer’s unvested stock options and shares of restricted stock.
	The amounts shown as the value of the accelerated stock options are based solely on the intrinsic value of the options as of June 30, 2009. For options, this was calculated by multiplying (i) the difference between the fair market value of our common stock on June 30, 2009 (being the last trading day of the fiscal year), $1.74, and the applicable exercise price by (ii) the assumed number of option shares vesting on an accelerated basis on June 30, 2009. Since the exercise price of all outstanding unvested options held by the named executive officers was greater than $1.74, other than options to purchase 24,630 shares held by Mr. Li, no additional value is represented by the acceleration of outstanding unvested options.
	The amount shown as the value of the accelerated shares of restricted stock represents the fair value calculated based on the fair market value of our common stock on June 30, 2009 (being the last trading day of the fiscal year), $1.74, multiplied by the assumed number of shares of restricted stock vesting on an accelerated basis on June 30, 2009.
(3)	Excludes the value to the executive of the continuing right to indemnification and continuing coverage under our directors’ and officers’ liability insurance (if applicable).

In addition, upon death or disability, each of our executive officers is entitled to coverage under our applicable insurance policies. Upon termination of employment as a result of disability, the executive officers are entitled to coverage up to an amount equal to two times their respective base salary, up to a maximum of $300,000; if such disability occurs as a result of a travel accident, they are entitled to an additional amount up to two times their base salary up to a maximum amount of $500,000. We also provide death benefits of an insured sum equal to two times their base salary up to $300,000, plus an additional amount equal to two times base salary up to a maximum of $500,000 if such death occurs as a result of a travel accident. We also offer life insurance coverage up to $3,000,000. Executive officers are fully vested in 100% of their account balance under the Retirement Savings Plan (401k Plan). All of our employees are eligible for continuing health coverage under COBRA; pursuant to the terms of their agreements, we pay the cost of such continuing coverage for Mr. Teichmann and Ms. Summers, as described above.

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Director Compensation

The Nominating and Corporate Governance Committee reviews and recommends to the Board non-employee director compensation. We use a combination of cash and stock-based compensation to attract and retain qualified candidates to serve on our board of directors. In setting the compensation of non-employee directors, we consider the significant amount of time that the Board members expend in fulfilling their duties to Trident as well as the experience level we require to serve on the Board. The Compensation Committee annually reviews the compensation and compensation policies for non-employee members of the Board of Directors.

The Board of Directors has adopted the following cash compensation payable to non-employee members of the Board of Directors for their service as Board members:

	Annual Cash Payment
	Annual Retainer Fees		Quarterly Payments
All Board Members (Base)	$	35,000.00	$	8,750.00
Chairman of the Board	$	25,000.00	$	6,250.00
	Audit Committee
Chair Fee	$	20,000.00	$	5,000.00
Member	$	10,000.00	$	2,500.00
	Compensation Committee
Chair Fee	$	12,000.00	$	3,000.00
Member	$	6,000.00	$	1,500.00
	Nominating and Corporate
	Governance Committee
Chair Fee	$	8,000.00	$	2,000.00
Member	$	4,000.00	$	1,000.00
	Strategy Committee
Chair Fee	$	12,000.00	$	3,000.00
Member	$	6,000.00	$	1,500.00

On July 20, 2009, the Compensation Committee approved a one-time payment to each of Mr. Raymond K. Ostby and Mr. Hans Geyer in the amount of $60,000, for their service on the Special Litigation Committee, formed in May 2007 to review and manage any claims that the Company may have relating to its historical stock option grant practices and related issues investigated by the Special Committee, including the purported stockholder derivative lawsuits wherein Trident has been named as a nominal defendant, and the investigations by the Securities and Exchange Commission and the Department of Justice. This fee is similar to the fee of $60,000 paid to the members of the Special Committee in fiscal 2008 upon completion of its work in connection with the Company’s investigation into its historical stock option granting practices and related accounting.

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On January 20, 2009, the Compensation Committee of the Board of Directors of the Company approved a one-time payment of $30,000 to members of the Board, in addition to the annual retainer being paid to Board members for their Board service during fiscal year 2009, due to the decreased number of restricted stock awarded to the Board in November 2008 following the 2008 Annual Stockholders Meeting. On July 20, 2009, the Compensation Committee of the Board of Directors of the Company also approved changes to the terms of equity grants to non-employee members of the Board of Directors. Currently, nonemployee members of the Board of Directors are granted, on the date immediately following the date of each annual meeting of the Company’s stockholders, automatically and without further action of the Board of Directors, a restricted stock award (an “Annual Restricted Stock Award”) equal to such number of shares determined by the stock price to be equal to $120,000 on the date of the award. Each Annual Restricted Stock Award shall vest on the day immediately preceding the first annual meeting occurring after the date of grant of the Annual Restricted Stock Award. However, subject to certain exceptions, under the terms of the Company’s 2006 Equity Incentive Plan (the “Plan”), within any fiscal year of the Company, no non-employee Director may be granted awards which, when combined with all other equity compensation awards granted by the Company within the same fiscal year, if any, are for a number of shares of stock that exceed a pre-determined percentage of the number of shares of Stock issued and outstanding on the first day of such fiscal year. Accordingly, the Compensation Committee amended the terms of the Board of Directors compensation program such that the Annual Restricted Stock Award to be granted to non-employee members of the Board of Directors will be limited to 24,000 shares of restricted stock. In partial compensation of this reduction in value of the Annual Restricted Stock Award, the Compensation Committee increased the cash compensation payable to non-employee members of the Board of Directors by $22,000 per annum, payable following the date of the annual meeting.

In addition to the Annual Restricted Stock Award granted annually to continuing directors, each person first elected or appointed as a non-employee director shall be granted, pursuant to our 2007 Equity Incentive Plan, on the date of such initial election or appointment, automatically and without further action of the Board of Directors, an option (an “Initial Option”) to purchase 25,000 shares of common stock (such number being subject to pro rata adjustment upon a change in our capital structure); provided, however, that a member of the Board of Directors who previously did not qualify as a non-employee director is not entitled to receive an Initial Option in the event that such director subsequently becomes a non-employee director. Each Initial Option shall have an exercise price per share equal to the closing sale price per share of our common stock on the date of grant of such option, as quoted on the Nasdaq Global Market, shall have a term of ten years and, subject to the director’s continued service, shall vest and become exercisable in three substantially equal annual installments on the first three anniversaries of the date of grant of the Initial Option.

The following table sets forth information concerning the compensation earned during the fiscal year ended June 30, 2009 by each individual who served as a director at any time during the fiscal year:

	Fees Earned or			Stock		Option		Other
Name	Paid in Cash ($)			Awards($)(1)		Awards($)(1)		Compensation($)		Total($)
Glen Antle	$	94,000		$	107,526		—		—	$	201,526
Brian Bachman	$	81,000		$	68,813	$	183,198		—	$	333,011
David Courtney	$	89,000		$	21,800	$	23,091		—	$	133,891
Hans Geyer	$	147,000	(2)	$	68,813	$	183,198		—	$	399,011
J. Carl Hsu	$	77,000		$	21,800	$	26,055		—	$	124,855
Raymond Ostby	$	151,000	(2)	$	68,813	$	148,498		—	$	368,311

(1)

The amounts shown in the “Stock Awards” and “Option Awards” columns are the compensation costs recognized in our financial statements for fiscal year 2009 related to restricted stock grants and grants of stock options to our non-employee directors in fiscal year 2009 and prior years, to the extent we recognized compensation costs in fiscal year 2009 for such awards in accordance with the provisions of SFAS 123R, excluding the impact of estimated forfeitures related to service-based vesting conditions. For a discussion of the valuation assumptions used in the SFAS 123R calculations, see Note 1 of Notes to Consolidated Financial Statements, “Description of Business and Summary of Significant Accounting Policies — Stock-Based Compensation” and Note 8, “Employee Benefit Plans — Equity Incentive Plans,” included in Part IV, Item 15 of our Annual Report on Form 10-K for the year ended June 30, 2009.

(2)

Includes a one-time payment in the amount of $60,000, for service on the Special Litigation Committee.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth, as of September 30, 2009, certain information with respect to the beneficial ownership of our common stock by (i) each stockholder who is known by us to beneficially own more than 5% of our common stock, (ii) each of our named executive officers, (iii) each of our directors, and (iv) all directors and executive officers of Trident as a group.

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	Number of Shares
	Beneficially
Beneficial Owner(1)	Owned(2)		Percent(3)
Beneficial Owners of in Excess of 5%
Micronas Semiconductor Holding AG(4) Technoparkestrasse 1 Zurich, V8 CH-8005		7,000,000		9.93	%
Cavalry Asset Management LP(5) One California Street San Francisco, CA 94111		5,234,792		7.42	%
Renaissance Technologies LLC(6) 800 Third Ave 33th Fl New York, NY 10022		5,139,280		7.29	%
Artis Capital Management, L.P. (7) One Market Plaza Spear St Tower San Francisco, CA 94105		4,634,748		6.57	%
Barclays Global Investors UK Holdings LTD(8) 1 Churchill Place London, E14 5HP		3,710,237		5.26	%
Executive Officers(9)
Sylvia Summers Couder(10)		388,164		*
Pete J. Mangan(11)		70,141		*
David L. Teichmann(12)		282,822		*
Christophe Chene(13)		61,100		*
Donna M. Hamlin(14)		59,150		*
Hungwen Li(15)		174,454		*
Uri Kreisman(16)		45,560		*
Richard Janney(17)		25,000		*
				*
Directors				*
				*
Glen M. Antle(18)		141,838		*
Brian R. Bachman(19)		76,172		*
David Courtney(20)		32,334		*
Hans Geyer(21)		76,172		*
Raymond K. Ostby(22)		92,838		*
J. Carl Hsu(23)		32,334		*
Directors and executive officers as a group (14 persons)(24)		1,558,079		2.21	%

*	Less than 1%.
(1)	Except as otherwise indicated, the persons named in this table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable and to the information contained in the footnotes to this table.
(2)	Under the rules of the Securities and Exchange Commission, a person is deemed to be the beneficial owner of shares that can be acquired by such person within 60 days upon the exercise of options.

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(3)	Calculated on the basis of 70,514,503 shares of common stock outstanding as of September 30, 2009, provided that any additional shares of common stock that a stockholder has the right to acquire within 60 days after September 30, 2009 pursuant to grants of stock options or awards of restricted stock are deemed to be outstanding and beneficially owned by the person holding such options or restricted stock for the purpose of computing the number of shares beneficially owned and the percentage ownership of such person, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.
(4)	Based on a Schedule 13G filed with the Securities and Exchange Commission on May 21, 2009 by Micronas Semiconductor Holding AG.
(5)	Based on a Schedule 13F filed with the Securities and Exchange Commission on August 14, 2009 by Cavalry Asset Management LP, Cavalry Asset Management LP has sole investment discretion over all of such shares and sole voting authority over all of such shares.
(6)	Based on a Schedule 13F filed with the Securities and Exchange Commission on August 13, 2009 by Renaissance Technologies LLC, Renaissance Technologies LLC has sole investment discretion over all of such shares, sole voting authority over 4,881,842 shares and no voting authority over 257,438 shares.
(7)	Based on a Schedule 13F filed with the Securities and Exchange Commission on August 14, 2009 by Artis Capital Management, L.P., Artis Capital Management, L.P. has sole investment discretion over all of such shares and sole voting authority over all of such shares.
(8)	Based on a Schedule 13F/A filed with the Securities and Exchange Commission on September 11, 2009 by Barclays Global Investors UK Holdings LTD, Barclays Global Investors, N.A. has defined investment discretion over 2,308,409 shares, sole voting authority over 1,924,139 shares, and no voting authority over 384,270 shares. Barclays Global Fund Advisors has defined investment discretion over 1,401,828 shares and sole voting authority over all of such shares.
(9)	The address of the executive officers and directors is c/o Trident Microsystems, Inc., 3408 Garrett Drive, Santa Clara, California 95054.
(10)	Includes 171,428 shares subject to options exercisable by Ms. Summers within sixty days of September 30, 2009. Also includes 201,324 shares of restricted stock that have not yet vested and are subject to repurchase by Trident should Ms. Summers’ employment terminate prior to vesting.
(11)	Includes 26,762 shares subject to options exercisable by Mr. Mangan within sixty days of September 30, 2009. Also includes 36,286 shares of restricted stock that have not yet vested and are subject to repurchase by Trident should Mr. Mangan’s employment terminate prior to vesting.
(12)	Includes 203,944 shares subject to options exercisable by Mr. Teichmann within sixty days of September 30, 2009. Also includes 57,366 shares of restricted stock that have not yet vested and are subject to repurchase by Trident should Mr. Teichmann’s employment terminate prior to vesting.
(13)	Includes 61,100 shares of restricted stock that have not yet vested and are subject to repurchase by Trident should Mr. Chene’s employment terminate prior to vesting.
(14)	Includes 23,000 shares subject to options exercisable by Dr. Hamlin within sixty days of September 30, 2009. Also includes 27,633 shares of restricted stock that have not yet vested and are subject to repurchase by Trident should Dr. Hamlin’s employment terminate prior to vesting.
(15)	Includes 90,492 shares subject to options exercisable by Mr. Li within sixty days of September 30, 2009. Also includes 59,001 shares of restricted stock that have not yet vested and are subject to repurchase by Trident should Mr. Li’s employment terminate prior to vesting.
(16)	Includes 15,800 shares subject to options exercisable by Mr. Kreisman within sixty days of September 30, 2009. Also includes 29,760 shares of restricted stock that have not yet vested and are subject to repurchase by Trident should Mr. Kreisman’s service terminate prior to vesting.
(17)	Includes 25,000 shares of restricted stock that have not yet vested and are subject to repurchase by Trident should Mr. Janney’s service terminate prior to vesting.
(18)	Includes 90,000 shares subject to options exercisable by Mr. Antle within sixty days of September 30, 2009. Also includes 24,000 shares of restricted stock that have not yet vested and are subject to repurchase by Trident should Mr. Antle’s service terminate prior to vesting.
(19)	Includes 33,334 shares subject to options exercisable by Mr. Bachman within sixty days of September 30, 2009. Also includes 24,000 shares of restricted stock that have not yet vested and are subject to repurchase by Trident should Mr. Bachman’s service terminate prior to vesting.
(20)	Includes 8,334 shares subject to options exercisable by Mr. Courtney within sixty days of September 30, 2009. Also includes 24,000 shares of restricted stock that have not yet vested and are subject to repurchase by Trident should Mr. Courtney’s service terminate prior to vesting.

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(21)	Includes 33,334 shares subject to options exercisable by Mr. Geyer within sixty days of September 30, 2009. Also includes 24,000 shares of restricted stock that have not yet vested and are subject to repurchase by Trident should Mr. Geyer’s service terminate prior to vesting.
(22)	Includes 50,000 shares subject to options exercisable by Mr. Ostby within sixty days of September 30, 2009. Also includes 24,000 shares of restricted stock that have not yet vested and are subject to repurchase by Trident should Mr. Ostby’s service terminate prior to vesting.
(23)	Includes 8,334 shares subject to options exercisable by Mr. Hsu within sixty days of September 30, 2009. Also includes 24,000 shares of restricted stock that have not yet vested and are subject to repurchase by Trident should Mr. Hsu’s service terminate prior to vesting.
(24)	Includes 754,762 shares subject to options that are currently exercisable or will become exercisable within 60 days after September 30, 2009 beneficially owned by executive officers and directors, and 641,470 shares of restricted stock that have not yet vested and are subject to repurchase by Trident should the employee’s employment terminate prior to vesting.

Equity Compensation Plan Information

We currently maintain two equity incentive plans that provide for the issuance of our common stock to officers, directors, employees and consultants. These plans consist of the 2006 Equity Incentive Plan (the “2006 Plan”), and the 2002 Stock Option Plan (the “2002 Plan”). In addition, we have adopted our 2001 Employee Stock Purchase Plan, which is currently suspended. Options to purchase our common stock remain outstanding under three equity incentive plans which have expired or been terminated: the 1992 Stock Option Plan (the “1992 Plan”), the 1994 Outside Directors Stock Option Plan (the “1994 Plan”) and the 1996 Nonstatutory Stock Option Plan (the “1996 Plan”). In addition, options to purchase Trident’s common stock are outstanding as a result of the assumption by the Company of options granted to TTI’s officers, employees and consultants under the TTI 2003 Employee Option Plan (“TTI Plan”). The options granted under the TTI option Plan were assumed in connection with the acquisition of the minority interest in TTI on March 31, 2005 and converted into options to purchase Trident’s common stock. Except for the 1996 Plan, all of the Company’s equity incentive plans, as well as the assumption and conversion of options granted under the TTI Plan, have been approved by the Company’s stockholders.

The following table sets forth information regarding outstanding options and shares reserved for future issuance under the foregoing plans as of June 30, 2009:

	Number of
	securities to be					Number of securities
	issued upon					remaining available for
	exercise of			Weighted-average		future issuance under
	outstanding			exercise price of		equity compensation
	options,			outstanding		plans (excluding
	warrants and			options, warrants		securities reflected in
Plan Category	rights			and rights		column A
Equity compensation plans approved by security holders		5,416,058	(1)	$	8.43		3,321,035	(2)
Equity compensation plan not approved by security holders		1,451,803	(3)	$	7.42		—
Total		6,867,861		$	8.21		3,321,035

(1)	Includes 40,000 shares that are reserved and issuable upon exercise of options outstanding under the 1994 Plan, which expired on January 13, 2004, 1,045,400 shares that are reserved and issuable upon exercise of options outstanding under the 2002 Plan and 988,655 shares that are reserved and issuable upon exercise of options outstanding under the TT1 Plan, and 3,342,003 shares that are reserved and issuable upon exercise of options outstanding under the 2006 Plan.
(2)	Includes 861,266 shares reserved for future issuance under the 2002 Stock Option Plan, and 2,459,769 shares reserved for future issuance under the 2006 Stock Option Plan, which has already included the 1.38 ratio for restricted stock.
(3)	Consists of shares subject to options that are outstanding pursuant to the 1996 Plan, which plan was terminated on June 19, 2007.

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Material Features of the 1996 Nonstatutory Stock Option Plan

As of June 30, 2009, we had reserved an aggregate of 1,452,000 shares of common stock for issuance under the 1996 Plan, which was terminated on June 19, 2007. The 1996 Plan provides for the granting of nonstatutory stock options to employees and consultants who are not our officers or directors, with exercise prices per share equal to no less than 85% of the fair market value of our Common Stock on the date of grant. Options granted under the 1996 Plan generally have a 10-year term and vest at the rate of 25% of the shares subject to the option on each of the first four anniversaries of the date of grant. The vesting of options granted under the 1996 Plan will be accelerated in full in the event of a merger of us with or into another corporation in which the outstanding options are neither assumed nor replaced by equivalent options granted by the successor corporation or a parent or subsidiary of the successor corporation. The 1996 Plan was not required to be and has not been approved by our stockholders.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

In July 2007, we made a $0.5 million additional investment in Anchor Semiconductor, Inc. Mr. Frank C. Lin, our former Chairman and Chief Executive Officer, has also made a concurring $500,000 investment and serves as a director on Anchor Semiconductor’s Board. The combined ownership in Anchor is less than 10% of the total outstanding shares. Our investment is accounted for under the cost method.

On May 14, 2009, the Company completed its acquisition of selected assets of the frame rate converter (“FRC”), demodulator (“DRX”) and audio decoder product lines from Micronas Semiconductor Holding AG (“Micronas”), a Swiss corporation. Due to the acquisition of the FRC, DRX, and audio decoder product lines from the Consumer Division of Micronas, we issued 7.0 million shares of common stock and warrants to purchase up to an additional 3.0 million shares of common stock to Micronas, and Micronas became the owner of approximately 10% of the outstanding common stock of the Company. In connection with the acquisition, we entered into the following related agreements with Micronas on or after May 14, 2009.

• On May 14, 2009, we entered into a Service Level Agreement or (“SLA”) with Micronas. Under the SLA, Micronas agreed to provide to us specified transition services and support, including intellectual property transitional services for a limited period of time to assist us in achieving a smooth transition of the acquired products and product lines. The transition services include certain manufacturing design, maintenance and support services, sales of inventory and newly-manufactured products and certain finance and administration, IT, infrastructure, warehousing and similar services, to be provided pursuant to specified service level agreements. Moreover, on May 14, 2009, we entered into an exclusive Distributor Agreement with Micronas. Under the Distributor Agreement, Micronas served as the exclusive supplier and OEM to us on the FRC, DRX, and Audio Decoder product lines from May 15, 2009 to June 15, 2009. As of June 30, 2009, the outstanding accounts payable to Micronas was $5.5 million, and the outstanding accounts receivable from Micronas was $5.3 million.

• We entered into a Cross License Agreement (the “Cross License”) with Micronas, pursuant to which Micronas has granted to us a royalty-free, perpetual, irrevocable, fully assignable and transferable worldwide license, including the right to sublicense, to patents that are relevant to, but not exclusive to, the FRC line of frame rate converters, the DRX line of demodulators and all of the audio processing product lines acquired in the acquisition. Ownership of these patents remains with Micronas following completion of the acquisition. The license is exclusive for the first three years, subject to certain exceptions, and is non-exclusive thereafter. We have granted to Micronas a royalty-free, perpetual, irrevocable, non-exclusive, fully assignable and transferable worldwide license, including the right to sublicense, to patents exclusively relevant to the FRC line of frame rate converters, the DRX line of demodulators and all of the audio processing product lines acquired in the acquisition. During the first three years, the license granted by us to Micronas is limited to use for products that are not a DRX, Audio or FRC Product. Following this three year period, Micronas may use the licensed rights on any product.

• We entered into a Stockholder Agreement (the “Stockholder Agreement”) with Micronas, setting forth specified registration rights associated with the shares, including demand and piggyback registration rights, restrictions on transfer of the Shares and provides Micronas certain pre-emptive rights to acquire additional shares of our Common Stock. Under the Stockholders Agreement, Micronas has agreed to vote the Shares in support of acquisition proposals approved by the disinterested members of its Board of Directors, and together with the recommendation of the disinterested members of the Board of Directors on other stockholder proposals, and Micronas’ ability to engage in certain solicitations and activities encouraging support for or against proposals inconsistent with its voting agreements is restricted.

• Micronas agreed to sublease 17,000 square footage of the office spaces located in Munich, Germany to us. We are currently using the office spaces for general and administration, research and engineering services. The lease expires on May 31, 2012.

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Procedures for Approval of Related Person Transactions

Our Audit Committee is responsible for reviewing and approving any related-party transactions, after reviewing each such transaction for potential conflicts of interests and other improprieties; provided, however, that transactions that are with parties who become related parties as part of a larger transaction approved by the Board of Directors, such as agreements entered into in connection with acquisitions approved by the Board of Directors, may be approved by the Board of Directors rather than by the Audit Committee. In addition, the Audit Committee is responsible for reviewing and investigating conduct alleged by the Board of Directors to be in violation of our Code of Business Conduct and Ethics, and adopting as necessary or appropriate, remedial, disciplinary, or other measures with respect to such conduct. Pursuant to our Code of Business Conduct and Ethics, our employees, including our executive officers, are prohibited from entering into transactions in which personal, family or financial interests conflict or even appear to conflict with our interests or compromise such interests. Under the Code of Business Conduct and Ethics, a “conflict of interest” exists when a person’s private interest interferes in any way with our interests. A conflict situation can arise when an employee, officer or director takes action or has interests that may make it difficult to perform his or her Company work objectively and effectively. Conflicts of interest may also arise when an employee, officer or director, or a member of his or her family, receives improper personal benefits as a result of his or her position with us. Loans to, or guarantees of obligations of, employees and their family members may create conflicts of interest.

The Board of Directors has also established an Investment Committee to review and approve investments made by us into complementary technologies, businesses or entities, pursuant to parameters established in investment guidelines adopted by the Investment Committee. If we propose an investment in an entity in which one of our officers or directors is making a concurrent investment, or in which one of our officers or directors is a prior investor, the Investment Committee shall not approve the investment unless the investment by the officer or director also meets all of the guidelines required of us, and the amount of the officer’s or director’s investment does not exceed the amount of the investment to be made by us.

Independence of the Board of Directors

The Board of Directors is currently composed of seven directors and the Board of Directors has determined that six meet the NASDAQ definition of independence. Ms. Summers, as Chief Executive Officer, does not meet the definition of independence. The Board of Directors annually determines the independence of directors based on a review by the directors and the Nominating and Corporate Governance Committee. No director is considered independent unless the Board of Directors has determined that he or she has no material relationship with us, either directly or as a partner, stockholder, or officer of an organization that has a material relationship with us. Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable, and familial relationships, among others. The standards relied upon by the Board of Directors in affirmatively determining whether a director is independent are embodied in our corporate governance guidelines available on our web site at http://www.tridentmicro.com/investors. These standards reflect the NASDAQ corporate governance listing standards. Under our corporate governance guidelines, a director will not be considered independent in the following circumstances:

(a) has been employed by Trident (or by any parent or subsidiary of Trident) within the past three years;

(b) has accepted or has a family member who has accepted payments from Trident (or any parent or subsidiary of the Company) in excess of $120,000 during the current or past three fiscal years, other than for:

(i)	compensation for board or board committee service;
(ii)	payments arising solely from investments in the Company’s securities;
(iii)	compensation paid to a family member who is a non-executive employee of the Company or a parent or subsidiary of the Company; or
(iv)	benefits under a tax-qualified retirement plan or nondiscretionary compensation;

(c) has a family member who was employed as an executive officer during the past three years by the Company or any parent or subsidiary of the Company;

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(d) is, or has a family member who is, an executive officer, partner or controlling stockholder of any organization to which the Company made, or from which the Company received, payment for property or services in the current or any of the past three fiscal years exceeding 5% of the recipient’s consolidated gross revenues for that year, or $200,000, whichever is greater, other than:

(i)	payments arising solely from investments in the Company’s securities; or
(ii)	payments under non-discretionary charitable contribution matching funds;

(e) is, or has a family member who is, employed as an executive officer of another entity where at any time during the past three years any of the executive officers of the Company served on the compensation committee of that other entity;

(f) is, or has a family member who is a current partner of the Company’s outside auditor or was a partner or employee of the Company’s outside auditor who worked on the Company’s audit at anytime during the past three years; or

(g) has any other relationship which in the Board’s judgment might interfere with the exercise of his or her independent judgment in carrying out his or her responsibilities as a director.

In addition, members of the Audit Committee must (i) meet the criteria for independence set forth in Rule 10A-3(b)(1) under the Securities Act of 1933, as amended, (ii) not have participated in the preparation of our financial statements or those of any of our current subsidiaries at any time during the past three years, and (iii) be able to read and understand fundamental financial statements, including a company’s balance sheet, income statement, and cash flow statement. Additionally, at least one member of the Audit Committee must have past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the individual’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities.

In September 2009, the directors and the Nominating and Corporate Governance Committee reviewed directors’ responses to a questionnaire asking about the relationships with us (and those of their immediate family members) and other potential conflicts of interest, as well as material provided by management related to transactions, relationships, or arrangements between us and the directors or parties related to the directors. The Nominating and Corporate Governance Committee determined that each of the directors is independent, other than Ms. Summers, and that the members of the Audit, Compensation and Nominating and Corporate Governance Committees also meet the independence tests of NASDAQ. The Nominating and Corporate Governance Committee reported its conclusion to the Board of Directors, and the Board of Directors then considered each director individually and determined that none of the directors has had during the last three years (i) any of the relationships prohibited by NASDAQ rules for independence or (ii) any other material relationship with us that would compromise his or her independence; provided, however, that as Chief Executive Officer, Ms. Summers does not meet the definition of independence.

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Item 14. Principal Accounting Fees and Services.

The following table sets forth the aggregate fees billed to us for the fiscal years ended June 30, 2009 and June 30, 2008 by our principal accounting firm, PricewaterhouseCoopers LLP:

	Year Ended		Year Ended
	June 30, 2009		June 30, 2008
Audit fees (1)	$	1,708,000	$	3,183,000
Audit-related fees (2)	$	15,000	$	43,000
Tax fees (3)	$	114,000	$	133,000
All other fees (4)	$	2,000	$	7,000
Total	$	1,839,000	$	3,366,000

(1)	Audit Fees. Consist of fees billed for professional services rendered for the audit of our consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by PricewaterhouseCoopers LLP in connection with statutory and regulatory filings or engagements.
(2)	Audit-related Fees. Consists of fees, billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under Audit Fees. These services include accounting consultations in connection with acquisitions and attest services that are not required by state or regulation and consultations concerning financial accounting and reporting standards.
(3)	Tax Fees. Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and international tax compliance, tax audit defense, customs and duties, mergers and acquisitions, and international tax planning.
(4)	Other Fees. The nature of other services includes subscription to an online accounting, auditing and reporting library and other miscellaneous services.

The Audit Committee has approved all of the fees above.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm.

The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm, which is PricewaterhouseCoopers LLP. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. PricewaterhouseCoopers LLP and management are required to periodically report to the Audit Committee regarding the extent of services provided by PricewaterhouseCoopers LLP in accordance with this pre-approval policy.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this Amendment:

	Page Number
1. Financial Statements:
Report of Independent Registered Public Accounting Firm		38
Consolidated Statements of Operations — For the Years Ended June 30, 2009, 2008 and 2007		4
Consolidated Balance Sheets — As of June 30, 2009 and 2008		5
Consolidated Statements of Cash Flows For the Years Ended June 30, 2009, 2008 and 2007		6
Consolidated Statements of Changes in Stockholders’ Equity For the Years Ended June 30, 2009, 2008 and 2007		7
Notes to Consolidated Financial Statements		8
2. Financial Statement Schedules:
II — Valuation and Qualifying Accounts for each of the Years Ended June 30, 2009, 2008 and 2007		78

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3. Exhibits:

The following exhibits are filed with this Amendment.

Exhibit		Description
	23.1	Consent of Independent Registered Public Accounting Firm.
	31.1	Rule 13a – 14(a) Certification of Chief Executive Officer.
	31.2	Rule 13a – 14(a) Certification of Chief Financial Officer.
	32.1	Section 1350 Certification of Chief Executive Officer.
	32.2	Section 1350 Certification of Chief Financial Officer.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: October 27, 2009

TRIDENT MICROSYSTEMS, INC.
By:	/s/Sylvia Summers Couder
	Sylvia Summers Couder
	Chief Executive Officer and President

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Schedule II

TRIDENT MICROSYSTEMS, INC.
VALUATION AND QUALIFYING ACCOUNTS

							Write-offs or
		Balance at		Charged as a			Adjustments
Fiscal		Beginning of		Reduction (Credit) to			Charged to		Balance at
Year	Description	Period		Revenue			Allowance		End of Period
		(In thousands)
2009	Allowance for sales returns	$	300	$	(244	)	$	—	$	56
2008	Allowance for sales returns	$	1,101	$	(801	)	$	—	$	300
2007	Allowance for sales returns	$	1,475	$	(374	)	$	—	$	1,101

		Balance at
Fiscal		Beginning of		Increase			Balance at End
Year	Description	Period		(decrease)			of Period
		(In thousands)
2009	Valuation allowance for deferred tax assets	$	20,820	$	9,190		$	30,010
2008	Valuation allowance for deferred tax assets	$	23,641	$	(2,821	)	$	20,820
2007	Valuation allowance for deferred tax assets	$	24,151	$	(510	)	$	23,641

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EXHIBIT INDEX

Exhibit		Description
	23.1	Consent of Independent Registered Public Accounting Firm.
	31.1	Rule 13a – 14(a) Certification of Chief Executive Officer.
	31.2	Rule 13a – 14(a) Certification of Chief Financial Officer.
	32.1	Section 1350 Certification of Chief Executive Officer.
	32.2	Section 1350 Certification of Chief Financial Officer.

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