EXHIBIT 10.42
Genesis Microchip Inc.
Executive Bonus Plan — Fiscal Year 2007
Adopted June 10, 2006
(1) General Purpose: This Executive Bonus Plan—Fiscal Year 2007 (this “Plan” or
“Executive Bonus Plan”) is designed to provide incentive and motivation to the
Executive Staff of Genesis Microchip Inc. (the “Company”) to achieve the
Company’s financial and operational plans.
(2) Duration: The Company’s fiscal year 2007 commences on April 1, 2006 and ends
on March 31, 2007. The Plan will be in effect from April 1, 2006 through
March 31, 2007 (the “Bonus Period”), subject to the payment of the bonuses after
fiscal year end as described in Section 8 below, and will be based on the full
fiscal year 2007 financial and operational results of the Company.
(3) Eligibility: This Plan covers the Chief Executive Officer (“CEO”) and the
members of his Executive Staff. Eligible executives are those persons who are
members of the CEO’s Executive Staff on or before December 31, 2006, and are
employed by the Company at the time of the bonus payment (the “Eligible
Executives”). Any Eligible Executive who joins the Executive Staff after the
beginning of the Bonus Period but before December 31, 2006 will receive a
prorated bonus, based upon his/her length of service during fiscal year 2007,
provided that said Eligible Executive remains employed by the Company at the
time of the bonus payment.
(4) Bonus Pool: If the Company meets or surpasses certain minimum financial
targets under its fiscal year 2007 operating plan (the “Operating Plan”), a
bonus pool will be established under this Plan. Specifically, these minimum
targets are (a) 90% of the Operating Plan revenue, and (b) 90% of the Operating
Plan non-GAAP operating income. Both (a) and (b) must be achieved in order for a
bonus pool to be established under this Plan.
(5) Calculation of Bonus: In the event a bonus pool is established under this
Plan, Eligible Executives are eligible for bonuses expressed in the tables below
as a percentage of annual base salary. Each Eligible Executive’s bonus will be
calculated on the basis of two components:

  (I)   FINANCIAL COMPONENT. This component is based on the Company’s financial
performance relative to the Operating Plan. This component will be weighted 75%
towards non-GAAP operating income and 25% towards revenue achievement. For
purposes of this calculation, non-GAAP operating income may be adjusted for
unusual items (such as mergers and acquisitions) as determined by the CEO and
Chief Financial Officer, and as approved by the Board of Directors. An Eligible
Executive may earn a bonus up to the percentage of his/her salary set forth
below, depending on the Company’s financial performance relative to the
Operating Plan.

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FINANCIAL COMPONENT BONUS AMOUNTS

                                                  Operating Plan Performance    
<90%       90%       100%       110%      
CEO
      0 %       12.5 %       25 %       50 %    
Sr. VP, WW Sales
      0 %       9.375 %       18.75 %       37.5 %    
Other Sr. VPs and EVP
      0 %       6.25 %       12.5 %       25 %    
All Other VPs*
      0 %       5 %       10 %       20 %    

Corporate financial performance levels that fall between any two Operating Plan
target levels will be paid at the lower of the two targets. In the event that
corporate financial achievement exceeds 110% of the Operating Plan, the Board of
Directors may, in its sole discretion, make additional bonus payments greater
than the target bonus percentages set forth in the table above, subject to the
limitation on aggregate bonus payments set forth in Section 6.
(II) MBO COMPONENT. This is a management-by-objective (“MBO”) component that
will be based on the Eligible Executive’s MBO performance. An Eligible Executive
may earn a bonus up to the percentage of his/her salary set forth below,
depending on MBO performance.
MBO COMPONENT BONUS AMOUNTS

                                                  Operating Plan                
                    Performance     <90%       90%       100%       110%      
CEO
      0 %       25 %       25 %       50 %    
Sr. VP WW Sales
      0 %       18.75 %       18.75 %       37.5 %    
Sr. VPs and EVP
      0 %       12.5 %       12.5 %       25 %    
All Other VPs*
      0 %       10 %       10 %       20 %    

 

*   Includes VPs on Executive Staff only.

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(6) Plan Limitations: The total potential bonus amounts, based on the two
components set forth in Section 5 above, are as follows.
TOTAL POTENTIAL BONUS AMOUNTS

                                                  Operating Plan                
                    Performance     <90%       90%       100%       110%      
CEO
      0 %       37.5 %       50 %       100 %    
Sr. VP WW Sales
      0 %       28.125 %       37.5 %       75 %    
Sr. VPs and EVP
      0 %       18.75 %       25 %       50 %    
Other VPs
      0 %       15 %       20 %       40 %    

The aggregate amount of bonus payments under this Plan, when combined with the
non-executive Employee Corporate Bonus Plan: (a) shall not exceed 15% of the
Company’s non-GAAP operating income before the bonus expense for fiscal year
2007, and (b) may not cause the Company’s non-GAAP net income to become a net
loss for fiscal year 2007 or any individual quarter during fiscal year 2007.
Notwithstanding anything to the contrary herein, the Board of Directors shall
have the discretion to reduce payments under this Plan so that such payments do
not cause the combined bonus plan payments to exceed the limitations described
above.
(7) Discretion of the CEO: The CEO shall have discretion to adjust any Eligible
Executive’s bonus determined under the plan by +/- 15%, subject to the
limitations set forth in Section 6. Final bonus amounts for all Eligible
Executives, including the CEO, must be approved by the Board of Directors.
(8) Approval and Payments: The Board of Directors must pre-approve all payments
under this Plan. Bonus payments will be paid 15 days after the Company’s filing
of its fiscal year 2007 Annual Report on Form 10-K with the Securities and
Exchange Commission. An Eligible Executive must be employed with the Company at
the time of payment to receive a bonus payment hereunder. All payments will be
made in the currency in which the Eligible Executive is regularly paid.
(9) Plan Modifications: This Plan will terminate at the end of fiscal year 2007
unless it is re-authorized by the Board of Directors. The Board of Directors, in
its sole discretion, may make any changes to the Plan it deems appropriate for
future bonus periods once the current Bonus Period is complete. The Board of
Directors, in its sole discretion, may modify the fiscal year 2007 corporate
financial targets in the event of a merger or acquisition.
(10) Plan Administration; General Terms and Conditions: The administrator of
this Plan is the Board of Directors, which has sole and exclusive authority to
interpret the Plan and adopt such rules and regulations for carrying out the
Plan as it deems necessary and

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appropriate. Decisions by the Board of Directors are final and binding on all
parties to the maximum extent allowed by law.
Amounts to be paid under this Plan are to be paid from the general funds of the
Company. Nothing in this Plan shall be construed to create a trust or establish
any evidence of any Eligible Executive’s claim of any right to payment other
than as an unsecured general creditor of the Company.
All payments under this Plan shall be subject to the satisfaction of applicable
federal, state or local income tax withholding requirements and to any
employment tax withholding requirements.
Nothing in this Plan shall interfere with or limit in any way the right of the
Company, or the right of any Eligible Executive, to terminate the employment or
service relationship with the Company at any time, with or without cause.
No award granted under this Plan may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will or the laws of descent
and distribution.
This Plan will be construed, administered and governed in all respects in
accordance with the laws of the State of California.
In the event that any provision of the Plan shall be held illegal or invalid for
any reason, the illegality or invalidity shall not affect the remaining parts of
the Plan, and the Plan shall be construed and enforced as if the illegal and
invalid provision had not been included.

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