EXHIBIT 10.40**SEPARATION AGREEMENT AND RELEASE**               This Separation Agreement and Release (this “Agreement”) is made by and between GenesisMicrochip Inc. (including any company or organization that Genesis Microchip Inc. has acquired inthe past and any subsidiary or affiliate of Genesis Microchip Inc.) (the “Company”), and KennethMurray (“Executive”) (collectively referred to as the “Parties”):               WHEREAS, Executive is employed by the Company as the Vice President of Human Resources;               WHEREAS, the Company and Executive have entered into the Confidentiality and Property RightsAgreements dated August 29, 2000 (the “Confidentiality Agreement”);               WHEREAS, the Parties have mutually determined that a termination of the employmentrelationship would be in the best interest of the Company, and therefore Executive will resign fromhis employment with the Company effective July 1, 2006 (the “Termination Date”);               WHEREAS, as of the Termination Date, Executive has been granted options to purchase anaggregate amount of 233,500 shares of the Company’s common stock pursuant to the Company’s 1997Employee Stock Option Plan, the 2000 Nonstatutory Stock Plan, the 2001 Nonstatutory Stock OptionPlan (collectively, the “Company Stock Plans”), and the related stock option agreements(collectively, the “Stock Option Agreements”);               WHEREAS, the Parties, and each of them, wish to resolve any and all disputes, claims,complaints, grievances, charges, actions, petitions and demands that the Executive may have againstthe Company as defined herein, including, but not limited to, any and all claims arising or in anyway related to Executive’s employment with, or separation from, the Company;               NOW THEREFORE, in consideration of the premises and the agreements made herein, the Partieshereby agree as follows:**COVENANTS**     1. Resignation. Executive hereby resigns from his position as the Company’s VicePresident of Human Resources and any or all other employment positions that may have at any timebeen held by Executive with the Company or any of its affiliates, effective the Termination Date.     2. Consideration.               (a) Cash Lump Sum Payment. The Company agrees to pay Executive a cash lump sumpayment of Ninety-Four Thousand Three Hundred Fifty Dollars (US$94,350), less applicablewithholdings, which amount is equal to twenty-six weeks of his base salary (the “SeverancePayment”). The Severance Payment shall be paid to Executive on the Termination Date.               (b) Bonus. The Company agrees to pay Executive a bonus in the amount of SixtyThousand Three Hundred Eighty-Four Dollars (US$60,384), less applicable withholdings, which
 

 
amount represents a bonus under the Company’s FY 2006 Executive Bonus Plan (the “Bonus”). TheBonus shall be paid to Executive on the Termination Date.          (c) COBRA. The Company shall reimburse Executive for the payments he makes for COBRAcoverage for a period of twelve (12) months after the Termination Date, or until Executive hassecured other employment with comparable coverage, whichever occurs first, provided Executivetimely elects and pays for COBRA coverage. COBRA reimbursements shall be made by the Company toExecutive within fifteen (15) days of Executive’s provision to the Company of documentationsubstantiating his payments for COBRA coverage.     3. Stock Options. The Parties agree that for purposes of determining the number ofshares of the Company’s common stock that Employee is entitled to purchase from the Companypursuant to the exercise of outstanding options, the Employee will be considered to have vestedonly up to the Termination Date. Employee acknowledges that as of the Termination Date, he willhave vested in 8,969 options and no more. The exercise of any stock options shall continue to besubject to the terms and conditions of the Stock Option Agreement(s) and the applicable CompanyStock Plan(s). Executive’s period to exercise his stock options, to the extent vested, shall beextended to December 31, 2006.     4. Benefits. Executive’s health insurance benefits with the Company will cease on theTermination Date, subject to the benefits described in paragraph 2(c), and subject to Executive’sright to continue his health insurance coverage under COBRA after expiration of the benefitsdescribed in paragraph 2(c). All other benefits and incidents of employment, including, but notlimited to paid time off, ceased on the Termination Date. The Executive shall receive payment forhis accrued and unused Paid Time Off (“PTO”) balance on the Termination Date.     5. Trade Secrets and Confidential Information/Company Property. Executive reaffirmsand agrees to observe and abide by the terms of the Confidentiality Agreement, specificallyincluding the provisions therein regarding nondisclosure of the Company’s trade secrets andconfidential and proprietary information, and non-solicitation of Company employees. Executive’ssignature below constitutes his certification under penalty of perjury that he has returned alldocuments and other items provided to Executive by the Company, developed or obtained by Executiveas a result of his employment, or otherwise belonging to the Company, except as otherwise providedherein. The Company agrees to provide the Executive at no cost his current Dell Notebook Computerafter the Company has reviewed and removed all Company information from the computer.     6. Payment of Compensation. Executive acknowledges and represents that the Companyhas paid all salary, wages, bonuses, accrued vacation, housing allowances, tax services, relocationexpenses, medical costs, immigration expenses, vehicle allowance, general expenses, legal feereimbursement, interest, severance, outplacement costs, fees, stock, stock options, vesting,commissions and any and all other benefits and compensation due to Executive, once the SeverancePayment, Bonus, PTO and COBRA benefits set forth herein are provided. Executive has ten (10)business days from the Termination Date to file any remaining expense reports and the Company shallhave ten (10) business days from the date of receipt of such expense reports to make anyappropriate reimbursements to Executive, pursuant to the Company’s regular policies and practicesrelated to expense reimbursement.
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     7. Trading in Company Stock. Executive acknowledges his continued obligation to abideby the Company’s Insider Trading Policy.     8. Release of Claims. Executive agrees that the foregoing consideration representssettlement in full of all outstanding obligations owed to Executive by the Company and its currentand former officers, directors, employees, agents, investors, attorneys, advisors, shareholders,administrators, affiliates, divisions, subsidiaries, predecessor and successor corporations andassigns (the “Releasees”), from, and agrees not to sue concerning, or in any manner to institute,prosecute or pursue, any claim, complaint, charge, duty, obligation or cause of action relating toany matters of any kind, whether presently known or unknown, suspected or unsuspected, thatExecutive may possess against any of the Releasees arising from any omissions, acts or facts thathave occurred up until and including the date Executive signs this Agreement including, withoutlimitation:               (a) any and all claims relating to or arising out of Executive’s employment relationship withthe Company and the termination of that relationship;               (b) any and all claims relating to, or arising from, Executive’s right to purchase, or actualpurchase of shares of stock of the Company, including, without limitation, any claims for fraud;misrepresentation; breach of fiduciary duty; breach of duty under applicable state corporate law;and securities fraud under any state or federal law;               (c) any and all claims under the law of any jurisdiction including, but not limited to,wrongful discharge of employment; termination in violation of public policy; discrimination;harassment; retaliation; breach of contract, both express and implied; breach of a covenant of goodfaith and fair dealing, fraud and fraudulent inducement, both express and implied; promissoryestoppel; negligent or intentional infliction of emotional distress; negligent or intentionalmisrepresentation; negligent or intentional interference with contract or prospective economicadvantage; unfair business practices; defamation; libel; slander; negligence; personal injury;assault; battery; invasion of privacy; false imprisonment; conversion; workers’ compensation; anddisability benefits;               (d) any and all claims for violation of any federal, state or municipal statute, including,but not limited to, Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; theAmericans with Disabilities Act of 1990; the Fair Labor Standards Act; the Fair Credit ReportingAct; the Age Discrimination in Employment Act of 1967; the Employee Retirement Income Security Actof 1974; the Worker Adjustment and Restraining Notification Act; the Family and Medical Leave Act;the California Family Rights Act; the California Fair Employment and Housing Act, and theCalifornia Labor Code, including, but not limited to Labor Code Sections 1400-1408;               (e) any and all claims for violation of the federal, or any state, constitution;               (f) any and all claims arising out of any other laws and regulations relating toemployment or employment discrimination;               (g) any and all claims for attorneys’ fees and costs; and
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               (h) any claim for any loss, cost, damage, or expense arising out of any dispute overthe non-withholding or other tax treatment of any of the proceeds received by Executive asa result of this Agreement.               Executive agrees that the release set forth in this section shall be and remain in effect inall respects as a complete general release as to the matters released. This release does notextend to any obligations incurred under this Agreement.     9. Acknowledgment of Waiver of Claims under ADEA. Executive acknowledges that he iswaiving and releasing any rights he may have under the Age Discrimination in Employment Act of 1967(“ADEA”) and that this waiver and release is knowing and voluntary. Executive and the Companyagree that this waiver and release does not apply to any rights or claims that may arise under ADEAafter the Effective Date of this Agreement. Executive acknowledges that the consideration givenfor this waiver and release Agreement is in addition to anything of value to which Executive wasalready entitled. Executive further acknowledges that he has been advised by this writing that:(a) he should consult with an attorney prior to executing this Agreement; (b) he has atleast twenty-one (21) days within which to consider this Agreement; (c) he has at least seven (7)days following the execution of this Agreement by the parties to revoke the Agreement; (d) thisAgreement, and all of the terms and conditions hereof, shall not be effective until the revocationperiod has expired; and (e) nothing in this Agreement prevents or precludes Executive fromchallenging or seeking a determination in good faith of the validity of this waiver under the ADEA,nor does it impose any condition precedent, penalties or costs from doing so, unless specificallyauthorized by law.     10. Civil Code Section 1542. Executive represents that he is not aware of any claimother than the claims that are released by this Agreement. Executive acknowledges that he has beenadvised by legal counsel and is familiar with the provisions of California Civil Code Section 1542,which provides as follows:A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOESNOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THERELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HISSETTLEMENT WITH THE DEBTOR.               Executive, being aware of said code section, agrees to expressly waive any rights he may havethereunder, as well as under any other statute or common law principles of similar effect.     11. No Pending or Future Lawsuits. Executive represents that he has no lawsuits,claims, or actions pending in his name, or on behalf of any other person or entity, against any ofthe Releasees. Executive also represents that he does not intend to bring any claims on his ownbehalf or on behalf of any other person or entity against any of the Releasees.     12. Non-Disparagement. Executive agrees to refrain from any defamation, libel orslander of the Releasees or tortious interference with the contracts and relationships of theReleasees. All inquiries by
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potential future employers of Executive will be directed to the Company’s Vice President ofHuman Resources if there shall be one, and otherwise to its President.     13. Application for Employment. Executive understands and agrees that, as a conditionof this Agreement, he shall not be entitled to any employment with the Company, and he herebywaives any right, or alleged right, of employment or re-employment with the Company. Executivefurther agrees that he will not apply for employment with the Company. Company agrees not tocontest any application for California State Unemployment Benefits made by the Executive.     14. Confidentiality. Executive agrees to maintain in complete confidence the contentsand terms of this Agreement and the consideration for this Agreement (hereinafter collectivelyreferred to as “Separation Information”) until such time as, and to the extent that, the SeparationInformation is publicly disclosed by the Company in a filing with the SEC or otherwise. Except asrequired by law, Executive may disclose Separation Information only to his immediate familymembers, the Court in any proceedings to enforce the terms of this Agreement, Executive’s legalcounsel, his accountant and any professional tax advisor to the extent that they need to know theSeparation Information in order to provide advice on tax treatment or to prepare tax returns, andshall take every reasonable precaution to prevent disclosure of any Separation Information to allother third parties. Executive agrees that he will not publicize, directly or indirectly, anySeparation Information.     15. Cooperation in Litigation. Executive agrees that he will not knowingly counsel orassist any attorneys or their clients in the presentation or prosecution of any disputes,differences, grievances, claims, charges, or complaints by any third party against any of theReleasees, unless under a subpoena or other court order to do so. Executive agrees both toimmediately notify the Company upon receipt of any such subpoena or court order, and to furnish,within three (3) business days of its receipt, a copy of such subpoena or court order to theCompany. If approached by anyone for counsel or assistance in the presentation or prosecution ofany disputes, differences, grievances, claims, charges, or complaints against any of the Releasees,Executive shall state no more than that he cannot provide counsel or assistance. Executive furtheragrees to make himself reasonably available to provide information and assistance to the Company inany disputes, lawsuits, differences, grievances, claims, charges, or complaints brought against theCompany, including, but not limited to making himself available to provide testimony and serve as awitness.     16. No Admission of Liability. Executive understands and acknowledges that thisAgreement constitutes a compromise and settlement of any and all potential disputed claims. Noaction taken by the Company hereto, either previously or in connection with this Agreement, shallbe deemed or construed to be: (a) an admission of the truth or falsity of any potential claims; or(b) an acknowledgment or admission by the Company of any fault or liability whatsoever to Executiveor to any third party.     17. Non-Solicitation. Executive agrees that for a period of twelve (12) monthsimmediately following the Effective Date of this Agreement, Executive shall not either directly orindirectly solicit, induce, recruit or encourage any of the Company’s employees or consultants toleave their employment or service relationship, or attempt to do so, either for himself or anyother person or entity.     18. Breach. Executive acknowledges and agrees that any breach of any provision ofthis Agreement, except as permitted by paragraph 9(e), shall constitute a material breach of thisAgreement and shall entitle
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the Company immediately to recover and/or cease the severance benefits provided to Executiveunder this Agreement.     19. Arbitration. The Parties agree that any and all disputes arising out of the termsof this Agreement, their interpretation, and any of the matters herein released, shall be subjectto binding arbitration in Santa Clara County before the American Arbitration Association under itsNational Rules for the Resolution of Employment Disputes. The Parties agree that the prevailingparty in any arbitration shall be entitled to injunctive relief in any court of competentjurisdiction to enforce the arbitration award. The Parties agree that the prevailing party in anyarbitration shall be awarded its reasonable attorneys’ fees and costs. **The Parties hereby agree towaive their right to have any dispute between them resolved in a court of law by a judge or jury.**This paragraph will not prevent either party from seeking injunctive relief (or any otherprovisional remedy) from any court having jurisdiction over the Parties and the subject matter oftheir dispute relating to Executive’s obligations under this Agreement and the ConfidentialityAgreement.     20. No Knowledge of Wrongdoing. Executive represents that he has no knowledge of anywrongdoing involving improper or false claims against a federal or state governmental agency, orany other wrongdoing that involves any of the Releasees.     21. Authority. The Company represents and warrants that the undersigned has theauthority to act on behalf of the Company and to bind the Company and all who may claim through itto the terms and conditions of this Agreement. Executive represents and warrants that he has thecapacity to act on his own behalf and on behalf of all who might claim through him to bind them tothe terms and conditions of this Agreement. Each Party warrants and represents that there are noliens or claims of lien or assignments in law or equity or otherwise of or against any of theclaims or causes of action released herein.     22. No Representations. Executive represents that he has consulted with an attorney,and has carefully read and understands the scope and effect of the provisions of this Agreement.Executive has not relied upon any representations or statements made by the Company which are notspecifically set forth in this Agreement.     23. Severability. In the event that any provision or any portion of any provisionhereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable orvoid, this Agreement shall continue in full force and effect without said provision or portion ofprovision.     24. Attorneys’ Fees. In the event that either Party brings an action to enforce oreffect its rights under this Agreement, the prevailing party shall be entitled to recover its costsand expenses, including the costs of mediation, arbitration, litigation, court fees, plusreasonable attorneys’ fees, incurred in connection with such an action.     25. Entire Agreement. This Agreement represents the entire agreement andunderstanding between the Company and Executive concerning Executive’s employment with andseparation from the Company and the events leading thereto and associated therewith, and supersedesand replaces any and all prior agreements, offer letters, and understandings concerning Executive’srelationship with the Company, with the exception of the Confidentiality Agreement and the StockOption Agreements, as may be amended hereby.
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     26. No Oral Modification. This Agreement may only be amended in writing signed byExecutive and the Company’s then chief executive officer.     27. No Waiver. The failure of the Company to insist upon the performance of any ofthe terms and conditions in this Agreement, or the failure to prosecute any breach of any of theterms and conditions of this Agreement, shall not be construed thereafter as a waiver of any suchterms or conditions. This entire Agreement shall remain in full force and effect as if no suchforbearance or failure of performance had occurred.     28. Governing Law. This Agreement shall be governed by the laws of the State ofCalifornia, without regard for choice of law provisions.     29. Effective Date. This Agreement will become effective after it has been signed byboth Parties and after seven (7) days have passed since Executive signed the Agreement (the“Effective Date”).     30. Counterparts. This Agreement may be executed in counterparts and by facsimile,and each counterpart and facsimile shall have the same force and effect as an original and shallconstitute an effective, binding agreement on the part of each of the undersigned.     31. Survival of the Agreement. This Agreement shall not be terminated by anydissolution of the Company resulting from either a merger or consolidation, in which the Company isnot the surviving or consolidated corporation, or a transfer of all or substantially all of theassets of the Company. If either event described in this Paragraph 30 occurs, the rights,benefits, and obligations set forth in this Agreement shall automatically be assigned to thesurviving or resulting corporation or to the transferee of the assets.     32. Voluntary Execution of Agreement. This Agreement is executed voluntarily andwithout any duress or undue influence on the part or behalf of the Parties hereto, with the fullintent of releasing all claims. The Parties acknowledge that:               (a) They have read this Agreement;               (b) They have been represented in the preparation, negotiation, and execution of thisAgreement by legal counsel of their own choice;               (c) They understand the terms and consequences of this Agreement and of the releasesit contains;               (d) They are fully aware of the legal and binding effect of this Agreement.
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     IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forthbelow.      **Kenneth Murray, an individual**