UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 8-K

Current Report

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 20, 2011

TRIDENT MICROSYSTEMS, INC.

(Exact name of registrant as specified in its charter)

0-20784

(Commission

File Number)

1170 Kifer Road

Sunnyvale, California 94086

(Address of principal executive offices, with zip code)

(408) 962-5000

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers.

(e)

On July 20, 2011, the Compensation Committee (the “Committee”) of the Board of Directors of Trident Microsystems, Inc. (the “Company”) approved the terms of a Second Half Fiscal 2011 Executive Incentive Plan (the “Plan”), which is applicable to executive officers of the Company as determined pursuant to Section 16 of the Securities Exchange Act of 1934, as amended.

The performance periods under the Plan are the third and fourth fiscal quarters of the Company’s 2011 fiscal year. The individual target bonus for each participant for each performance period will be equal to 25% of his or her individual annual target bonus. For each performance period, the Committee will establish target levels of achievement for two separate financial performance metrics: (i) total revenue and (ii) cash. At these target levels, the achievement percentage for each of the total revenue and cash metrics will be 12.5%. The minimum achievement percentage for each of the total revenue and cash metrics will be 5%, and the maximum achievement percentage for each of the total revenue and cash metrics will be 25%.

The Committee shall determine for each executive officer (other than Richard Janney) for each performance period the dollar amount that is equal to (i) such executive officer’s individual target bonus multiplied by (ii) the sum of the achievement percentage of each financial performance metric. For Mr. Janney, the Committee shall determine for each performance period the dollar amount that is equal to (i) his individual target bonus multiplied by (ii) (A) the sum of the achievement percentage of each financial performance metric multiplied by 80%, and (B) his individual performance goal percentage for the performance period by 20%.

After the end of the second performance period, the Committee will aggregate the calculated bonus for each performance period. In furtherance of the Company’s pay-for-performance philosophy, the Committee may, in its sole discretion, determine to increase or decrease this aggregate amount, or eliminate any bonus, based upon the executive officer’s individual performance during the performance periods or such other factors as the Committee may determine; provided (a) the final bonus for each executive officer, after such adjustment (if any), will be capped at 200% of his or her aggregate individual target bonus for both performance periods, and (b) the aggregate amount of the final bonuses payable to all executive officers may not exceed the total bonus pool determined by the Committee to be available for distribution to all of the Company’s executives under its second half fiscal 2011 incentive plans.

Bonuses will be payable in the form of fully-vested restricted stock awards under the Company’s 2010 Equity Incentive Plan, subject to the approval of the Committee and based upon the closing price of the Company’s common stock on the grant date, as reported by the Nasdaq Stock Market. The Committee may elect in its sole discretion to pay some or all of the payable bonuses to one or more of the Plan participants in cash.

For fiscal year 2011, the individual target percentages for the executive officers range from 40% to 100% of base salary, depending on the executive officer’s position. The Committee has established the following as the individual annual target bonuses for fiscal year 2011 for the Company’s executive officers:

The Plan will be administered by the Committee, which will have the sole discretion and authority to administer and interpret the Plan, and the decisions of the Committee will in every case be final and binding on all persons having an interest in the Plan. The Committee may modify the financial performance goals with the advice and counsel of the CEO and CFO at any time during the performance period and may grant bonuses to executive officers even if the financial performance goals are not met. The Committee retains the absolute discretion to amend, modify or terminate the Plan at any time.

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A copy of the Plan is attached hereto as an exhibit, and the foregoing description of the terms thereof is qualified in its entirety by the terms therein.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: July 26, 2011

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