Table of
Contents








Exhibit
10.03




SILICON
IMAGE, INC.


EMPLOYEE
BONUS PLAN FOR FISCAL YEAR 2009




1.
            Purpose




The
purpose of this Bonus Plan (this “Plan”) is to provide financial
incentives for certain executive1
and non-executive2 employees (“Executives” and “Non-Executives”, respectively)
of Silicon Image, Inc. (the “Company”) to meet and exceed
the Company’s annual financial performance goals.




2.
            Eligibility




Executives
and Non-Executives of the Company selected by the Committee (the “Participants” and each a
“Participant”) shall be
eligible to participate in this Plan; provided however, that the
following employees are not entitled to participate in this
Plan:  Executives and Non-Executives who are entitled to participate
in any Company Business Development- or Sales-incentive plan; employees who
commence employment with the Company on or after May 15, 2009 will not be
eligible to participate in this Plan with respect to the first Bonus Pool
Funding Date, as hereinafter defined; and employees who commence employment with
the Company on or after November 15, 2009 will not be eligible to participate in
this Bonus Plan with respect to the second Bonus Pool Funding Date, as
hereinafter defined.   Participation in this Plan is at the sole
discretion of the Compensation Committee of the Company’s Board of Directors
(the “Committee”).




3.
            Administration




a.      This
Plan shall be administered by the Committee which may delegate specific
administrative tasks to others as appropriate for administration of this
Plan.




b.      Subject
to the provisions of this Plan, the Committee shall have exclusive authority to
designate the Participants eligible to participate in this Plan, each
Participant’s target bonus under this Plan (“Bonus”),the actual amount
(if any) of each Bonuspaid under this Plan
(which amounts may be less than, equal to or greater than a Participant’s target
Bonus), the date when any performance goals are measured, and the date when
Bonuses (if any) will be paid.




c.      The
Committee shall have all discretion and authority necessary or appropriate to
administer this Plan, including, but not limited to, the power to interpret this
Plan, to prescribe, amend and rescind rules and regulations relating to it, and
to make all other determinations necessary or advisable in the administration of
this Plan, and such determination shall be final and binding upon all persons
having an interest in this Plan.




d.      A
majority of the Committee shall constitute a quorum, and the acts of a majority
of the members present at a meeting at which a quorum is present or any action
taken without a meeting by a writing executed by all of the members of the
Committee shall constitute the act of the Committee.




e.      The
Committee may employ attorneys, consultants, accountants, or other
persons.  The Committee and the Company and its officers and directors
shall be entitled to rely upon the advice, opinion, or valuations of any such
persons.  No member of the Committee shall be personally liable for
any action, determination, or interpretation taken or made with respect to this
Plan, unless such action is determined
by final adjudication to be criminal misconduct, willful misconduct or
demonstrates bad faith by the member.  In such event, the member shall
be liable for future expenses, including legal fees, including fines and
penalties, resulting from the final adjudication.







1 “Executive” means an employee
of the Company at the level of Vice President or above employed by the Company
or any affiliated Company as determined by the Committee.


2 “Non-Executive” means an
employee of the Company, other than an Executive, employed by the Company or any
affiliated Company as determined by the Committee.





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4.
            Bonus
      Pool Establishment and Allocation




4.1Subject to the terms and
conditions of this Plan, the Company will fund a cash Bonus pool of
approximately $3,200,000 on June 30, 2009 (a “Bonus Pool Funding Date”)
if:




·
            Actual
      revenue3 for the semiannual period ending June
      30, 2009 (“Actual
      Revenue”) equals or exceeds 100% of the planned revenue (“Plan Revenue”)
      established in the 2009 Annual Operating Plan approved by the Board of
      Directors (“Annual
      Operating Plan”) for such period;
and




·
            Operating
      income determined in accordance with generally accepted accounting
      principles less stock-based compensation expense, amortization of
      intangible assets and such other extraordinary items as may be determined
      by the Committee (“Non-GAAP Operating
      Income”) for the semiannual period ending June 30, 2009 equals or
      exceeds 100% of the planned Non-GAAP Operating Income established in the
      Annual Operating Plan (the “Plan Non-GAAP Operating
      Income”) for such semiannual period.  The determination
      as to whether Non-GAAP Operating Income equals or exceeds Plan Non-GAAP
      Operating Income shall be made after taking into account the compensation
      expense associated with the establishment of the cash Bonus
      pool.




4.2Subject to Section 4.4
below and the other terms and conditions of this Plan, the Company will fund a
cash Bonus pool of approximately $3,200,000 on December 31, 2009 (a “Bonus Pool Funding Date”)
if:




·
            Actual
      Revenue for the semiannual period ending December 31, 2009 equals or
      exceeds 100% of the Plan Revenue established in the Annual Operating Plan
      for such period; and




·
            (A)
      Non-GAAP Operating Income for the semiannual period ending December 31,
      2009 divided by (B) Actual Revenue for such semiannual period (“Non-GAAP Operating Margin
      Percentage”) equals or exceeds 100% of the planned Non-GAAP
      Operating Margin Percentage established in the Annual Operating Plan (the
      “Plan Non-GAAP Operating
      Margin Percentage”) for such semiannual period.  The
      determination as to whether Non-GAAP Operating Margin Percentage equals or
      exceeds Plan Non-GAAP Operating Margin Percentage shall be made after
      taking into account the compensation expense associated with the
      establishment of the cash Bonus
pool.




4.3If the Company does not
fund a bonus pool on the June 30, 2009 Bonus Pool Funding Date due to not having
achieved the required financial performance criteria as described in Section 4.1
above, subject to Section 4.4 below and the other terms and conditions of this
Plan, the Company will fund a cash Bonus pool of approximately $6,400,000 on the
December 31, 2009 Bonus Pool Funding Date instead of the $3,200,000 referenced
in Section 4.2 above if:




A Bonus pool is not funded on the June 30, 2009 Bonus Pool Funding Date under
Section 4.1 above due to the Company’s failure to achieve 100% of Plan Revenue
or 100% of Plan Non-GAAP Operating Income or both for the semiannual period
ending on June 30, 2009;
  ·
              Actual
      Revenue for the fiscal year ended December 31, 2009 equals or exceeds 100%
      of the Plan Revenue for such period established in the Annual Operating
      Plan; and
  ·
              Non-GAAP
      Operating Margin Percentage for the fiscal year ended December 31, 2009
      equals or exceeds 100% of the Plan Non-GAAP Operating Margin Percentage
      for such period established in the Annual Operating Plan after taking into
      account the compensation expense associated with the establishment of the
      cash Bonus pool.


3
Represents the Company’s total product, development, licensing and royalty
revenues for fiscal year 2009 as reported in the Company’s financial
statements.
 4
Represents the Company’s total earnings before interest, tax, depreciation, and
amortization, and, excludes stock compensation expense as accounted for under
SFAS No. 123R.





2





4.4In the event that the
Company’s financial performance for 2009 with respect to Actual Revenue and
Non-GAAP Operating Margin Percentage exceeds 100% of the Plan Revenue and Plan
Non-GAAP Operating Margin Percentage established in the Annual Operating Plan
for the full fiscal year, subject to the terms and conditions of this Plan, the
Company will fund on the December 31, 2009 Bonus Pool Funding Date a cash Bonus
pool in the amount of approximately $8,500,000 less any Bonus amount funded on
the June 30, 2009 Bonus Pool Funding Date under Section 4.1 above (in lieu of
any cash bonus pools referenced above to be funded on the December 31, 2009
Bonus Pool Funding Date)  if:




·
            Actual
      Revenue for the fiscal year ended December 31, 2009 equals or exceeds 109%
      of the Plan Revenue established in the Annual Operating Plan for such
      period; and




·
            Non-GAAP
      Operating Margin Percentage for the fiscal year ended December 31, 2009
      equals or exceeds 125% of the Plan Non-GAAP Operating Margin Percentage
      established in the Annual Operating Plan for such period after taking into
      account the compensation expense associated with the establishment of the
      cash Bonus pool.




Semiannual
bonus pools of approximately $3,200,000, or approximately $6,400,000 in the
aggregate, represent 75% of the aggregate amount of the target bonuses of those
employees who are expected to be Participants in the Bonus Plan, while an
aggregate cash Bonus pool of approximately $8,500,000 represents 100% of the
aggregate amount of the target bonuses of those employees who are expected to be
Participants in the Bonus Plan.  Therefore, if the Registrant achieves
100% of the Plan Revenue and Plan Non-GAAP Operating Margin Percentage
established in the Annual Operating Plan, Participants in the Bonus Plan will
receive 75% of their target bonuses; and, if the Registrant achieves 109% of the
Plan Revenue and 125% of the Plan Non-GAAP Operating Margin Percentage
established in the Annual Operating Plan, Participants in the Bonus Plan will
receive 100% of their target bonuses.




The actual amount of a cash bonus pool on a Bonus Pool Funding Date shall be a
function of (i) the Registrant’s financial performance with respect to actual
revenue, Non-GAAP Operating Income and Non-GAAP Operating Margin Percentage, as
the case may be, compared to the Annual Operating Plan and (ii) the actual
Participants participating in the Bonus Plan as of each Bonus Pool Funding Date
and such Participants’ target Bonuses.   In the event that the
Registrant’s performance with respect to revenue and Non-GAAP Operating Margin
Percentage falls in between the targets established in the Annual Operating Plan
and the targets established by the Bonus Plan for the payment of 100% of target
bonuses, the actual bonus amounts will be calculated pro rata on a straight line
basis.  For upside payments, growth must be deemed to be “organic”
rather than “acquired”, except as contemplated by the Annual Operating
Plan.






The
amounts of Bonuses, if any, allocable to individual Participants will be
determined by the Committee in its sole discretion and may be less than, equal
to or greater than target Bonus levels.







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5.      Payment




Bonuses
under this Plan, if any, will be distributed as soon as reasonably practicable
following determination of the amounts of the Bonus pool and the amounts
applicable to Participants provided, however, that distribution of the Bonus
pool funded on the December 31, 2009 Bonus Pool Funding Date, if any, shall in
no event occur after March 15, 2010.  Participants must be employed by
the Company as employees at the time of computation and distribution in order to
be eligible to receive payment of Bonuses, if any, unless otherwise determined
by the Compensation Committee.  Employees who commence employment with
the Company on or after May 15, 2009 will not be eligible to participate in this
Plan with respect to the first Bonus Pool Funding Date; and employees who
commence employment with the Company on or after November 15, 2009 will not be
eligible to participate in this Bonus Plan with respect to the second Bonus Pool
Funding Date.   Participants who begin their employment with the
Company after January 1, 2009 but prior to May 15, 2009 with respect to the
first Bonus Pool Funding Date, and Participants who begin their employment with
the Company after July 1, 2009 but prior to November 15, 2009 with respect to
the second Bonus Pool Funding Date, shall be eligible to receive payment of a
pro-rated Bonus (based on the full days of such Participant’s employment during
the applicable semi-annual period).  In addition, Participants must
complete all mandatory training(s) within the time noted in the notice to
employees to be eligible to receive payment of a Bonus.  The Committee
may impose additional eligibility requirements on payment of any Bonuses in its
sole discretion.  It is the objective of the Committee that the entire
calculated pool be distributed to eligible Participants.




6.
            General
      Provisions




a.      No
Prior Funding




No
amounts payable under this Plan shall be funded, set aside or otherwise
segregated prior to payment.  The obligation to pay Bonuses shall at
all times be an unfunded and unsecured obligation of the Company, and the
Company shall not be required to incur indebtedness to fund any Bonus pool
unless otherwise directed to do so by the Committee.  Participants
shall have the status of general creditors.  This Plan is not
qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended,
and is not subject to any provisions of the Employee Retirement Income Security
Act of 1974.




b.      No
Obligation to Employ




Eligibility
for participation in this Plan is not evidence of, nor does it constitute, a
contract of employment between the Company and any
individual.  Nothing in this Plan will confer or be deemed to confer
on any individual any right to continue in the employ of the Company or limit in
any way the right of the Company to terminate an individual’s employment at any
time, with or without cause.  This Plan is not intended to and does
not create any legal rights for any employee.




c.      Amendment
or Termination of Plan




This Plan
may be amended or terminated by the Board or the Committee at any time prior to
funding or payment of Bonuses hereunder.




d.      Headings




The
headings of the sections hereof are inserted for convenience only and shall not
be deemed to constitute a part hereof nor to affect the meaning
thereof.




e.      Withholding
of Taxes




To the
extent that the Company is required to withhold federal, state, local or foreign
taxes in connection with any benefit realized by a Participant under this Plan,
and the amounts available to the Company
for such withholding are insufficient, it will be a condition to the realization
of such benefit that the Participant make arrangements satisfactory to the
Company for payment of the balance of such taxes required or requested to be
withheld.




f.      Choice
of Law




All
questions concerning the construction, validity and interpretation of this Plan
will be governed by the law of the State of California.  Any Bonus
will not be effective unless such Bonus is made in compliance with all
applicable laws, rules and regulations.







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